<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by Registrant.
[_] Filed by Party other than the Registrant
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GOTHIC ENERGY CORPORATION
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(4) and 0-11.
[_] 1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
[_] 2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
[_] 3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
[_] 4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
[_] 5) Total Fee Paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the Fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
----------------------------------------------
2) Form, Schedule or Registration Statement Number:
---------------------
3) Filing Party:
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4) Date Filed:
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<PAGE>
GOTHIC ENERGY CORPORATION
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Gothic
Energy Corporation (the "Company") will be held at the Double Tree Hotel, Main
Floor Boardroom, 6110 South Yale Avenue, Tulsa, Oklahoma 74136, on Tuesday,
April 22, 1997, at 10:00AM, for the following purposes:
1. To elect five (5) directors of the Company to hold office until the
next Annual Meeting of Shareholders in 1998 and until their respective
successors are elected and qualified;
2. To transact such other business as may properly come before the
meeting, or any adjournments thereof.
Information with respect to the above is set forth in the Proxy Statement
which accompanies this Notice. Only holders of shares of the Company's Common
Stock of record at the close of business on March 5, 1997 (the "Record Date")
are entitled to notice of and to vote at the Meeting.
We hope that all of our shareholders who can conveniently do so will attend
the Meeting. Shareholders who do not expect to be able to attend the Meeting
are requested to mark, date and sign the enclosed proxy and return the same in
the enclosed addressed envelope which requires no postage and is intended for
your convenience.
John Rainwater, Secretary
Dated: March 14, 1997
<PAGE>
GOTHIC ENERGY CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
The enclosed proxy is solicited by the Board of Directors of Gothic Energy
Corporation, an Oklahoma corporation (the "Company"), from the holders of shares
of Common Stock, $.01 par value ("Common Stock") to be voted at the Annual
Meeting of Shareholders (the "Meeting") to be held at the Double Tree Hotel,
Main Floor Boardroom, 6110 South Yale Avenue, Tulsa, Oklahoma 74136, on
Tuesday, April 22, 1997, at 10:00AM, and at any adjournments thereof.
The only business which the Board of Directors intends to present or knows
that others will present at the Meeting is the election of five (5) Directors of
the Company to hold office until the next Annual Meeting of Shareholders in 1998
and until their successors have been elected and qualified. Management does not
know of any other business to be brought before the Meeting but it is intended
that as to any other business, a vote may be cast pursuant to the proxy in
accordance with the judgment of the person or persons acting thereunder. If
proxies in the enclosed form are properly executed and returned, the Common
Stock represented thereby will be voted at the Meeting in accordance with the
shareholder's direction. Unless otherwise specified, proxies in the enclosed
form will be voted for the election of five (5) Directors named as nominees.
Any shareholder giving a proxy has the power to revoke it at any time before the
proxy is voted by revoking it in writing, by executing a later dated proxy or
appearing at the Meeting and voting in person. Any writing revoking a proxy
should be addressed to John Rainwater, Secretary of the Company, at the address
set forth below.
The Directors to be elected at the Meeting will be elected by a plurality
of the votes cast by the holders of Common Stock present in person or by proxy
and entitled to vote. With regard to the election of Directors, votes may be
cast for or withheld from each nominee. Votes that are withheld will have no
effect on the outcome of the election because Directors will be elected by a
plurality of votes cast.
Under the rules of the New York Stock Exchange, brokers who hold shares in
street name have the authority to vote on certain routine matters on which they
have not received instructions from beneficial owners. Brokers holding shares
of the Company's Common Stock in street name who do not receive instructions are
entitled to vote on the election of Directors.
Only holders of record of Common Stock as of the close of business on March
5, 1997 are entitled to vote at the Meeting or any adjournments thereof. On
such date,
<PAGE>
the Company had outstanding voting securities consisting of 12,395,857 shares of
Common Stock, each of which shares is entitled to one (1) vote on all proposals
submitted to a vote of shareholders at the Meeting. Under the terms of the
Company's Certificate of Incorporation, as amended, the holders of Preferred
Stock have no voting rights except as required by the General Corporation Law of
Oklahoma, and are not entitled to vote in the election of Directors.
The Company's principal executive office address is Gothic Energy
Corporation, 5727 South Lewis Avenue, Suite 700, Tulsa, Oklahoma 74105, and its
telephone number is (918) 749-5666. This Proxy Statement and the enclosed Form
of Proxy will be mailed to the Company's shareholders on or about March 14,
1997.
ELECTION OF DIRECTORS
At the Meeting, it is proposed to elect five (5) Directors to hold office
until the next Annual Meeting of Shareholders in 1998 and until their respective
successors are elected and qualified. It is intended that, unless otherwise
indicated, the shares of Common Stock represented by proxies solicited by the
Board of Directors will be voted for the election as Directors of the five
nominees hereinafter named. If, for any reason, any of said nominees shall
become unavailable for election, which is not now anticipated, the proxies will
be voted for the other nominees and may be voted for a substitute nominee
designated by the Board of Directors. Each nominee has indicated that he is
willing and able to serve as a Director if elected, and, accordingly, the Board
of Directors does not have in mind any substitute.
The nominees as Director and their age are as follows:
Name Age
---- ---
John J. Fleming 56
Michael K. Paulk 48
John L. Rainwater 49
Morton A. Cohen 61
Brian E. Bayley 44
- 2 -
<PAGE>
JOHN J. FLEMING: Mr. Fleming was elected a Director of the Company in
October 1994. Mr. Fleming is currently Chairman, President and Chief Executive
Officer of Profco Resources, Ltd., which engages in oil and gas exploration.
From 1992 through December 1995, Mr. Fleming was Chairman and chief executive
officer of Excel Energy, Inc., engaged in oil and gas exploration. Prior
thereto, commencing in 1989 he was Chairman and chief executive officer of
Trical Resources, Inc. and its successor Voyager Energy, Inc. Mr. Fleming was
Chairman of the Board of American Natural Energy Corporation ("ANEC") from
August 1993 to July 1994. He has been involved in the oil and gas industry as
president, chairman or chief executive officer of a number of corporations for
more than the past fifteen years. Mr. Fleming is also a Director of Imco
Recycling Inc., Newfoundland Capital Corporation, Canadian Helicopters Limited
and Quest Oil & Gas, Inc.
MICHAEL K. PAULK: Mr. Paulk was elected President and Director of the
Company in October 1994. Mr. Paulk has been engaged in the oil and gas industry
for more than fifteen years. He was President of ANEC from its inception in
1985 until his resignation in September 1994 after its acquisition by Alexander
Energy Corporation in July 1994.
JOHN L. RAINWATER: Mr. Rainwater was elected Vice President of Corporate
Development in October 1994 and a Director of the Company in April 1995. From
June 1992 until he joined the Company in October 1994, Mr. Rainwater was an
independent petroleum consultant. From January 1990 through June 1992, Mr.
Rainwater was the President of Eberle, Rainwater & Associates, a financial
management corporation specializing in mergers and acquisitions and funding
activities. Mr. Rainwater resigned as President of the firm in June 1992 and it
commenced a proceeding in March 1993 under the Federal Bankruptcy laws.
MORTON A. COHEN: Mr. Cohen was elected a Director of the Company in
October 1995. Mr. Cohen has been, for more than ten years, the President and
Chairman of Clarion Capital Corporation, a small business investment company.
Mr. Cohen is a Director of Zemec Corporation, Abaxis, Inc., Montek Technologies,
Inc., and Cohesant Technologies, Inc.
BRIAN E. BAYLEY: Mr. Bayley was elected a Director of the Company in
February 1996. He has been President of Quest Oil & Gas, Inc. ("Quest")
(formerly known as Quest Capital Corporation) since October 1990 and for the
four years prior thereto was its Vice-President of Corporate Administration.
Mr. Bayley is a Director of a number of other corporations, none of which are
reporting companies under the Securities Exchange Act of 1934, as amended.
- 3 -
<PAGE>
DIRECTOR AND OFFICER SECURITIES REPORTS
The Federal securities laws require the Company's Directors and executive
officers, and persons who own more than ten percent (10%) of a registered class
of the Company's equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
any equity securities of the Company. Copies of such reports are required to be
furnished to the Company. To the Company's knowledge, based solely on a review
of the copies of such reports and other information furnished to the Company,
all persons subject to these reporting requirements filed the required reports
on a timely basis with respect to the Company's year ended December 31, 1996.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
during the Company's three fiscal years ended December 31, 1996 to the Company's
chief executive officer and all other executive officers who received
compensation exceeding $100,000 and who served in such capacities at December
31, 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
- -----------------------------------------------------------------------------------------
COMPENSATION
-----------------------------
OTHER LONG-TERM
NAME AND ANNUAL AWARD'S OPTION ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMP. (#) COMP.
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Michael K. Paulk 1996 $107,458 /(1)/ -0- -0- 125,000 -0-
1995 $ 96,000 -0- -0- -0- -0-
1994 $ 16,000 /(2)/ -0- -0- 250,000 -0-
John Rainwater 1996 $107,458 /(1)/ -0- -0- 125,000 -0-
1995 $ 96,000 -0- -0- -0- -0-
1994 $ 16,000 /(2)/ -0- -0- 250,000 -0-
</TABLE>
- ---------------------------
(1) Excludes bonuses aggregating $100,000 proposed to be paid to Messrs. Paulk
and Rainwater as compensation for 1996, the amount of which is to be determined
by the Compensation Committee of the Board of Directors
subsequent to the date of this Proxy Statement.
(2) Messrs. Paulk and Rainwater were elected executive officers of the Company
on October 31, 1994.
- 4 -
<PAGE>
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996.
- ----------------------------------------------
The following table provides information with respect to the above named
executive officers regarding options granted to such persons during the
Company's year ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL OPTIONS/ EXERCISE MARKET
SECURITIES SARS GRANTED TO OR PRICE ON
UNDERLYING SARS/ EMPLOYEES IN BASE PRICE DATE OF
NAME OPTIONS GRANTED (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE GRANT
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Michael K. Paulk 125,000 /(1)/ 29.8% $2.56 7/16/2001 $2.56
John Rainwater 125,000 /(1)/ 29.8% $2.56 7/16/2001 $2.56
</TABLE>
- --------------------------
(1) Of which, options to purchase 62,500 shares become exercisable on July 16,
1997 and options to purchase 62,500 shares become exercisable on July 16,1998,
provided, however, such options become immediately fully exercisable in the
event of a "change of control," as defined, of the Company.
STOCK OPTION HOLDINGS AT DECEMBER 31, 1996.
- ------------------------------------------
The following table provides information with respect to the above named
executive officers regarding Company options held at the end of the Company's
year ended December 31, 1996 (such officers did not exercise any options during
the most recent fiscal year).
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31,1996 AT DECEMBER 31, 1996 /(1)/
- --------------------------------------------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michael K. Paulk 250,000 /(2)/ --- -0- -0-
--- 125,000 /(3)/ -0- -0-
John Rainwater 250,000 /(2)/ --- -0- -0-
--- 125,000 /(3)/ -0- -0-
</TABLE>
- ----------------------------
(1) Based on the closing sales price on December 31,1996 of $2.375.
(2) Exercisable at $2.50 per share.
(3) Exercisable at $2.56 per share.
- 5 -
<PAGE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements expiring December 31,
1999, with each of Michael Paulk and John Rainwater pursuant to which they are
employed as the President and Vice-President, respectively, of the Company.
Messrs. Paulk and Rainwater receive base salaries of $121,000 and $121,000 per
year, respectively, plus such additional amounts as may be determined from time
to time by the Company's Board of Directors. In addition, such persons are to
receive a cash bonus as may be determined by the Company's Board of Directors.
Messrs. Paulk and Rainwater are also entitled to participate in such incentive
compensation and benefit programs as the Company makes available. The Company
has the right to terminate the employment agreements at any time upon 45 days
notice and, unless the agreement has been terminated for cause, as defined, the
Company is obligated to pay such persons the sum of $200,000 together with any
sums unpaid under the terms of the employment agreements and continue such
persons' medical insurance in effect for a period of one year after such
termination. In the event of a change in control, as defined, of the Company,
Messrs. Paulk and Rainwater each have the right to terminate their employment
agreements with the Company within 60 days thereafter and the Company is
obligated to pay to each of such persons the same sums and other benefits
described above as if such agreements had been terminated by the Company without
cause. The agreements also contain certain provisions restricting such persons
from engaging in business activities in competition with the Company.
DIRECTORS COMPENSATION
Directors of the Company do not receive any compensation for serving in
that capacity; however, they are reimbursed for their out-of-pocket expenses in
attending meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 21, 1995, Quest Oil & Gas, Inc. ("Quest"), of which Mr. Bayley, a
Director of the Company, is an officer, Director and shareholder, loaned to the
Company the sum of $1,850,000 to fund payment of the purchase price for an
option entered into by the Company in March 1995 to purchase Buttonwood Energy
Corporation. The loan of Quest to the Company bore interest at 1% per month and
was secured by a mortgage on the properties acquired from The Egolf Company and
certain affiliated entities on January 19, 1995 (the "Egolf Acquisition"). The
Loan Agreement
- 6 -
<PAGE>
provided that if the indebtedness was not repaid in full on or before June 30,
1995, on the first day of each of the months of July 1 through October 1, 1995,
the Company was to issue to Quest an additional 25,000 shares of Common Stock
and, so long thereafter as the loan remained unpaid, on the first day of each
month thereafter the Company was to issue to Quest 40,000 shares of Common
Stock. The loan was repaid on January 30, 1996 and from March 21, 1995 through
January 1, 1996 the Company issued to Quest pursuant to this agreement an
aggregate of 320,000 shares of its Common Stock.
On January 30, 1996, Quest exchanged $1,290,000 principal amount of the
loan from Quest for 1,290 shares of the Company's 7-1/2% Cumulative Convertible
Preferred Stock. After reflecting the exchange of $1,290,000 principal amount
for 1,290 shares of 7-1/2% Cumulative Convertible Preferred Stock, the remaining
$560,000 of principal and accrued interest of $173,000 on the loan and other
obligations aggregating $92,000 owing to Quest under its agreement to receive
10% of the net profits from revenues generated from the sale of minerals on the
properties acquired in the Egolf Acquisition and for reimbursement of legal fees
was replaced with a Subordinated Note in the principal amount of $825,000
bearing interest at 7-1/2% per annum, due, together with all accrued interest
thereon, ten years from its date of issuance. The $825,000 note was prepaid on
March 13, 1996.
On November 14, 1995, each of Quest and Epoch Capital Corporation purchased
the Company's secured notes in the principal amount of $333,333 and common stock
purchase warrants to purchase 83,333 shares of the Company's Common Stock at an
exercise price of $2.40 per share. A third person not otherwise affiliated with
the Company also purchased $333,333 principal amount of such notes and warrants
to purchase 83,333 shares of Common Stock. The proceeds were used by the
Company to fund the payment of $1,000,000 of the purchase price for a second
option entered into in September 1995 to acquire Buttonwood Energy Corporation
concurrently with the termination of the option entered into in March 1995. The
notes were repaid on January 30, 1996 and bore interest at 1% per month,
compounded monthly.
In connection with the acquisition on May 31, 1995 from Johnson Ranch
Partners and an affiliated entity of certain oil and gas assets (the "Johnson
Ranch Acquisition"), the Company entered into a Loan Agreement with Stratum
Group, L.L.C. ("Stratum") pursuant to which the Company was able to borrow up to
$8,131,500. This loan, outstanding in the amount of $6,575,000 at the time, was
repaid in full on January 30, 1996. As partial consideration for making the
loan, the Company issued to Stratum five year common stock purchase warrants to
purchase an aggregate of 1,000,000
- 7 -
<PAGE>
shares of the Company's Common Stock exercisable, with respect to 500,000
shares, at $3.50 per share and, as to the remaining 500,000 shares, at $4.00 per
share. Effective February 7, 1996, the Company and Stratum agreed to amend the
terms of such warrants to grant to Stratum the right, commencing June 2, 1996,
to demand registration under the Securities Act of 1933, as amended, of the
warrants and shares of Common Stock issuable on exercise thereof. The right was
granted to Stratum in consideration of it agreeing not to exercise its right to
have its warrants and shares of Common Stock included in a registration
statement filed by the Company which became effective on January 26, 1996. As
additional consideration for making the loan in May 1995, the Company conveyed
to Stratum an overriding royalty interest of 7% in the properties acquired in
the Johnson Ranch Acquisition. Through May 15, 1996, Stratum was paid $122,109
pursuant to this royalty interest. On May 15, 1996 the Company completed the
acquisition of Stratum's 7% overriding royalty interest for a purchase price of
$800,000 and a reduction of the exercise price on Stratum's 1,000,000 Common
Stock Purchase Warrants to $3.25 per share.
Concurrently with entering into the Stratum Loan Agreement, the Company
entered into an Oil Purchase and Sale Agreement with Stratum whereby Stratum was
obligated to purchase and the Company was obligated to sell, over the five years
ending June 30, 2000, certain minimum monthly quantities of crude oil produced
from the properties acquired. The purchase price for the minimum amounts of
crude oil purchased was fixed at $17.16 per barrel, based on the market price at
the time with adjustments for a location differential and transaction cost.
The Company also entered into an agreement with Stratum pursuant to which the
Company was obligated to pay to Stratum monthly during the five years ending
June 30, 2000, the amount by which the market price prevailing on the date of
computation for specified quantities of natural gas ranging from 22,167MmBtu to
32,614MmBtu per month exceeds $1.875 per MmBtu, and Stratum was obligated to pay
to the Company the amount by which such price specified for the quantities of
natural gas is less than $1.875 per MmBtu. Effective January 30, 1996, the Oil
Purchase and Sale Agreement with Stratum was amended to delete the obligations
of Stratum and the Company to purchase and sell oil and the agreement relating
to natural gas was canceled.
The Company has agreed with Bank One, Texas, N.A. under the terms of its
Credit Facility that in the event certain promissory notes owing to the bank by
Messrs. Michael Paulk and John Rainwater in the aggregate amount of $316,000 are
not paid when due on December 31, 1997, such amounts will be drawn against the
Company's Credit Facility and Messrs. Paulk and Rainwater will be obligated to
the Company for such sums.
- 8 -
<PAGE>
Management of the Company believes, based on negotiations that occurred at
the time, that the foregoing transactions were no less favorable to the Company
than could have been obtained at the time and under the circumstances from non-
affiliated persons. All future and on-going transactions between the Company
and its officers, Directors and principal stockholders or affiliates will be on
terms no less favorable to the Company than may be obtained from unaffiliated
third parties, and any such transactions will be approved by a majority of the
disinterested Directors of the Company.
- 9 -
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Set forth below is information concerning the Common Stock ownership of all
persons known by the Company to own beneficially 5% or more of the Company's
Common Stock, and the Common Stock ownership of each Director of the Company and
all Directors and officers of the Company as a group, as of March 5, 1997. As
of March 5, 1997, the Company had 12,395,857 shares of Common Stock outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL
HOLDER, IDENTITY OF GROUP /(1) (2)/ AMOUNT PERCENT OF CLASS
- --------------------------------------------------------------------------------
<S> <C> <C>
Michael Paulk 486,976 /(3)/ 3.8%
John Rainwater 483,916 /(3)/ 3.8%
John Fleming 150,000 /(4)/ 1.2%
Morton A. Cohen 500,000 /(5)/ 3.9%
Brian E. Bayley 150,000 /(6)/ 1.2%
Kuhlen Capital, L.P. /(7)/ 1,000,000 8.1%
45 Rockefeller Plaza 9/th/ Floor
New York, New York 10111
Stratum Group, L.L.C. /(7)/ 1,000,000 /(8)/ 7.5%
650 Fifth Avenue
New York, New York 10019
Cambridge Investments, Ltd. /(7)/ 1,161,800 9.4%
600 Montgomery Street - 27/th/ Floor
San Francisco, California 94111
Quest Oil & Gas, Inc. 2,229,497 /(9)/ 16.3%
1095 West Pender Street-Suite 850
Vancouver, British Columbia,
Canada V6E 2M6
All Officers and Directors as a Group 1,517,832 12.0%
(5 persons)
</TABLE>
________________________________
(1) This tabular information is intended to conform with Rule 13d-3 promulgated
under the Securities Exchange Act of 1934 relating to the determination of
beneficial ownership of securities. The tabular information gives effect
to the exercise of warrants or options exercisable within 60 days of the
date of this table owned in each case by the person or group whose
percentage ownership is set forth opposite the respective percentage and is
based on the assumption that no other person or group exercise their
option.
- 10 -
<PAGE>
(2) The address of Messrs. Paulk and Rainwater is c/o the Company, 5727 South
Lewis Avenue, Suite 700, Tulsa, Oklahoma 74105. The address of Mr. Fleming
is 1500, 340 12th Avenue SW, Calgary, Alberta T2R 1L5. The address of Mr.
Cohen is c/o Clarion Capital Corporation, Ohio Savings Plaza, Suite 510,
1801 East Ninth Street, Cleveland, Ohio 44114. The address of Mr. Bayley
is c/o Quest Oil & Gas, Inc., 1095 West Pender Street - Suite 850,
Vancouver, British Columbia, Canada V6E 2M6.
(3) Includes 250,000 shares issuable upon exercise of options at an exercise
price of $2.50 per share of which options to purchase 125,000 shares became
exercisable on October 31, 1995 and options to purchase the remaining
125,000 shares become exercisable on October 31, 1996. Also includes
125,000 shares issuable upon exercise of options at an exercise price of
$2.56 per share of which options to purchase 62,500 shares become
exercisable on July 16, 1997 and options to purchase the remaining 62,500
shares become exercisable on July 16, 1998. In the event of a "change of
control" of the Company, as defined in the option agreement, such remaining
options become immediately exercisable.
(4) Includes 100,000 shares issuable on exercise of options at an exercise
price of $1.50 per share which are exercisable during the five-year period
beginning July 11, 1996 and 50,000 shares issuable on exercise of options
at an exercise price of $2.56 per share which are exercisable during the
five-year period beginning July 16, 1997. The securities beneficially
owned by Quest, of which Mr. Fleming is a Director and minority
shareholder, or by Marlco, Inc., a wholly owned subsidiary of Quest. Mr.
Fleming disclaims beneficial ownership of the shares held by both Quest and
Marlco, Inc. See Note 11 below.
(5) Represents shares held by Clarion Capital Corp., of which Mr. Cohen is an
officer, Director and principal shareholder. Such amount also includes
250,000 shares issuable on conversion of 500 shares of 7 1/2% Cumulative
Convertible Preferred Stock held by Clarion Capital, Inc. Also includes
150,000 shares issuable on exercise of options at an exercise price of
$2.56 per share which are exercisable during the five-year period beginning
July 11, 1996 held by Mr. Cohen.
(6) Includes 150,000 shares issuable on exercise of options at an exercise
price of $2.56 per share which are exercisable during the five-year period
beginning July 11, 1996. Does not include the securities held by Quest of
which Mr. Bayley is Secretary, a Director and holds 11.3% of the shares
outstanding. Mr. Bayley disclaims beneficial ownership of such shares.
(7) Based on information contained in Schedule 13D provided by such person.
(8) Issuable on exercise of common stock purchase warrants at $3.25 per share.
The general partner of Stratum Group, L.P. is Stratum Finance, L.L.C. and
the members of Stratum Finance, L.L.C. are Energy Investment Partners, a
New York general partnership, Joseph M. Rinaldi, Michael W. Walker, Richard
E. Bani, John C. Alvardo, Curt S. Taylor, and Betsy D. Cotton. Stratum
Finance, L.L.C. is managed by Energy Investment Partners, which has four
votes, Joseph M. Rinaldi, who has one vote, and Michael W. Walker,
appointed by the natural person members of Stratum Finance, L.L.C., who has
one vote. Energy Investment Partners has three general partners, SGLLC
Partners, L.P. ("SGLLC"), SGLLC Partners Offshore, L.P. ("Offshore") and
The Beacon Group Energy Investment Fund, L.P. ("Fund"). The sole general
partner of each of SGLLC and Offshore is SG-GP, L.P. whose sole general
partner is Energy Fund GPI, Inc. ("GPI"). The sole general partner of Fund
is Beacon Energy Investors, L.P. ("Investors"). The sole general partner
of Investors is BEIGP, Inc. ("BEIGP"). The names of the officers and
Directors of both GPI and BEIGP are Geoffrey Boisi, John McWilliams,
Preston Miller, bHarold Pote, Faith Rosenfeld, Robert Semmens, David
Remmington, Thomas Mendell and Frank Murray.
(9) Includes 300,000 shares issuable on exercise of common stock purchase
warrants exercisable at $1.00 per share, 333,331 shares issuable, on
exercise of common stock purchase warrants exercisable at $2.40 per share
which become exercisable January 26, 1997 and, based on a conversion price
calculated as of January 21, 1997 at $2.00 per share, 645,000 shares
issuable on conversion of 1,290 shares of 7-1/2% Cumulative Convertible
Preferred Stock. By virtue of their ability to direct the voting and
disposition of such shares, the Board of Directors of Quest Oil & Gas, Inc.
may be deemed to be the beneficial owner of such shares. The Board of
Directors of Quest Oil & Gas, Inc. includes Brian E. Bayley, John Fleming,
John Craig, Barry Harrison, Harry Steele, A. Murray Sinclair, Jr., and
Thomas Swartwood. Based on information provided by Quest Oil & Gas, Inc.,
the only beneficial holders of more than 5% of the outstanding shares of
Quest Oil & Gas, Inc. are Brian E. Bayley, who holds 5.0%, John Fleming,
who holds 5.0%, and A. Murray Sinclair, Jr., who holds 5. 7%.
- 11 -
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors has a Compensation Committee consisting of
Messrs. Fleming, Paulk and Cohen and an Audit Committee consisting of Messrs.
Fleming and Bayley. The Compensation Committee makes determinations on behalf
of the Board of Directors concerning salaries and incentive compensation for
officers and employees of and consultants to the Company. The Audit Committee
will consider the retention of the Company's independent accountants, review the
Company's annual financial statements and discuss the financial statements with
the Company's independent accountants, review the independence of accountants
conducting the audit, review the services of independent accountants, discuss
with management and the independent accountants the Company's accounting system
and related systems of internal control and consult as necessary with the
independent accountants and the Company's financial staff. The Board of
Directors does not have a nominating committee.
The Company's Board of Directors held six (6) meetings during the year
ended December 31, 1996. The audit, compensation and nominating committees held
no meetings in 1996.
SUBMISSION OF SHAREHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the Company's 1998 Annual Meeting and which such shareholders
desire to have included in the Company's proxy statement and form of proxy
relating to that meeting must be sent to the Company's executive office and
received by the Company not later than December 14, 1997.
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<PAGE>
GENERAL
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by use of the mails, certain officers and regular employees may
solicit proxies personally and by telephone and the Company will request banks,
brokerage houses and nominees and fiduciaries to forward soliciting material to
their principals and will reimburse them for their reasonable out-of-pocket
expenses.
The Company's Annual Report on Form 10-KSB for the year ended December 31,
1996, including financial statements, is being mailed to shareholders herewith.
By Order of the Board of Directors
John Rainwater, Secretary
Dated: March 14, 1997
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<PAGE>
APPENDIX: FORM OF PROXY
GOTHIC ENERGY CORPORATION
5727 South Lewis Avenue - Suite 700
Tulsa, Oklahoma 74105
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mr. Michael K. Paulk and Mr. John L.
Rainwater, and each of them, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and vote, as designated
below, all the shares of common stock of Gothic Energy Corporation held of
record by the undersigned on March 5, 1997 at the annual meeting of shareholders
to be held on April 22, 1997 or any adjournment thereof.
1. Election of Directors
[_] For all nominees listed below (except as marked to contrary
below)
[_] Withhold Authority to vote for all nominees listed below
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
John J. Fleming Morton A. Cohen
Michael K. Paulk Brian E. Bayley
John L. Rainwater
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
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<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, AS EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated: , 1997
--------------- ----------------------------------------
Signature
Title (if required)
----------------------------------------
Signature (if held jointly)
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