<PAGE>
_______________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
FRONTIER NATURAL GAS CORPORATION
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1421000
(State of incorporation) (I.R.S. Employer Identification Number)
9400 NORTH BROADWAY, SUITE 120
ONE BENHAM PLACE
OKLAHOMA CITY, OKLAHOMA 73114
(Address of registrant's principal executive offices, including zip code)
Registrant's telephone number, including area code: (405) 478-4455
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 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:
_______________________________________________________________________
[X] Fee paid previously with preliminary materials.
<PAGE>
FRONTIER NATURAL GAS CORPORATION
9400 NORTH BROADWAY
ONE BENHAM PLACE
OKLAHOMA CITY, OKLAHOMA 73114
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 1996
TO OUR SHAREHOLDERS:
The 1996 Annual Meeting of Shareholders of Frontier Natural Gas
Corporation, an Oklahoma corporation (the "Company"), will be held at the
Corporate Offices of Frontier Natural Gas Corporation, 9400 North Broadway, One
Benham Place, Suite 120, Oklahoma City, Oklahoma 73114 on Thursday, June 6,
1996, at 10:00 a.m., local time, for the following purposes:
1. To elect directors for terms expiring in 1996;
2. To approve an amendment to Article VII of the Company's Certificate of
Incorporation to correct a typographical error which currently reads
"The number of Directors of this Corporation shall be no less than
four (4) and no less than eight (8)" to read "The number of Directors
----
of this Corporation shall be no less than four (4) and no more than
----
eight (8).
3. To approve the Stock Incentive Option Plan - 1996;
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on April 22, 1996 are
entitled to notice of and to vote at the meeting. A complete list of the
shareholders entitled to vote at the meeting will be available for examination
by any shareholder at the Company's executive offices, during ordinary business
hours, for a period of at least ten days prior to the meeting.
The accompanying Proxy Statement contains information regarding the matters
to be considered at the meeting. For reasons outlined therein, the Board of
Directors recommends a vote "FOR" the matters being voted upon.
YOUR PROXY IS IMPORTANT TO ASSURE A QUORUM AT THE MEETING. WHETHER OR NOT
YOU EXPECT TO ATTEND THE MEETING, PLEASE BE SURE THAT THE ENCLOSED PROXY IS
PROPERLY COMPLETED, DATED, SIGNED AND RETURNED WITHOUT DELAY IN THE ENCLOSED
ENVELOPE. IT REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS,
\s\
David W. Berry,
President
Oklahoma City, Oklahoma
May 6, 1996
_______________________________________________________________________________
<PAGE>
FRONTIER NATURAL GAS CORPORATION
_____________
PROXY STATEMENT
_____________
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 6, 1996
GENERAL INFORMATION
This Proxy Statement is furnished to the stockholders of Frontier
Natural Gas Corporation, an Oklahoma corporation (the "Company"),in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at the Annual Meeting of Shareholders of the Company (the "Meeting") to be
held on the date, at the time and place and for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders, and any adjournment of
the Meeting.
This Proxy Statement and accompanying form of proxy, along with the
Company's Annual Report for its fiscal year ended December 31, 1995, are first
being mailed to holders of the Company's $.01 par value common stock ("Common
Stock") on or about May 6, 1996. Shareholders are referred to the Annual Report
for financial information concerning the activities of the Company.
The Board of Directors has established April 22, 1996 as the record
date (the "Record Date") to determine shareholders entitled to notice of and to
vote at the Meeting. At the close of business on the Record Date, 5,058,406
shares of Common Stock were outstanding. Each share is entitled to one vote. The
holders of a majority of the outstanding Common Stock, present in person or by
proxy, will constitute a quorum for the transaction of business at the Meeting.
Each proxy which is properly signed, dated and returned to the Company
in time for the Meeting, and not revoked, will be voted in accordance with
instructions contained therein. If no contrary instructions are given, proxies
will be voted "FOR" each item to be voted upon. Proxies may be revoked at any
time prior to their being exercised by delivering a written notice of revocation
or a later dated proxy to the Secretary of the Company. In addition, a
shareholder present at the Meeting may revoke his or her proxy and vote in
person.
Election of the director nominees will be by plurality vote. Approval
of each of the other matters require the affirmative vote of at least a majority
of votes cast at the Meeting on such matters. The Company's Secretary will
appoint an inspector of election to tabulate all votes and to certify the
results of all matters voted upon at the Meeting. It is the Company's policy
(i) to count abstentions and broker non-votes for purposes of determining the
presence of a quorum at the Meeting; (ii) to treat abstentions as shares
represented at the Meeting and voting against a proposal and to disregard broker
-----------------------------
non-votes in determining results on proposals requiring a majority vote; and
(iii) to consider neither abstentions nor broker non-votes in determining
results of plurality votes.
The cost of soliciting proxies in the enclosed form will be borne by
the Company. In addition to solicitation by mail, officers, employees or agents
of the Company may solicit proxies personally, or by telephone, telegraph,
facsimile transmission or other means of communication. The Company will request
banks and brokers or other similar agents or fiduciaries to transmit the proxy
material to the beneficial owners for their voting instructions and will
reimburse them for their expenses in so doing.
ELECTION OF DIRECTORS
Pursuant to provisions of the Company's Certificate of Incorporation
and Bylaws, the Board of Directors
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has fixed the number of directors at seven. The Company's Certificate of
Incorporation and Bylaws provide for three classes of directors serving
staggered three-year terms, with each class to be as nearly equal in number as
possible. There are currently vacancies in the board seats which terms expire
in 1997 and 1998. The Board currently consists of five directors, three of whom
have terms which expire at the Annual Meeting, with the remaining two directors
serving terms which expire in 1997 and 1998, respectively. In order to more
equally distribute the number of directors among the three classes, two of the
three directors whose terms expire at the Annual Meeting have been nominated to
fill the vacancies existing in the class of directors whose terms expire in 1997
and 1998. Accordingly, the Board of Directors has nominated David B.
Christofferson to fill the vacant seat expiring in 1998, and has nominated
Jeffrey R. Orgill to fill the vacant seat expiring in 1997. David W. Berry is
being nominated for re-election as director for a three-year term expiring at
the 1999 Annual Meeting. In addition, S. Gordon Reese, Jr. has been nominated by
the Board of Directors to serve on the Board of Directors for a term expiring in
1999. The Board is continuing to search for a qualified and available nominee
to fill the remaining vacant board seat which, when filled, will have a term
expiring in 1999. If elected, the nominee will serve for the term indicated and
until his successor is duly elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR
ELECTION TO THE BOARD OF DIRECTORS. DIRECTORS ARE ELECTED BY PLURALITY VOTE.
ALL DULY SUBMITTED AND UNREVOKED PROXIES IN THE FORM ACCOMPANYING THIS PROXY
STATEMENT WILL BE VOTED FOR THE NOMINEES SELECTED BY THE BOARD OF DIRECTORS,
EXCEPT WHERE AUTHORIZATION TO VOTE IS WITHHELD.
It is the intention of the persons named in the enclosed form of proxy
to vote such proxy for the election of the nominees. The Board of Directors
expects that the nominees will be available for election but, in the event that
any nominee is not so available, proxies received will be voted for a substitute
nominee to be designated by the Board of Directors or, in the event no such
designation is made by the Board, proxies will be voted for a lesser number of
nominees.
INFORMATION REGARDING NOMINEES AND DIRECTORS
The following information is furnished for each person who is
nominated for election as a director or who is continuing to serve as a director
of the Company after the Meeting.
NOMINEE AS DIRECTOR FOR TERM EXPIRING 1999
S. GORDON REESE, JR., age 46, Vice President - Gulf Coast Region,
received his degree in Petroleum Engineering and Geology from Louisiana State
University in 1971. From 1982 until joining Frontier, Mr. Reese has been the
managing general partner of Reese Production Co. He is a Vice President of the
Independent Petroleum Association of America.
NOMINEE FOR RE-ELECTION AS DIRECTOR FOR TERM EXPIRING IN 1999
DAVID W. BERRY age 46, Chairman of the Board and President is
responsible for overall corporate direction, corporate management, capital
formation, and asset acquisitions and has served as President since the
Company's inception in 1988 and as Chairman of the Board since 1991.
NOMINEE FOR RE-ELECTION AS DIRECTOR FOR TERM EXPIRING IN 1998
DAVID B. CHRISTOFFERSON, age 48, Executive Vice-President, General
Counsel and a Director, received his BS in Finance and Juris Doctorate from the
University of Oklahoma. Mr. Christofferson has served as General Counsel and
Director since 1989. He also received a Masters of Divinity degree with Magna
Cum Laude honors from Phillips University. Mr. Christofferson has been active in
the natural gas and oil industry for over 15 years.
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NOMINEE FOR RE-ELECTION AS DIRECTOR FOR TERM EXPIRING IN 1997
JEFFREY R. ORGILL, age 51, Vice-Chairman of the Board has served in
such capacity since June 1988. Mr. Orgill also has served as Vice-President of
Exploration and Production for the Company from June 1988 through May 1, 1996.
Mr. Orgill will become a consultant to the Company on May 1, 1996. Mr. Orgill
received his education and background in geology and natural gas and oil
exploration. Mr. Orgill has BS and MS degrees in Geology with 25 years of
industry experience.
DIRECTOR WHOSE TERM EXPIRES IN 1998
NEAL M. ELLIOTT, age 56, a Director of Frontier since September 1991,
is also Chairman of the Board, President and Chief Executive Officer of Horizon-
CMS Healthcare Corp. Horizon, which is publicly-traded on the New York Stock
Exchange, operates extended nursing care facilities and acute rehabilitation
hospitals in over 250 locations nationwide. He joined Horizon-CMS Healthcare
Corp. upon its formation in 1987. Mr. Elliott has a BA degree from Stanford
University and an MA from Columbia University. His background includes public
accounting with Price Waterhouse, as well as executive senior management duties
for major health care providers. Mr. Elliott also serves as a director of LTC
Properties, a publicly held healthcare real estate investment trust and as a
trustee for Baron Asset Fund, a mutual fund.
DIRECTOR WHOSE TERM EXPIRES IN 1997
ALLEN H. SWEENEY, age 49, has served as a Director of the Company
since September 1993. He received his Bachelor of Science degree in Accounting
from Oklahoma State University in 1969 and his MBA from Oklahoma City University
in 1972. Mr. Sweeney has 25 years of experience in the natural gas and oil
industry. He started his career with Sohio as a Systems and Procedures Analyst.
Mr. Sweeney has served as the Controller of Lyco Energy Corp. in Dallas, Texas,
Vice President of Finance of Plains Resources, Inc. and Treasurer/Chief
Accounting Officer of Phoenix Resources, Inc., both of Oklahoma City. Sohio,
Lyco Energy Corp., Plains Resources, Inc. and Phoenix Resources Company are all
oil and gas exploration companies. Mr. Sweeney currently owns his own consulting
firm. Mr. Sweeney also serves as a director of Panaco Inc., a publicly traded
oil and gas exploration company.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors held two meetings and acted two times by
consent without a meeting during the Company's fiscal year ended December 31,
1995. The Board of Directors has a standing Compensation Committee. It does
not have a standing nominating committee.
The duties of the Compensation Committee are to determine the
salaries, bonuses and other remuneration of the executive officers. The
Compensation Committee may make recommendations to the Board of Directors with
respect to the Company's compensation policy. Mr. Elliott serves as Chairman of
the Compensation Committee and Mr. Sweeney comprises the remaining Committee
member. The Compensation Committee held no meetings during the fiscal year
ended December 31, 1995.
Each director attended at least 75% of the total number of Board and
committee meetings held while serving as a director or committee member during
fiscal year 1995.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The table below sets forth as of the Record Date (i) the name and
address of each person known by management to own beneficially more than 5% of
the Company's outstanding Common Stock, the number of shares beneficially owned
by each such shareholder and the percentage of outstanding shares owned and (ii)
the number and percentage of outstanding shares of Common Stock beneficially
owned by each of the Company's
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nominees, directors, executive officers listed in the Summary Compensation Table
below and by all directors and executive officers of the Company as a group.
Unless otherwise noted, the persons named below have sole voting and investment
power with respect to such shares.
<TABLE>
<CAPTION>
COMMON STOCK
------------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNERS SHARES CLASS(1)
- - ----------------- --------- -------------
<S> <C> <C>
David W. Berry* (2)(3) 684,370 13.5%
Jeffrey R. Orgill*(2)(4) 603,000 11.9%
David B. Christofferson*(2)(5) 212,000 4.1%
Neal M. Elliott*(2)(6) 74,750 1.5%
S. Gordon Reese, Jr.**(2)(8) 8,000 0.2%
Allen H. Sweeney*(2)(7) 4,000 0.1%
All executive officers and directors as a group(3)(4)(5)(6)(7)(8) 1,586,120 30.1%
Hi-Chicago Trust(9)(10) 667,200 12.5%
- - -----------------------
</TABLE>
* Director
** Nominee Director
(1) Percent of class for any stockholder listed is calculated without regard to
shares of Common Stock issuable to others upon exercise of outstanding
stock options, warrants or subscriptions for Common Stock. Any shares a
stockholder is deemed to own by having the right to acquire by exercise of
an option, warrant or by subscription are considered to be outstanding
solely for the purpose of calculating that stockholder's ownership
percentage.
(2) Address is c/o Frontier Natural Gas Corporation, One Benham Place, 9400
North Broadway, Oklahoma City, Oklahoma 73114.
(3) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 24,000 shares of Common Stock which are currently exercisable by
Mr. Berry.
(4) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 24,000 shares of Common Stock which are currently exercisable by
Mr. Orgill.
(5) Includes options to purchase 132,000 shares of Common Stock granted
pursuant to the Company's Incentive Stock Option Plan and 24,000 options
granted pursuant to the Company's Stock Incentive Plan, which are currently
exercisable by Mr. Christofferson.
(6) Includes options granted pursuant to the Company's Stock Incentive Place to
purchase 4,000 shares of Common Stock which are currently exercisable by
Mr. Elliott.
(7) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 4,000 shares of Common Stock which are currently exercisable by
Mr. Sweeney.
(8) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 8,000 shares of Common Stock which are currently exercisable by
Mr. Reese.
(9) Includes 300,000 common stock purchase warrants exercisable at $3.00 per
share.
(10) Address is Two North LaSalle Street, Chicago, Illinois 60602.
The Company also has outstanding 85,691 shares of its Preferred Stock. Each
share of Preferred Stock
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is convertible into two shares of Common Stock and two Common Stock Warrants. No
director, director nominee, or any of the above referenced officers own any
shares of Preferred Stock. The Hi-Chicago Trust owns 2,000 shares of Preferred
Stock representing 2.3% of said class.
COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers and any persons who own more than 10%
of a registered class of the Company's equity securities to file with the
Securities and Exchange Commission and Nasdaq reports of ownership and
subsequent changes in ownership of Common Stock and other securities of the
Company. Officers, directors and greater than 10% shareholders are required by
SEC regulation to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on review of the copies of such reports furnished to
the Company or written representations that no other reports were required, the
Company believes that, during 1995, all filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were timely made
except for one late filing by David B. Christofferson, Executive Vice President,
General Counsel and Director of the Company of a Form 4 reporting the sale of
Common Stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the cash compensation paid by the Company to
its Chief Executive Officer ("CEO") and each executive officer other than the
CEO who were serving as executive officers at the end of the last completed
fiscal year, and whose total annual salary and bonus for the last completed
fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------- ------------------------------
AWARDS OF ALL
OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (# OF SHARES) COMPENSATION
---- -------- ------- -------------- --------------
<S> <C> <C> <C> <C> <C>
David W. Berry 1995 $120,000 $ -0- -0- $ 8,367/(2)/
Chairman of the Board and 1994 120,000 -0- -0- 18,367/(2)/
President 1993 71,250 29,250 24,000/(1)/ 9,184/(2)/
Jeffrey R. Orgill 1995 120,000 -0- -0- 31,344/(2)/
Vice-Chairman of the Board 1994 120,000 -0- -0- 31,344/(2)/
and Vice-President of 1993 71,250 29,250 24,000/(1)/ 15,672/(2)/
Exploration and Production
David B. Christofferson 1995 95,000 5,000 -0- 20,090/(2)/
Director, Executive Vice- 1994 90,000 10,000 -0- 20,090/(2)/
President, Chief Financial 1993 70,000 30,000 24,000/(1)/ 10,045/(2)/
Officer, Secretary and General
Counsel
S. Gordon Reese, Jr. 1995 70,000 35,000 -0- -0-
Vice-President of Gulf Coast 1994 70,000 20,000 12,000/(3)/ -0-
Region 1993 70,000 30,000 -0- -0-
</TABLE>
(1) The total options include 24,000 options which are components of units in
the Company's Stock Incentive
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Plan. Each unit contains one option to purchase one share of Common Stock
(the "Plan Option") and one Stock Appreciation Right, representing the
right to receive a cash payment equal to twice the amount by which the fair
market value of the Common Stock on the date of exercise of the Plan Option
exceeds the exercise price thereof. Plan Options are granted with an
exercise price equal to the fair market value of the Common Stock on the
date of the grant; the exercise price of the Plan Options indicated is
$3.10 per share.
(2) Represents accrued liabilities of the Company pursuant to deferred
compensation benefits payable to the individual officers.
(3) The total options include 12,000 options which are components of units in
the Company's Stock Incentive Plan. Each unit contains one option to
purchase one share of Common Stock (the "Plan Option") and one Stock
Appreciation Right, representing the right to receive a cash payment equal
to twice the amount by which the fair market value of the Common Stock on
the date of exercise of the Plan Option exceeds the exercise price thereof.
Plan Options are granted with an exercise price equal to the fair market
value of the Common Stock on the date of the grant; the exercise price of
the Plan Options indicated is $3.50 per share.
STOCK OPTIONS GRANTED IN FISCAL 1995
No options to purchase Common Stock were granted in fiscal 1995 to the
executive officers named in the Summary Compensation Table.
No options were exercised by the Company's executive officers during the
fiscal year ended December 31, 1995. The following table sets forth information
about the unexercised options to purchase Common Stock held by Messrs. Berry,
Orgill, Christofferson and Reese at December 31, 1995.
FISCAL 1995 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of unexercised
Number of Unexercised in-the-money
Options at 12/31/95 Options at 12/31/95
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - ---- -------------------------- --------------------------
<S> <C> <C> <C> <C>
David W. Berry 16,000 8,000 $ 0 $ 0
Jeffrey R. Orgill 16,000 8,000 0 0
David B. Christofferson 148,000 56,000 181,500 77,000
S. Gordon Reese, Jr. 8,000 4,000 0 0
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with David W. Berry,
Jeffrey R. Orgill and David B. Christofferson ("Employees"). Each of these
agreements was effective July 1, 1993 and initially had a term extending to
December 31, 1995. Each agreement automatically renews for additional one-year
terms each December 31st unless terminated by either the Company or Employee.
Under these agreements, Messrs. Berry and Orgill will receive annual salaries of
$120,000, and Mr. Christofferson will receive an annual salary of $100,000. In
addition, each Employee shall be entitled to receive deferred compensation,
provided he remains employed by the Company until expiration of the initial term
of his agreement and has not been terminated for cause thereunder. The deferred
compensation shall be an annual payment equal to the product of $9,000
multiplied by the number of years Employee is employed by the Company beginning
with July 1, 1993 (up to a maximum of 10 years); payments commence the year the
Employee reaches 65 or retires from the Company, whichever is later. Deferred
payments shall be paid for a maximum of 15 years thereafter. In the event of
Employee's death or permanent disability during the term of his employment,
deferred compensation shall be
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paid to Employee or his estate beginning at the time of said death or
disability, in an aggregate amount computed as if Employee were employed for ten
years after July 1, 1993; provided, however, that any such payments pursuant to
Employee's disability will be reduced by the amount of any employer paid
insurance which pays disability payments to Employee. "Cause" for termination of
an Employee includes: the conviction of a felony; the perpetration of a fraud,
misappropriation or embezzlement of property of the Company; willful misconduct
with respect to the duties or obligations of Employee under his employment
agreement; or intentional or continual neglect of duties. Effective May 1,
1996, Mr. Orgill and the Company have agreed to the termination of the current
agreement. Mr. Orgill has resigned as Vice-President of Exploration and
Production as of May 1, 1996. He will continue to serve as a director and
consultant to the Company. Mr. Orgill entered into a Consulting Agreement with
the Company effective May 1, 1996 to March 31, 1998. Mr. Orgill will be paid
$10,000.00 per month under the terms of the agreement.
DIRECTORS' COMPENSATION
During the fiscal year ended December 31, 1995, directors who were not
officers of the Company were paid $1,000 for each Board of Directors' meeting
attended and, additionally, received an automatic grant of 2,000 Units under the
Company's Stock Incentive Plan (the "Incentive Plan"). Each Unit contains one
option to purchase one share of Common Stock (the "Plan Option") and one Stock
Appreciation Right, representing the right to receive a cash payment equal to
twice the amount by which the fair market value of the Common Stock on the date
of exercise of the Plan Option exceeds the exercise price thereof. Plan Options
are granted with an exercise price equal to the fair market value of the Common
Stock on the date of grant. Units in the Incentive Plan vest annually. Each
year directors who are not officers of the Company receive automatic grants of
Units under the Incentive Plan, which vest one year from the grant date. Each
of Messrs. Elliott and Sweeney were granted 2,000 Plan Units in September 1993
which vested in January 1994 and an additional 2,000 Units each in June 1995
which vest in June 1996. The exercise price of the 1994 Plan Options is $3.10
and $2.09 for the 1995 Plan Options. In January 1996, the Board of Directors
discontinued the automatic grant of 2,000 Units under the Incentive Plan. The
Board of Directors replaced the above automatic grant with an automatic grant of
options to purchase 6,000 shares of Common Stock of the Company pursuant to the
Stock Incentive Option Plan - 1996.
CERTAIN TRANSACTIONS
On December 22, 1992, the Company entered into a Consultant's Agreement with
Federman Associates, Inc. ("Federman Associates"), pursuant to which Federman
Associates agreed to provide financial consulting services to the Company and
the Company agreed to pay Federman Associates $3,000 per month for 36 months
commencing December 1992. In addition, Mr. H. L. Federman of Federman
Associates was granted 6,000 Plan Units under the Company's Incentive Plan.
Federman Associates was engaged to advise the Company relative to general
financing matters. These matters include structural and other issues involved
in the Company's private placement in February 1993 (the "Private Placement"),
its public offering in November 1993 and future financing needs. None of the
services provided by Federman Associates constitute underwriting, or acting as
an agent of the Company in connection with, the offer or sale of securities of
the Company. Mr. Federman is either the father or spouse of all of the
beneficiaries of the Hi-Chicago Trust, which, in the Private Placement,
purchased $400,000 in principal amount of Convertible Notes, and subscribed to
purchase an additional 107,200 shares of Common Stock at $1.68 per share. The
Convertible Notes held by the trust were converted into 200,000 shares of Common
Stock during 1994. On March 31, 1995, the subscribed shares of Common Stock
were purchased.
In 1995, Hi-Chicago Trust asserted a claim against the Company claiming that
the Company failed to take reasonable steps as required to timely register Hi-
Chicago Trust's stock obtained under the convertible note agreement. The
Company had an obligation to register within one year of its effective date of
the initial public offering, 275,000 shares of Common Stock issued or issuable
upon conversion of Convertible Notes, and an additional 147,400 shares subject
to subscriptions pursuant to an offering of securities in a private placement
7
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transaction effected in 1993. The registration statement registering such
shares was filed in January 1995 and was declared effective by the Securities
and Exchange Commission in May 1995. The Company and Hi-Chicago Trust agreed to
a settlement in December 1995 whereby the Company issued 75,000 shares of Common
Stock and a stock purchase warrant to purchase up to 300,000 shares of Common
Stock at an exercise price of $3.00 per share in settlement of the claim. The
warrant is exercisable through the earlier of 60 months from the settlement date
or for a period of 30 days after the closing bid price of the Company's stock
equals or exceeds $6.00 per share for sixty consecutive trading days. The
issued shares are unregistered and are subject to certain registration rights
The settlement provides for the issuance of additional shares of the Company's
stock if the Company does not promptly register the stock upon demand by Hi-
Chicago Trust. The Company recorded a loss of $96,093 related to this
settlement.
The Company's Board of Directors has adopted a policy whereby all
transactions or loans between the Company and its directors, officers, principal
stockholders or affiliates must be approved by a majority of the disinterested
directors of the Company and must be on terms no less favorable than those
obtained from unaffiliated parties.
AMENDMENT TO FRONTIER NATURAL GAS CORPORATION
CERTIFICATE OF INCORPORATION
CORRECTION OF TYPOGRAPHICAL ERROR
Article VII of the Certificate of Incorporation, relating to the Board of
Directors, currently contains the following requirement: "The number of
directors of this Corporation shall be no less than four (4) and no less than
eight (8), and such number may be determined from time to time under the Bylaws
or upon resolution of the Board of Directors." The phrase "no less than eight"
was intended to be and has been observed as "no more than eight." The Company's
Board of Directors has approved a proposed amendment to the Company's
Certificate of Incorporation to correct the above typographical error so that
the above sentence would be replaced with "The number of directors of this
Corporation shall be no less than four (4) and no more than eight (8), and such
number may be determined from time to time under the Bylaws or upon resolution
of the Board of Directors."
The Board of Directors believes the above amendment will have no effect on
the operations of the Company and is strictly being proposed to correct a
typographical error.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE AMENDMENT TO THE ARTICLES
OF INCORPORATION. THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE SHARES
PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING IS NECESSARY FOR
APPROVAL.
ADOPTION OF STOCK INCENTIVE OPTION PLAN - 1996
The Company's Board of Directors has adopted the Stock Incentive Option Plan
- - - 1996 (the "Plan") to continue to further the interests of the Company by
providing incentives for officers, directors and other key employees of the
Company who may be designated for participation in the Plan and to provide
additional means of attracting and retaining competent personnel. The Board of
Directors is requesting shareholder approval of the plan in order that said plan
may comply with certain guidelines of the Internal Revenue Code for a qualified
plan.
The Company previously had authorized and adopted the Management Incentive
Stock Option Plan, pursuant to which 120,000 Units have been granted. Under the
Management Incentive Stock Option Plan, each Unit consists of an option to
purchase one share of Common Stock and two stock appreciation rights ("SAR").
The Board of Directors has decided to cease issuing Units under the Management
Incentive Option Plan, for
8
<PAGE>
which 120,000 Units were ungranted, due to the potential for the SAR portion of
the plan to result in a negative impact on financial results by the requirement
to recognize expense for any cash payment which would be necessary as a result
of the SAR. The Board of Directors has developed the Plan to continue to offer
incentives to key personnel but without the SAR component.
The full text of the Plan appears in Exhibit A hereto. The principle
features of the Plan are outlined below and should be read in conjunction with
Exhibit A.
DESCRIPTION OF PLAN
The Plan is administered by the Compensation Committee of the Board of
Directors. Under the Plan, the Board may from time to time grant options to
purchase shares of Common Stock to key employees up to an aggregate of 350,000
shares. Each option grants the holder the right to purchase one share of Common
Stock at the exercise price which will be at least equal to the fair market
value of the Common Stock on the date of grant. Any terminated or expired
options will be available for future grant.
The Board shall determine and designate from time to time the employees of
the Company to whom options are to be granted and who thereby become
participants in the Plan. Options granted to officers and other key employees
are vested over a three year period with one-third of the option exercisable on
or after each of the three succeeding anniversary dates of the granting of the
option. The options are exercisable for a period of ten years from the date of
the grant. The Board may at its discretion set forth such other vesting and
exercise periods as it may from time to time establish. Options granted to
directors who are not full-time employees are determined initially by the Board
and automatically granted annually.
If the option holder's employment is terminated, the options terminate three
months after the date of termination. If the option holder dies, the options are
terminated six months after the date of death. The shares to be issued pursuant
to the Plan have not been registered with the Securities and Exchange
Commission.
The Board may amend, suspend, discontinue or terminate the Plan at its
discretion.
The following table discloses the options which have been granted to
purchase shares pursuant to the Stock Incentive Option Plan - 1996:
<TABLE>
<CAPTION>
NAME NUMBER OF UNIT
- - ---- --------------
<S> <C>
David W. Berry 120,000
David B. Christofferson 100,000
S. Gordon Reese, Jr. 85,000
-------
Total Options to be issued
to Executive Officers 305,000
Employee Group (1 employee) 20,000
</TABLE>
The option price, as determined by the Compensation Committee on the date of
grant, is $1.47 for all options other than those issued to David W. Berry. Mr.
Berry's option price is 110% plus $.01 of said $1.47 fair market value.
The shares of Common Stock to be issued upon exercise of the Plan Options
will not be registered under
9
<PAGE>
the Securities Act of 1933, as amended (the "Act"), in reliance upon the
exemptions from registration provided by Section 4(6) and/or Section 4(2) of the
Act. Of the 350,000 shares of Common Stock issuable under the Stock Option
Plan, 325,000 are issuable under Plan Options which have been granted (subject
to shareholder approval pursuant to this Proxy Statement) to directors and/or
executive officers of the Company, who are "accredited investors" within the
meaning of Rule 215 of the Act. Accordingly, the Common Stock underlying the
Plan Options granted to such individuals will be issued pursuant to the
exemption provided by Section 4(6) of the Act, which exempts sales made solely
to accredited investors. The remaining 25,000 shares of Common Stock issuable
under the Stock Option Plan are issuable under Plan Options which will be
granted, subject to shareholder approval, to key employees of the Company. The
Common Stock underlying the Plan Options granted to such individuals will be
issued pursuant to the exemption from registration provided by Section 4(2) of
the Act.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL OF THE ADOPTION OF THE STOCK
INCENTIVE PLAN - 1996. THE AFFIRMATIVE VOTE OF AT LEAST A MAJORITY OF THE
SHARES PRESENT IN PERSON OR REPRESENTED BY PROXY AT THE ANNUAL MEETING IS
NECESSARY FOR APPROVAL.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP served as the Company's independent accountants for
the year ended December 31, 1995 and 1994.
Representatives of Deloitte & Touche are expected to attend the Meeting.
They will have an opportunity to make a statement if they desire to do so, and
will be available to respond to shareholders' questions.
SHAREHOLDER PROPOSALS
At the annual meeting each year, the Board of Directors submits to
shareholders its nominees for election as directors. In addition, the Board of
Directors may submit other matters to the shareholders for action at the annual
meeting.
Shareholders of the Company also may submit proposals for inclusion in the
proxy material. These proposals must meet the shareholder eligibility and other
requirements of the Securities and Exchange Commission. In order to be included
in the Company's 1997 proxy material, a shareholder's proposal must be received
not later than December 1, 1996 by the Company at 9400 North Broadway, Suite
120, One Benham Place, Oklahoma City, Oklahoma 73114, Attention: Secretary.
In addition, the By-Laws provide that in order for business to be brought
before a shareholders' meeting, a shareholder's written notice must be delivered
to or mailed and received at the principal executive offices of the Company not
less than forty (40) days prior to the meeting; provided, however, that in the
event less than forty-five (45) days' notice or prior public disclosure of the
date of the meeting is given or made to shareholders, notice by the shareholder
must be so received not later than the tenth day following the day on which such
notice of the date of the meeting was mailed or such disclosure was made, but
not less than five days prior to the meeting. A shareholder's notice to the
Secretary shall set forth (a) a brief description of the business to be brought
before the meeting and the reasons for conducting such business at the meeting,
(b) the name and address, as they appear on the Company's books, of the
shareholder proposing such business, (c) the class and number of shares of the
Company which are beneficially owned by the shareholder, and (d) any material
interest of the shareholder in such business. Notwithstanding anything in the
By-Laws to the contrary, no business shall be conducted at a meeting except in
accordance with the procedures set forth in the By-Laws. The chairman of the
meeting shall, if the facts warrant, determine that business was not properly
brought before the meeting and in accordance with the provisions of Section 1.8
of the By-Laws, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
10
<PAGE>
In addition, nominations for the election of directors shall be made by the
Board of Directors or by any shareholder entitled to vote in the election of
directors generally. However, any shareholder entitled to vote in the election
of directors generally may nominate one or more persons for election as
directors at a meeting only if timely notice of such shareholder's intent to
make such nomination or shareholder's notice is delivered to or mailed and
received at the principal executive offices of the Company not fewer than forty
(40) days prior to the meeting, provided, however, that in the event that less
than forty-five (45) days' notice or prior public disclosure of the date of the
meeting is given or made to shareholders, notice by the shareholder to be timely
must be so received no later than the close of business on the tenth day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. Each notice shall set forth (a) the name and
address of the shareholder who intends to make the nomination and of the person
or persons to be nominated; (b) a representation that the shareholder is a
holder of record of stock of the Company entitled to vote for the election of
directors on the date of such notice and intends to appear in person or by proxy
at the meeting to nominate the person or persons specified in the notice; (c) a
description of all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by the
shareholder; (d) such other information regarding each nominee proposed by such
shareholders as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, had the
nominee been nominated, or intended to be nominated, by the Board of Directors;
and (e) the consent of each nominee to serve as a director of the Corporation if
so elected.
If the chairman of the meeting for the election of directors determines that
a nomination of any candidate for election as a director at such meeting was not
made in accordance with the applicable provisions of Section 2.9 of the By-Laws,
such nomination shall be void.
ANNUAL REPORT
This Proxy Statement is accompanied by the Annual Report for the fiscal year
ended December 31, 1995. Stockholders are referred to such report for financial
and other information about the activities of the Company, but such report is
not to be deemed a part of the proxy soliciting material.
FORM 10-KSB
The Company will provide without charge to each person to whom a copy of
this Proxy Statement is delivered, on the written request of any such person, a
copy of the Company's annual report on Form 10-KSB filed with the Securities and
Exchange Commission (not including exhibits to the Form 10-KSB). Written
requests for such copies should be directed to Investor Relations, Frontier
Natural Gas Corporation, 9400 North Broadway, Suite 120, Oklahoma City, Oklahoma
73114.
OTHER MATTERS
The Company's management does not know of any matters to be presented at the
Meeting other than those set forth in the Notice of Annual Meeting of
Shareholders. However, if any other matters properly come before the Meeting,
the persons named in the enclosed proxy intend to vote the shares to which the
proxy relates on such matters in accordance with their best judgment unless
otherwise specified in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
\s\
__________________________________
David B. Christofferson, Secretary
May 6, 1996
11
<PAGE>
EXHIBIT "A"
FRONTIER NATURAL GAS CORPORATION
STOCK INCENTIVE OPTION PLAN - 1996
1. PURPOSE. The purpose of this Stock Incentive Option Plan - 1996 (the
"Plan") is to further the interests of Frontier Natural Gas Corporation
(hereinafter called "the Company") by providing incentives for officers,
managers, department heads, corporate counsel, directors and other key employees
of the Company who may be designated for participation in the Plan and to
provide additional means of attracting and retaining competent personnel.
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (hereinafter referred to as the "Board"). Subject to
the provisions of the Plan and applicable law, the Board is authorized to
interpret the Plan and to prescribe, amend and rescind rules and regulations
regulating to the Plan and to make all other determinations necessary or
advisable for the administration of the Plan. In the event the Board forms an
Executive Compensation Committee said Committee shall assume all of the
responsibility for the administration of the Plan.
3. PARTICIPANTS AND ALLOTMENTS. The Board shall determine and designate
from time to time those employees of the Company to whom options to purchase
shares of common stock of the Company pursuant to the Plan are to be granted and
who thereby become participants in the Plan. The Board shall allot to such
participants (the "Option Holders") in such amount as the Board shall from time
to time determine. No member of the Board shall have any right to vote or
decide upon any matter relating solely to himself or a member of his immediate
family or solely to any of his rights or benefits (or rights or benefits of a
member of his immediate family) under the Plan, provided, however that, the
Board of Directors may provide for the automatic annual grant of a pre-
determined number of stock options to each member of the Board of Directors who
is not an employee of the Company. Participation in the Plan shall not confer
any right of continuation of service as an employee of the Company.
4. SHARES OF COMMON STOCK SUBJECT TO PLAN. Under this Plan, the Board may
from time to time grant options to purchase shares of common stock to key
employees of the Company up to an aggregate of 350,000 shares. If any options
granted under the Plan shall terminate or expire, in whole or in part, the
shares so released from the options may be made the subject of additional
options granted under the Plan. The Company shall reserve and keep available
such number of shares of stock as will satisfy the requirements of all
outstanding options granted under the Plan. If there is any change in the
Company's shares of Common Stock, as by stock splits, reverse stock splits,
stock dividends or recapitalization, the number of options outstanding and the
shares subject to options shall be appropriately adjusted by the Board.
5. OPTION PRICE. The Option price or prices shall be greater than or equal
to the fair market value of issued and outstanding shares of stock of the
Company at the date the Option is granted. For the purposes hereof, fair market
value shall be determined by the Board after due investigation and inquiry.
6. OTHER PROVISIONS. Each Option shall be subject to all provisions of
this Plan, including, but not limited to, the following terms and conditions:
(a) Options granted under the Plan shall be exercisable for a period of ten
years from the date of the grant.
(b) The Board shall grant Options to officers and other key employees and shall
provide for the automatic receipt of options by directors who are not full-
time employees. Each option shall consist of an option ("Option") to
purchase one share of common stock at the exercise price (as defined
below). The Exercise Price shall be at least the fair market value of the
Common Stock on the date of the grant of the Option.
(c) The Board may in its discretion establish a schedule setting forth time a
period during which options may be exercised. Absent such a schedule, the
options shall be exercisable 33 1/3% one year from the effective date of
the grant thereof, an additional 33 1/3% two years from the effective date
of the grant thereof, and the final 33 1/3% three years from the date of
the grant thereof. As to all other options granted the options shall be
exercisable 33 1/3% on each of the three anniversary dates following the
<PAGE>
date of the grant of the options. The Option Holder's right to exercise
the options shall, however, be cumulative.
(d) If the employment of the Option Holder by the Company is terminated for any
reason other than (i) his death, (ii) his discharge for dishonesty or
commission of a crime, or (iii) his employment with a competitor of the
Company without the Company's consent, the Option Holder may, within three
months thereafter, subject to provisions of subsections 6(a) and (b) above,
exercise the option to the extent that the option was exercisable as of the
date of termination of his employment. All unexercised Options shall
terminate, be forfeited and shall lapse upon the expiration of said three-
month period, or immediately if the employment of the Option Holder is
terminated by the Company for any of the reasons set forth in (ii) or (iii)
above.
(e) If the Option Holder dies (i) while employed by the Company or (ii) within
three months after termination of his employment for any reason other than
as set forth in subsections 6(c)(ii) or (iii) above, then within six months
after the date of Option Holder's death, subject to the provisions of
subsections 6(a) and (b) above, the Option may be exercised by his estate
or by any person who has acquired the Option Holder's right to exercise the
Option by bequest or inheritance to the extent the Option was exercisable
as of the date of his death. Upon the expiration of such six-month period,
all unexercised options shall terminate, be forfeited and shall lapse.
(f) Except as otherwise provided in subsection 6(d) above, the Option and all
rights granted hereunder shall not be transferred by the Option Holder, and
may not be assigned, pledged or hypothecated in any way and shall not be
subject to execution, attachment or similar process. Upon any attempt by
the Option Holder to transfer the option, or to assign, pledge, hypothecate
or otherwise dispose of such Option or of any rights granted hereunder,
contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon such Option or such rights, such Option and such
rights shall immediately become null and void. The Option shall be
exercisable, during the lifetime of the Option Holder, only by the Option
Holder.
7. EXERCISE OF OPTIONS.
(a) To exercise the Option, the Option Holder or his successor shall give
written notice to the Company's President at the Company's principal
office. Within ten days of the receipt by the Company of such written
notice, the Company shall tender the Common Stock due pursuant to the
exercise of the Option. The Option Holder shall, concurrent with
acceptance of the tendered Common Stock remit full payment for the Common
Stock being purchased pursuant to the Option to the Company. The Option
Holder shall also provide to the Company a written statement that the
shares are purchased for investment and not with a view to distribution.
However, this statement shall not be required if the shares subject to the
option are registered with the Securities and Exchange Commission. If the
option is exercised by the successor of the Option Holder, following his
death, proof shall be submitted, satisfactory to the Board, of the right of
the successor to exercise the option.
(b) Shares of stock issued pursuant to this Plan which have not been registered
with the Securities and Exchange Commission shall bear the following
legend:
The securities represented by this stock certificate have not been
registered under the Securities Act of 1933 (the "Act") or applicable state
securities law (the "State Acts"), and shall not be sold, pledged,
hypothecated, donated or otherwise transferred (whether or not for
consideration) by the holder except upon the issuance to the corporation of
a favorable opinion of its counsel and/or the submission to the Corporation
of such other evidence as may be satisfactory to counsel for the
Corporation, to the effect that any such transfer shall not be in violation
of the Act and the State Acts.
(c) The Company shall not be required to transfer or deliver any certificate or
certificates for shares purchased upon any exercise of such option: (i)
until after compliance with all then applicable requirements of law; and
(ii) prior to admission of such shares to listing on any stock exchange on
which the stock may then be listed. In no event shall the Company be
required to issue fractional shares to the Optionee.
Incentive Stock Option Plan - Page 2
<PAGE>
8. REGISTRATION. If the Company shall be advised by its counsel that
shares of stock deliverable upon any exercise of an option are required to be
registered under the Securities Act of 1933, or that the consent of any other
authority is required for the issuance of same, the Company may effect
registration or obtain consent, and delivery of shares by the Company may be
deferred until registration is effected or consent obtained.
9. ISSUANCE OF STOCK. No stock shall be issued until full payment for such
stock has been made. The Option Holder shall have no rights as a shareholder
with respect to optioned shares until the date of the issuance of a stock
certificate to him for such shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Sections 4 and 10 hereof.
10. CORPORATE REORGANIZATION. If there shall be any capital reorganization
or consolidation or merger of the Company with another corporation or
corporations, or any sale of all or substantially all of the Company's
properties and assets to any other corporation or corporations, then all Options
outstanding shall be exercisable for a thirty day period prior to the effective
date thereof. Options not so exercised shall expire upon the effectiveness of
such a transaction. This provision does not however, apply to mergers where the
Company is the survivor.
11. AMENDMENTS AND TERMINATION. The Board of Directors or the Committee
may terminate the Plan in whole or in part, may suspend the Plan in whole or in
part from time to time, and may amend the Plan from time to time, including the
adoption of amendments deemed necessary or desirable to qualify the Options
under the laws of various states (including tax laws) and under rules and
regulations promulgated by the Securities and Exchange Commission with respect
to persons who are subject to the provisions of Section 16 of the Securities
Exchange Act of 1934, or to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Option granted thereunder,
without the approval of the share owners of the Company.
However, no action shall be taken without the approval of the share owners
of the Company if the Committee determines that the approval of share owners
would be necessary to retain the benefits of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, or Section 162(m) of the Internal Revenue Code
of 1986, as amended.
12. OPTION AGREEMENT. The granting of an option shall take place only when
a written option agreement in the form of a Stock Incentive Option Plan 1996
Agreement is executed by or on behalf of the Company and the employee to whom
the Option is granted and such executed agreement is delivered to the Company.
13. PERIOD OF PLAN. No Option shall be granted on or after the tenth
anniversary of the date of adoption of the Plan by the Board of Directors of the
Company. The Plan shall expire on the later of such tenth anniversary date or
the date on which all Options granted under the Plan have expired or been
exercised in full.
Incentive Stock Option Plan - Page 3
