SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
-----
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
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
FRONTIER NATURAL GAS CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
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 No.:
----------------------------------------------------------------------
3. Filing Party:
----------------------------------------------------------------------
4. Date Filed:
----------------------------------------------------------------------
<PAGE>
FRONTIER NATURAL GAS CORPORATION
One Allen Center
500 Dallas Street, Suite 2920
Houston, Texas 77002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 5, 1997
TO OUR SHAREHOLDERS:
The 1997 Annual Meeting of Shareholders of Frontier Natural Gas
Corporation, an Oklahoma corporation (the "Company"), will be held at the
Doubletree Hotel - Downtown, Fannin Room, Second Floor, 400 Dallas Street,
Houston, Texas, on Thursday, June 5, 1997, at 10:00 a.m., local time, for the
following purposes:
1. To elect two Directors for terms expiring in 2000; and
2. 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 21, 1997 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,
David W. Berry,
President
Houston, Texas
May 5, 1997
<PAGE>
FRONTIER NATURAL GAS CORPORATION
-------------
PROXY STATEMENT
-------------
ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 5, 1997
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, 1996, are first
being mailed to holders of the Company's $.01 par value Common Stock ("Common
Stock") on or about May 5, 1997.
The Board of Directors has established April 21, 1997 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, 9,865,906 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 requires 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.
All of the expenses of soliciting proxies from shareholders, including the
reimbursement of brokerage firms and others for their expenses in forwarding
proxies and proxy statements to the beneficial owners of the Company's Common
Stock, will be borne by the Company.
ELECTION OF DIRECTORS
Pursuant to provisions of the Company's Certificate of Incorporation and
Bylaws, the Board of Directors 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
1
<PAGE>
equal in number as possible. There is currently a vacancy in the board seat
which term expires in 1998. The Board currently consists of six Directors, two
of whom have terms which expire at the Annual Meeting, two Directors serving
terms which expire in 1998 and two Directors serving terms which expire in 1999.
The terms of Jeffrey R. Orgill and Allen H. Sweeney expire as of the Meeting.
The Board of Directors has nominated Mr. Orgill and Mr. Sweeney to continue as
Directors (the "Nominees") until the 2000 Annual Meeting of shareholders and
until their successors are duly elected and qualified or until such Directors'
earlier resignation or removal. 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 1998.
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.
Nominees for Re-election as Directors for Terms Expiring in 2000
Jeffrey R. Orgill, age 52, has served as either Chairman or Vice-Chairman
of the Board since June 1988. From October 1988 to May 1996, he served as the
Company's Vice President of Exploration and Production. Mr. Orgill became a
consultant to the Company on May 1, 1996. Mr. Orgill received a Bachelor of
Science degree in Geology in 1970 and a Master of Science degree in Geology in
1971 from Brigham Young University. Mr. Orgill has over 25 years of experience
in the gas and oil industry.
Allen H. Sweeney, age 50, has served as a Director of the Company since
September 1993. From 1991 to 1994, Mr. Sweeney also served as Chief Accountant
and as a consultant to the Company. Since 1990, Mr. Sweeney has served as
President and a Director of AHS & Associates, Inc., a gas and oil consulting
firm; as President and a Director of Columbia Production Company, an independent
gas and oil company; and as Vice President and a Director of Mid-American Waste
Management, Inc., a waste management company. Mr. Sweeney received a Bachelor of
Science degree in Accounting from Oklahoma State University in 1969 and a Master
of Business Administration degree from Oklahoma City University in 1972. He is
also a former Director of Panaco, Inc., a publicly held oil and gas exploration
and production company.
Directors Whose Terms Expire in 1999
David W. Berry age 47, 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 incorporation of its
predecessor on August 1, 1988 and has served as Chairman of the Board since
1991. Mr. Berry is a member of the Texas Independent Producers & Royalty Owners
Association.
2
<PAGE>
S. Gordon Reese, Jr., age 48, was elected a Director in June 1996 and has
served as Senior Vice President since January 1993. He received a Bachelor of
Science degree from Louisiana State University in 1971. From 1991, until joining
the Company in January 1993, he was the managing general partner of Reese
Production Company, a gas and oil company. From 1986 till 1991, he was the
President of Reese Energy Corporation. Mr. Reese is a Director of the Louisiana
Independent Oil and Gas Association and a past Vice President of the Independent
Petroleum Association of America.
Directors Whose Terms Expire in 1998
David B. Christofferson, age 49, has served as General Counsel, Secretary
and a Director of the Company since 1989, Executive Vice President since January
1993 and as Chief Financial Officer since December 1994. He received his
Bachelor of Science degree in Finance in 1971 and a Juris Doctor in 1974 from
the University of Oklahoma. He also received a Master of Divinity degree with
Magna Cum Laude honors from Phillips University in 1985. He has been active in
the gas and oil industry for more than 15 years. Mr. Christofferson is a member
of the Independent Petroleum Association of America and the Texas Independent
Producers & Royalty Owners Association.
Neal M. Elliott, age 57, Director, has served as a Director of the Company
since September 1991. He has served as Chairman of the Board and President of
Horizon Healthcare Corp. since 1986. Horizon Healthcare Corp. is a publicly
traded company listed on the New York Stock Exchange which operates extended
nursing care facilities in over 50 locations nationwide. Mr. Elliott received a
Bachelor of Arts degree from Stanford University in 1963 and a Master of
Business Administration degree from Columbia University in 1965. His background
includes public accounting with the firm of 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 traded real estate
investment trust.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
In order to facilitate the various functions of the Board of Directors, the
Board has created a standing Compensation Committee.
The functions of the Company's Compensation Committee include reviewing the
existing compensation arrangements with officers and employees, periodically
reviewing the overall compensation program of the Company and recommending to
the Board modifications of such program which, in the view of the development of
the Company and its business, the Committee believes are appropriate,
recommending to the full Board of Directors the compensation arrangements for
senior management and Directors, and recommending to the full Board of Directors
the adoption of compensation plans in which officers and Directors are eligible
to participate and granting options or other benefits under such plans. The
members of the Compensation Committee are Mr. Elliott, Chairman, and Mr.
Sweeney.
The Board of Directors does not have a standing audit committee or
nominating committee or committees performing similar functions.
During the year ended December 31, 1996, the Board of Directors held four
formal meetings and acted through unanimous written consent on two occasions and
the Compensation Committee held one meeting. Each Director (during the period in
which each such Director served) attended at least 75% of the aggregate of (i)
the total number of meetings of the Board of Directors, plus (ii) the total
number of meetings held by all committees of the Board of Directors on which the
Director served.
3
<PAGE>
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 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.
Number of Percent of
Beneficial Owners Shares Class(1)
- ----------------- --------- ----------
David W. Berry (2)(3) 724,930 7.3%
State Street Research & Management
Company (10) 600,000 6.1%
Metropolitan Life Insurance Company (9) 600,000 5.9%
Jeffrey R. Orgill (2)(4) 592,500 6.0%
David B. Christofferson (5) 269,333 2.7%
Neal M. Elliott (6) 82,539 *
S. Gordon Reese, Jr. (8) 40,333 *
Allen H. Sweeney (7) 12,000 *
Michael A. Barnes (12) 8,333 *
All executive officers and Directors
as a group (7 persons)(11) 1,730,179 16.9%
- ----------------------
* Less than 1%
(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 Allen Center, 500
Dallas Street, Suite 2920, Houston, Texas, 77002.
(3) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 24,000 shares of Common Stock and 40,000 options granted pursuant
to the Company's Stock Option Plan 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 156,000 shares of Common Stock granted
pursuant to the Company's Incentive Stock Option Plan, 24,000 options
granted pursuant to the Company's Stock Incentive Plan and 33,333 options
granted pursuant to the Company's Stock Option Plan which are currently
exercisable by Mr. Christofferson.
4
<PAGE>
(6) Includes options to purchase 6,000 shares of Common Stock granted pursuant
to the Company's Stock Incentive Plan and 6,000 options granted pursuant to
the Company's Stock Option Plan which are currently exercisable or will
become exercisable within 60 days of the record date by Mr. Elliott.
(7) Includes options to purchase 6,000 shares of Common Stock granted pursuant
to the Company's Stock Incentive Plan and 6,000 options granted pursuant to
the Company's Stock Option Plan which are currently exercisable or will
become exercisable within 60 days of the record date by Mr. Sweeney.
(8) Includes options granted pursuant to the Company's Stock Incentive Plan to
purchase 12,000 shares of Common Stock and 28,333 options granted pursuant
to the Company's Stock Option Plan which are currently exercisable by Mr.
Reese.
(9) Based on a filing with the Securities and Exchange Commission of Schedule
13G dated February 12, 1997, reporting beneficial ownership as of December
31, 1996. Includes 300,000 shares of Common Stock issuable upon exercise of
Series B Warrants held by Metropolitan Life Insurance Company whose address
is One Madison Avenue, New York, New York, 10010-3690.
(10) Based on a filing with the Securities and Exchange Commission of Schedule
13G dated February 13, 1997, reporting beneficial ownership as of December
31, 1996. State Street Research & Management Company ("State Street") may
be deemed to own 600,000 shares of the Company's Common Stock as a result
of State Street's acting as investment advisor to various clients. State
Street disclaims beneficial ownership of all such shares. The address of
State Street is One Financial Center, 30th Floor, Boston, Massachusetts
02111-2690.
(11) Includes 373,999 shares issuable pursuant to various options held by
executive officers and directors and currently exercisable or will become
exercisable within 60 days of the record date.
(12) Includes options granted pursuant to the Company's Stock Option Plan to
purchase 8,333 shares of Common Stock which become exercisable within 60
days of the record date.
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 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 1996, all filing requirements applicable to its officers,
Directors and greater than 10% beneficial owners were made on a timely basis.
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.
5
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
---------------------------------- ----------------------------
Awards of All
Options Other
Name and Principal Position Year Salary Bonus Other (# of shares) Compensation
- ---------------------------- ---- ---------- ----- ----- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
David W. Berry 1996 $124,000 $ -0- (1) 120,000(3) $20,145(4)
Chairman of the Board, Chief
Executive Officer and President 1995 120,000 -0- (1) -0- 18,367(4)
1994 120,000 -0- (1) -0- 18,367(4)
Jeffrey R. Orgill 1996 40,000(2) -0- (1) -0- 6,504(4)
Vice-Chairman of the Board 1995 120,000 -0- (1) -0- 31,344(4)
1994 120,000 -0- (1) -0- 31,344
David B. Christofferson 1996 103,000 -0- (1) 100,000(3) 22,469(4)
Director, Executive Vice-President 1995 95,000 5,000 (1) -0- 20,090
Chief Financial Officer, Secretary 1994 90,000 10,000 (1) -0- 20,090
and General Counsel
S. Gordon Reese, Jr. 1996 98,900 -0- (1) 85,000(3) -0-
Senior Vice-President 1995 70,000 35,000 (1) -0- -0-
1994 70,000 20,000 (1) 12,000(5) -0-
Michael A. Barnes 1996 61,750 -0- (1) 25,000(3) -0-
Vice-President of Exploration and 1995 -0- -0- -0- -0- -0-
Production 1994 -0- -0- -0- -0- -0-
</TABLE>
- ------------------------
(1) Although the officers receive certain perquisites such as use of company
automobiles, the value of such perquisites did not exceed the lesser of
$50,000 or 10% of the officers' salary and bonus.
(2) Mr. Orgill was employed by the Company as Vice President of Exploration and
Production until May 1, 1996. The Company entered into an agreement with
Mr. Jeffrey R. Orgill to serve as a consultant to the Company. The
consulting agreement provides for Mr. Orgill to furnish exploration and
production oversight services on the Company's existing properties and
prospects in the Mid-Continent Area and prospect generation and evaluation
services on the Company's existing 3-D seismic data over acreage in the
Mid-Continent Area, for a period of 23 months commencing on May 1, 1996 for
a monthly compensation of $10,000. This consulting agreement was entered
into in settlement of a previously existing employment agreement which
would have been more costly to the Company and for a longer period of time.
The salary indicated in the table includes only compensation paid through
May 1, 1996.
(3) The total options granted during the 1996 fiscal year include 330,000
options in the Company's Stock Incentive Option Plan. 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. The exercise price is $1.47 for 185,000
options, $1.62 for 120,000 options and $2.125 for 25,000 options.
(4) Represents accrued liabilities of the Company pursuant to deferred
compensation benefits payable to the individual officers.
(5) 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.
6
<PAGE>
Stock Options Granted in Fiscal 1996
The following table sets forth information concerning the grant of stock
options made during 1996 to each of the Named Officers:
Percent of
Total Options
Granted to
Options Employees in Price Expiration
Name Granted (1) Fiscal Year Per Share Date
---- ----------- ------------ --------- ----------
David Berry 120,000 36.4% $ 1.62 2/02/06
David B. Christofferson 100,000 30.3% 1.47 2/02/06
S. Gordon Reese, Jr. 85,000 25.7% 1.47 2/02/06
Michael A. Barnes 25,000 7.6% 2.125 5/15/06
- ------------------------
(1) All options were granted under the Company's Stock Incentive Option Plan.
All such options become exercisable over a three-year period with one-third
of the options exercisable on or after each of the three succeeding
anniversary dates of the granting of the option.
Stock Option Exercises
The following table sets forth information concerning the exercise of stock
options during 1996 by each of the Named Officers and the number and value of
unexercised options held by the Named Officers at the end of 1996:
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised In-the-Money
Acquired in Value Options at 12/31/96 Options at 12/31/96(1)
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David W. Berry -0- -0- 64,000 80,000 $ 22,700 $45,400
Jeffrey R. Orgill -0- -0- 24,000 -0- -0- -0-
David B. Christofferson -0- -0- 213,333 90,667 103,000 47,800
S. Gordon Reese, Jr. -0- -0- 40,333 56,667 20,300 40,600
Michael A. Barnes -0- -0- -0- 25,000 -0- 1,500
</TABLE>
- ------------------------
(1) Based on the fair market value per share of the Common Stock at year end,
minus the exercise price of "in-the-money" options. The closing price for
the Company's Common Stock on December 31, 1996 on the Nasdaq Small-Cap
Market was $2 3/16.
Employment Agreements
The Company has entered into employment agreements with David W. Berry
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, Mr. Berry will receive an annual salary of $134,400, and Mr.
Christofferson will receive an annual salary of $112,000. 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
7
<PAGE>
number of years the 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 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 include 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.
Directors' Compensation
During the fiscal year ended December 31, 1996, 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 6,000 options under
the Company's Stock Incentive Option Plan. Each option grants the holder the
right to purchase one share of Common Stock. Plan Options are granted with an
exercise price equal to the fair market value of the Common Stock on the date of
grant. Options granted under the Stock Incentive Option Plan vest annually. Each
year Directors who are not officers of the Company receive automatic grants of
Units under the Management Incentive Stock 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. In June 1996, each
of Messers. Elliott and Sweeney were granted 6,000 options, which vest one year
from the grant date. The exercise price of the 1996 Plan Options is $2.13.
Certain Transactions
Effective May 1, 1996, Jeffrey Orgill and the Company agreed to the
termination of Mr. Orgill's employment agreement and Mr. Orgill resigned as Vice
President of Exploration and Production as of May 1, 1996. 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 per month under the terms of the
agreement. Pursuant to said Consulting Agreement, the Company paid $80,000 to
Mr. Orgill during 1996 for consulting services. He will continue to serve as
Director to the Company.
The Company made advances to officers and affiliates of the Company during
1996 and 1995 of $51,143 and $14,234, respectively, and received repayments of
$18,741 and $30,282, respectively. The December 31, 1996 and 1995 receivables
include approximately $48,000 and $138,000, respectively, from an affiliated
partnership for which the Company serves as the managing general partner.
During 1996, as a part of the corporate move and relocation to Houston,
Texas, the Company purchased the homes of David W. Berry and David B.
Christofferson, both officers of the Company, for $191,395 and $178,000,
respectively. These amounts in each case were ascertained by averaging two
independent MAI appraisals to determine fair market value. The Company
subsequently sold the homes at a sales contract price of $176,200 and $178,000,
respectively, pursuant to which sales contracts the Company received net sales
proceeds after commissions and other selling expenses of $158,847 and $165,626,
respectively.
The Company's Board of Directors has adopted a policy whereby all
transactions or loans between the Company and its Directors, 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.
8
<PAGE>
INDEPENDENT ACCOUNTANTS
The Board of Directors selected Deloitte & Touche LLP as independent
auditors for the year ended December 31, 1996. Deloitte & Touche were also the
Company's independent auditors in 1995. The Company has not chosen an
independent auditor for the year ending December 31, 1997, as the Company,
historically, does not choose its auditors until near the end of the fiscal
year.
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
In order for shareholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 1998 Annual Meeting of
shareholders, such proposals must be received by the Company at its principal
executive offices not later than January 15, 1998.
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
David B. Christofferson, Secretary
Houston, Texas
May 5, 1997
<PAGE>
FRONTIER NATURAL GAS CORPORATION
One Allen Center
500 Dallas Street, Suite 2920
Houston, Texas 77002
Proxy for Annual Meeting of Shareholders
to be held on June 5, 1997
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints David W. Berry and David B. Christofferson,
and each of them, as Proxies, with full power of substitution in each of them,
in the name, place and stead of the undersigned, to vote at an Annual Meeting of
Shareholders (the "Meeting") of Frontier Natural Gas Corporation, an Oklahoma
corporation (the "Company"), to be held on June 5, 1997, at 10:00 a.m., or at
any adjournment or adjournments thereof, in the manner designated below, all of
the shares of the Company's common stock that the undersigned would be entitled
to vote if personally present.
1. GRANTING WITHHOLDING authority to vote for the election
--------- -------
as directors of the Company the following nominees: Jeffrey R. Orgill and Allen
H. Sweeney (term expiring 2000).
(Instructions: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name.)
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments thereof.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE. IF NO
INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NOMINEES AS DIRECTORS.
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as an attorney,
executor, administrator, trustee, guardian, or
corporate officer, please indicate the capacity
in which signing.
DATED: , 199
--------------------------- ----
------------------------------------------------
Signature
------------------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE
