<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
COHO ENERGY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 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> 2
[COHO LOGO]
April 9, 1998
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Coho Energy, Inc. which will be held at 2:00 p.m., Dallas, Texas time, on May
12, 1998 at the Westin Hotel Galleria, Johnson 2 Room, 13340 Dallas Parkway,
Dallas, Texas.
Enclosed are the Notice of Annual Meeting of Shareholders and the Proxy
Statement, which contains information about the nominees for the Board of
Directors, management's proposal to amend the 1993 Stock Option Plan, and
management's proposal concerning the appointment of independent auditors.
It is important that your shares be represented at the meeting regardless
of the size of your holdings. We urge you to complete and return your proxy card
as promptly as possible.
Sincerely,
/s/ JEFFREY CLARKE
Jeffrey Clarke
Chairman, President and
Chief Executive Officer
<PAGE> 3
[COHO LOGO]
14785 Preston Road, Suite 860
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders of Coho Energy, Inc.:
The Annual Meeting of Shareholders of Coho Energy, Inc. (the "Company")
will be held on May 12, 1998 at 2:00 p.m., Dallas, Texas time, at the Westin
Hotel Galleria, Johnson 2 Room, 13340 Dallas Parkway, Dallas, Texas, for the
following purposes:
1. To elect a board of seven directors to serve until the next Annual
Meeting of Shareholders or until their successors are elected and
qualify;
2. To approve an amendment to the 1993 Stock Option Plan that would
increase the number of shares issuable thereunder by 500,000 to a total
of 2,544,500;
3. To ratify the selection by the Board of Directors of the firm of Arthur
Andersen L.L.P. as independent auditors for the Company for 1998; and
4. To transact such other business as may properly come before the meeting.
Holders of record of the Common Stock, $0.01 par value, of the Company as
reflected on the books of the Company at the close of business on April 3, 1998
will be entitled to vote at the meeting and any adjournments thereof. Whether or
not you expect to attend the meeting, please fill in, date, sign, and return the
proxy in the enclosed envelope which requires no postage if mailed in the United
States.
/s/ JEFFREY CLARKE
Jeffrey Clarke
Chairman, President and
Chief Executive Officer
<PAGE> 4
COHO ENERGY, INC.
14785 Preston Road, Suite 860
Dallas, Texas 75240
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1998
------------------------
This Proxy Statement is being furnished to shareholders of Coho Energy,
Inc., a Texas corporation ("Coho" or the "Company"), in connection with the
solicitation of proxies by its Board of Directors for use at the Annual Meeting
of Shareholders (the "Meeting") scheduled to be held on May 12, 1998 at 2:00
p.m., Dallas, Texas Time, at the Westin Hotel Galleria, Johnson 2 Room, 13340
Dallas Parkway, Dallas, Texas, and any adjournment or postponement thereof.
Any shareholder giving a proxy has the right to revoke the same prior to
its exercise by written notice to the President of the Company at any time prior
to the voting of the proxy or by appearing at the Meeting and requesting the
return of the proxy before voting. Presence at the Meeting does not itself
revoke the proxy.
Only holders of record of the Common Stock, $0.01 par value, of the Company
(the "Common Stock") as reflected on the books of the Company at the close of
business on April 3, 1998 (the "Record Date") will be entitled to notice of and
to vote at the Meeting. As of the close of business on the Record Date, the
Company had 25,603,512 shares of Common Stock outstanding. With respect to the
election of directors, each share of Common Stock entitles the holder thereof to
seven votes, which may be allocated among one or more of the nominees as set
forth below. With respect to all other matters to come before the Meeting, the
holders of the Common Stock will have one vote per share.
This Proxy Statement and the accompanying proxy card are being sent on or
about April 9, 1998 to shareholders of record as of the close of business on the
Record Date.
The holders of a majority of the total shares of Common Stock issued and
outstanding on the Record Date, whether present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Meeting.
Under Texas law, any unvoted position in a brokerage account with respect to any
matter will be considered as not voted and will not be counted toward
fulfillment of quorum requirements. The shares held by each shareholder who
signs and returns the enclosed form of proxy will be counted for purposes of
determining the presence of a quorum at the Meeting.
On September 29, 1993 the Company completed the Plan of Reorganization,
dated June 30, 1993 (the "Combination"), with Coho Resources, Inc. ("CRI"), then
the parent of the Company, and Coho Resources Limited ("CRL"), the parent of
CRI. Upon consummation of the Combination, CRL became a wholly-owned subsidiary
of the Company and the Company owned all of the outstanding common stock of CRI,
32% directly and 68% indirectly through CRL. The Company has been treated as a
successor registrant of CRI and, accordingly, certain information in this Proxy
Statement related to periods prior to September 29, 1993 relate to CRI.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting, each to hold office until
the next annual meeting of the shareholders, or until his successor shall be
elected and qualify. The nominees for election to the Board of Directors are all
currently directors of the Company.
Management of the Company does not anticipate that any of such nominees
will become unavailable for any reason; however, should any nominee become
unavailable, the persons designated in the enclosed proxy will vote for the
election of such other person or persons as management may recommend.
<PAGE> 5
Each shareholder entitled to vote at the Meeting shall have the right in
voting for directors: (i) to vote the number of shares owned by him or her for
each director; or (ii) to cumulate his or her votes by giving one candidate as
many votes as the number of directors to be elected multiplied by his or her
number of shares; or (iii) to distribute such votes on the same principle among
any number of the candidates for director. Cumulative voting shall not be
allowed unless a shareholder who intends to cumulate his or her votes shall have
given written notice of such intention to the Secretary of the Company on or
before the day preceding the Meeting. If a holder of Common Stock cumulating his
or her votes has voted for more than one nominee without specifying the
distribution of his or her votes among the nominees, he or she shall be deemed
to have distributed his or her votes equally among the nominees for whom he or
she voted.
Nominees for director receiving a plurality of votes cast in the election
of directors will be elected. The enclosed form of proxy provides a means for
shareholders to vote for all of the nominees for director listed therein, to
withhold authority to vote for one or more of such nominees or to withhold
authority to vote for all of such nominees. Each properly executed proxy
received in time for the Meeting will be voted as specified therein, or if a
shareholder does not specify how the shares represented by his or her proxy are
to be voted, such shares shall be voted for the nominees listed therein.
Abstentions and broker non-votes will not be treated as a vote for a particular
director and will not affect the outcome of the election of directors.
At a Board of Directors meeting held on March 31, 1998 the Board of
Directors agreed to reduce the number of Board members from ten to seven and to
implement a mandatory retirement age of 70 years of age. Messrs. Robert
Anderson, Roy Baker and Frederick Campbell, currently members of the Board of
Directors, withdrew their names from consideration for reelection at the
Meeting.
Certain information concerning the nominees for election as directors is
set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NOMINEE AGE SINCE*
------- --- --------
<S> <C> <C>
Jeffrey Clarke.............................................. 52 1982
Louis F. Crane(a)........................................... 57 1993
Howard I. Hoffen(a)......................................... 33 1994
Kenneth H. Lambert(a)....................................... 53 1980
Douglas R. Martin(b)........................................ 53 1990
Carl S. Quinn(b)............................................ 67 1994
Jake Taylor(b).............................................. 52 1993
</TABLE>
- ---------------
(a) Member of the Audit Committee
(b) Member of the Compensation Committee
* Represents the year each individual became a director of the Company or its
predecessor CRI
Jeffrey Clarke has served as Chairman of the Company since October 1993 and
as President and Chief Executive Officer of the Company since September 1993.
Mr. Clarke served as Executive Vice President and Chief Operating Officer of CRI
from May 1982 until May 1990, as President and Chief Operating Officer of CRI
from May 1990 to October 1992 and as President and Chief Executive Officer of
CRI since October 1992. He served as Senior Vice President, Chief Operating
Officer and a director of CRL from 1984 to October 1992 and as President and
Chief Executive Officer of CRL since October 1992 and has been engaged by CRL in
various capacities since 1980.
Louis F. Crane has served as President and Chief Executive Officer of
Orleans Capital (investment portfolio management firm) since November 1991. Mr.
Crane is Chairman of the Board of Offshore Logistics Inc. and a director of
Columbia Universal Corp.
Howard I. Hoffen has been a Managing Director since December 1997, was a
Principal from January 1996 to December 1997, and was a Vice President from 1994
to January 1996, of Morgan Stanley & Co. Incorporated (an investment banking
firm). Mr. Hoffen joined Morgan Stanley in 1985 and became a member of the
Private Equity Group in 1986. Mr. Hoffen is currently a Vice President of the
general partner
2
<PAGE> 6
of The Morgan Stanley Leveraged Equity Fund II, L.P. and a director of Amerin
Corporation and Catalytica Inc.
Kenneth H. Lambert served as Chairman of the Board of Directors of CRI from
1980 until the Combination, as Chief Executive Officer of CRI from 1980 to 1992
and as President of CRI from 1980 to 1990. Mr. Lambert served as President and
Chief Executive Officer of CRL from 1980 to June 1992, and as Chairman of the
Board of CRL from June 1992 until the Combination. Mr. Lambert has served as
President and Chief Executive Officer of Nugold Technology Ltd. (a private
company dealing in the recovery of precious metals) since April 1993. Mr.
Lambert is chairman of the board, president, chief executive officer and
director of Edmonton International Industries Ltd. (a Canadian public investment
holding company), the Chairman of the Board of Destination Resorts, Inc. (a
Canadian public resort development corporation) and Chairman of the Board of Oz
New Media (a Canadian public educational network, multimedia, digital content
company).
Douglas R. Martin has served as Chairman of Pursuit Resources Corp. (a
Canadian public oil and gas company) since September 1993. Mr. Martin served as
Senior Vice President and Chief Financial Officer of CRI from May 1990 to August
1993. He served as CRL's Senior Vice President and Chief Financial Officer from
April 1990 to August 1993.
Carl S. Quinn served as Chairman of the Board, President and Chief
Executive Officer of Interstate Natural Gas Company ("ING") from its inception
in March 1992 until its acquisition by the Company in December 1994. Mr. Quinn
is a director of Atmos Energy Corporation.
Jake Taylor has been an independent financial consultant since 1989.
Messrs. Hoffen and Quinn have been designated to serve as directors of the
Company by The Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II")
pursuant to the terms of the Registration Rights and Shareholder Agreement dated
December 8, 1994 as amended September 29, 1997 (collectively the "ING
Shareholder Agreement"), among MSLEF II and Quinn Oil Company Ltd. ("Quinn")
(the previous stockholders of ING), and the Company.
The Company agreed to continue to nominate the number of designees to which
MSLEF II or Quinn are entitled for election to the Board of Directors of the
Company at each annual meeting of the Company's shareholders. In the event the
shares of Common Stock owned by MSLEF II and Quinn that were acquired by them
pursuant to the ING acquisition or upon the exchange of Series A Preferred Stock
(including for this purpose shares that have been distributed by MSLEF II or
Quinn to their respective partners, and are owned by such partners and deeming
shares of Series A Preferred Stock to be exchanged for Common Stock)acquired by
them pursuant to the ING acquisition shall constitute less than 5% of the
outstanding shares of Common Stock, the Company's obligation under the ING
Shareholder Agreement to nominate any designees of MSLEF II or Quinn to the
Board ceases. The ING Shareholder Agreement further provides that, if the
Company's proxy statement for any annual meeting includes a recommendation
regarding the election of any other nominees to the Company's Board of
Directors, the Company must include a recommendation that the shareholders also
vote in favor of the nominees of MSLEF II and Quinn. So long as any designee of
MSLEF II serves as a director of the Company, the Company agreed to appoint one
of such designees to be a member of the Compensation Committee of the Board and,
in the event the Board of Directors establishes an Executive Committee, the
Executive Committee of the Board.
Jeffrey Clarke, Chairman, President and Chief Executive Officer of the
Company, and Keri Clarke, Vice President, Land and Environmental/Regulatory
Affairs of the Company, are brothers. There is no other family relationship
between any director, executive officer or person nominated or chosen by the
registrant to become a director or executive officer.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Audit Committee and Compensation
Committee. Mr. Kenneth H. Lambert is chairman of the Audit Committee and Mr.
Douglas R. Martin is chairman of the Compensation Committee.
3
<PAGE> 7
The Audit Committee of the Board of Directors is authorized to review and
examine all matters pertaining to internal and external auditing of the accounts
of the Company, including: (a) procuring information respecting the scope of
audits and the auditing procedures employed therein, the form of report by the
Company's independent auditors and other matters upon which the Committee may
desire information relating to such audits; (b) receiving the recommendation of
the auditors with respect to the scope of the audits, the adequacy of the
accounting procedures employed by the Company and the sufficiency of the
internal checks and controls incorporated in its accounting systems; (c)
reviewing and implementing the Company's business ethics policy and related
matters; and (d) submitting such information and recommendations to the Board of
Directors together with any recommendations which the Committee may wish to make
relating thereto. During 1997 the Audit Committee held one meeting.
The Compensation Committee of the Board of Directors: (a) approves
compensation of key employees and serves as an advisory committee and makes
recommendations to the Chief Executive Officer regarding the compensation
structure of the Company as applied to executive personnel so that the pattern
of total compensation for such personnel shall be consistent with industry
practice and in the best interests of the Company; (b) reviews and makes
recommendations to the Chief Executive Officer regarding bonuses, long-term
incentive plans and other forms of additional compensation for key employees;
(c) makes recommendations to the Board regarding compensation of the Chief
Executive Officer; and (d) administers the Option Plan (as defined below). The
Compensation Committee met once during 1997.
During 1997 the Board of Directors met six times (one of which was a
telephonic meeting). Each incumbent director of the Company, except for Mr.
Taylor who attended four of the six meetings of the Board of Directors, during
his term as a director in 1997 attended at least 75% of the total number of
meetings of the Company's Board of Directors and committees of which he was a
member.
COMPENSATION OF DIRECTORS
Director Fees
Directors who are not employees of the Company receive a semi-annual
retainer of $7,000 plus a fee of $500 for each Board or Board committee meeting
attended or, if attendance is by telephone, a fee of $250 for each such meeting
in which he participated. All directors are reimbursed for expenses incurred in
attending Board or committee meetings. Employees of the Company who are also
directors do not receive a retainer or fees for Board or committee meetings
attended.
Non-Employee Director Stock Option Plan
Under the 1993 Non-Employee Director Stock Option Plan (the "Director
Plan"), for so long as there is an adequate number of shares available for grant
thereunder, each person who becomes a non-employee director of Coho is entitled
to receive an option to purchase 5,000 shares of Common Stock at a price per
share equal to the closing sale price of such stock on the date of his
appointment or election. In addition, and for so long as there is then an
adequate number of shares available for grant under the Director Plan, each
non-employee director is entitled to receive, on the date of each annual meeting
of Coho's shareholders at which he is re-elected as director, an option to
purchase an additional 1,000 shares of Common Stock at the closing sale price on
the date of grant; provided that, until a non-employee director shall have
received options under the Director Plan for an aggregate of 15,000 shares of
Common Stock, he shall receive an option to purchase 5,000 shares on the date of
each annual meeting of Coho's shareholders at which he shall be re-elected as
director.
Options granted under the Director Plan are exercisable one year after the
date of grant and must be exercised within five years from the date the option
becomes exercisable. Such options terminate on the earlier of the date of the
expiration of the option or one day less than one month after the date the
optionee ceases to serve as a director of Coho for any reason other than death,
disability or retirement of the director. If an optionee retires from the Board
or dies while serving as a director of Coho, the option terminates on the
earlier of the date of expiration of the option or one year following the date
of retirement or death.
4
<PAGE> 8
During the year ended December 31, 1997, Messrs. Crane, Lambert, Martin,
Quinn and Taylor were each granted options under the Director Plan to acquire
1,000 shares of Common Stock, at an exercise price of $8.125 per share. Mr.
Hoffen has declined to accept options granted under the Director Plan.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE WITH RESPECT TO
COMPENSATION OF EXECUTIVE OFFICERS
To the Board of Directors
Coho Energy, Inc.
Objectives
The objective of the Compensation Committee is to develop compensation
policies which will provide incentives to key executives to develop and carry
out the Company's business strategy that will result in the maximization of
return to the shareholders. More specifically, the Compensation Committee's
objectives are to develop compensation policies that will:
i) Allow the Company to attract and retain qualified individuals;
ii) Encourage achievement of short term and long term goals of the
Company; and
iii) Align executive remuneration with the interests of shareholders
by linking a significant portion of executive compensation to the
appreciation of the share price of the Common Stock.
The Compensation Committee's philosophy toward executive compensation is to
provide a combination of base level cash compensation and annual incentives, as
well as providing longer term awards through a stock option plan. Executives are
also permitted to participate in a health benefits insurance program and a
401(k) plan, each of which is available to all employees of Coho.
Base Compensation
Cash compensation levels are based on such factors as the executives'
levels of responsibility, prior experience, breadth of knowledge, individual
performance during the last year, Coho's performance over the last year and
compensation paid to similarly situated executives employed by oil and gas
companies with capitalizations comparable to Coho. The Compensation Committee's
review and analysis of these matters are subjective in nature, with no
particular weight being placed on any specific factors. Coho determines base
compensation levels utilizing energy industry surveys done by independent
compensation consultants, as well as information gathered from proxy statements
of publicly held companies in the same industry. The comparative companies used
by the Compensation Committee generally are not the same companies that
constitute the Standard Industrial Code Index for Crude Oil and Natural Gas
Producers used in the Performance Graph included in this Proxy Statement. The
Compensation Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be included
in a published industry index established for comparing stockholder returns. The
financial performance of comparable companies relative to Coho's financial
performance was not considered by the Compensation Committee when determining
compensation levels.
None of the executive officers named in the Summary Compensation Table
received salary increases effective in the year ended December 31,1997. On
January 20, 1998 the Board approved salary increases for all of the executive
officers effective January 1, 1998.
Annual Incentives
In 1996, the Company implemented an annual bonus program available to
executive officers based on the Company's after tax return on equity for the
year. The Board of Directors believes that the concept of
5
<PAGE> 9
measuring executive performance based upon return on shareholders' equity is
appropriate because an improved return on equity is a reflection of improved
operating results, low finding costs for oil and gas reserves and appropriate
financing decisions. Generally, individual awards are expected to be made to the
executive officers pro rata on the basis of their annual salaries. However, the
Chief Executive Officer's portion of the bonus will be determined by the Board
of Directors, and the Chief Executive Officer will have discretion to determine
the individual amounts paid to the other executive officers based on
performance. All non-executive full time employees of the Company are also
eligible to receive a bonus if certain levels of production volumes as
established by the Board of Directors are met.
For 1996 the Company established an executive bonus pool based upon a
graduating scale of return on beginning shareholders' equity. The pool would be
awarded as follows: $375,000 at the floor return of 5%, increasing pro rata to;
$750,000 if the return is 7%, and increasing pro rata again from $750,000 to a
maximum of $1,500,000 if the return is 10% or greater. The determination of the
percentage would be based on the audited year end financial statements after
giving consideration to the bonus.
For the year ended December 31, 1996 the amount of the annual bonus was
$785,000 and was paid to the officers on March 6, 1997. The individual amounts
have been included in the 1996 bonuses reported in the Summary Compensation
Table.
For 1997 the Company continued with an executive bonus pool based upon
return on beginning shareholders' equity; however, to set higher goals for
management and to continue to provide an incentive to the officers to increase
shareholder value, the Board of Directors altered the formula for calculating
the bonus pool for 1997. No bonus will be paid until a return on equity of
greater than 7% is reached and, thereafter, for every one tenth of one per cent
in excess of 7%, up to 12% (at which point there would be no further accrual of
bonus), the size of the bonus pool would increase by $30,000. Officers as a
group could earn a maximum bonus not to exceed $1.5 million. The determination
of the percentage would be based on the audited year end financial statements
after giving consideration to the bonus.
Coho's earnings for the fiscal year ended December 31,1997 provided a bonus
pool of $360,000 but the Board of Directors approved a bonus pool of $850,000 to
recognize several significant corporate events. During the year Coho
successfully completed an equity and debt offering of approximately $240 million
that strengthened the balance sheet and significantly increased the trading
liquidity of the Common Stock. In addition, the Company completed the largest
transaction in its history in December 1997 when it acquired oil and gas
properties located primarily in Oklahoma for payment by Coho to seller of $257
million and the issuance by Coho to seller of five year warrants to purchase one
million shares of Coho at $10.425 per share.
For 1998, the Board of Directors has established an executive bonus plan
which will be substantially similar to the 1997 plan to the extent the potential
amount available for the bonus pool will be the same but will be at the
discretion of the Board of Directors to take in to account the economic
conditions at the time of the grant.
Long Term Incentives
Longer term incentives in the form of stock options to executives and other
key employees of the Company are designed to enhance long term growth in
shareholder value. Stock options to persons other than the Chief Executive
Officer are granted by the Compensation Committee upon the recommendation of the
Chief Executive Officer. The options cannot be granted for a price less than the
fair market value of the Common Stock on the date of the grant. The Committee
believes that linking a portion of executive compensation to future shareholder
value will encourage long term performance and growth of Coho.
In 1997, options for 755,000 shares of Common Stock were granted under the
Option Plan to the executive officers of the Company named in the Summary
Compensation Table, including the Chief Executive Officer. The stock options
granted in 1997 vested immediately and expire five years after the date of
vesting.
6
<PAGE> 10
Compensation of the Chief Executive Officer
Effective January 1, 1998, Mr. Jeffrey Clarke's base compensation was
increased to $300,000 per annum. The Committee believes Mr. Clarke's base
compensation for 1998 is in line with his level of responsibility, as well as
salaries paid to CEOs of other companies in the industry group, as determined by
independent compensation surveys for the oil and gas industry.
In 1997 the Board of Directors granted Mr. Clarke options to acquire
300,000 shares of Common Stock. Mr. Clarke currently holds options to acquire
638,712 shares of Common Stock. All of such options are immediately exercisable.
On March 26, 1998 Mr. Clarke received $250,000 as his share of the annual
executive officers bonus pool for the year ended December 31, 1997.
Summary
The Compensation Committee believes that the compensation program that has
been developed for its key executives provides appropriate incentives to these
individuals to achieve the Company's primary objective of maximizing the share
price for the shareholders.
Respectfully submitted,
COMPENSATION COMMITTEE
Douglas R. Martin
Roy R. Baker
Carl S. Quinn
Jake Taylor
7
<PAGE> 11
SUMMARY COMPENSATION AND OPTIONS
The following tables set forth information with respect to the five most
highly compensated executive officers, including the Chief Executive Officer, in
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Clarke.................. 1997 $265,000 $250,000 -- 300,000 $52,539
President and Chief 1996 $258,333 $350,000 -- -- $47,811
Executive Officer(1) 1995 $225,000 $ 75,000 -- -- $23,070
R. M. Pearce.................... 1997 $195,000 $140,000 -- 160,000 $13,954
Executive Vice President and 1996 $192,250 $212,000 -- 100,000 $ 7,768
Chief Operating Officer(2) 1995 $178,500 $ 48,000 -- -- $ 4,965
Eddie M. LeBlanc, III........... 1997 $161,650 $ 85,000 -- 150,000 $11,170
Senior Vice President and 1996 $160,125 $136,000 -- -- $ 7,014
Chief Financial Officer(3) 1995 $155,433 $ 97,335 $28,568 -- $47,647
Anne Marie O'Gorman............. 1997 $161,650 $ 85,000 -- 100,000 $10,516
Senior Vice President 1996 $153,875 $148,620 -- 50,000 $ 6,112
Corporate Development and 1995 $115,000 $ 22,000 -- -- $ 5,003
Corporate Secretary(4)
Larry L. Keller................. 1997 $143,100 $ 65,000 -- 45,000 $10,050
Vice President Exploitation(5) 1996 $141,750 $103,000 -- -- $ 5,813
1995 $135,000 $ 18,000 -- -- $ 4,751
</TABLE>
- ---------------
(1) Mr. Clarke's All Other Compensation includes the Company's contributions to
a 401(k) savings plan of $8,000, $4,750 and $4,620 in 1997, 1996 and 1995,
respectively; premiums paid on a disability and life insurance policy of
$32,463, $31,910 and $18,450 in 1997, 1996 and 1995, respectively; and
$12,076 and $11,152 in 1997 and 1996, respectively, of imputed interest on a
loan from the Company.
(2) Mr. Pearce's All Other Compensation includes the Company's contribution to a
401(k) savings plan of $8,000, $4,750, and $4,620 in 1997, 1996 and 1995,
respectively; and premiums paid on a disability policy of $5,954, $3,018,
and $345 in 1997, 1996 and 1995, respectively .
(3) Mr. LeBlanc's Other Annual Compensation in 1995 includes a reimbursement of
$25,609 to cover taxes incurred by Mr. LeBlanc as a result of the
reimbursement of the loss on the sale of a home.
Mr. LeBlanc's bonus in 1995 constituted reimbursements of certain relocation
expenses.
Mr. LeBlanc's All Other Compensation includes the Company's contributions to
a 401(k) savings plan of $8,000, $4,750 and $4,620 in 1997, 1996 and 1995,
respectively; reimbursement in 1995 of the loss on the sale of a house owned
by Mr. LeBlanc in Houston, Texas of $42,590; and premiums paid on a
disability policy of $3,171, $2,264 and $437 in 1997, 1996 and 1995,
respectively.
(4) Ms. O'Gorman's All Other Compensation includes the Company's contributions
to a 401(k) savings plan of $8,000, $4,750, and $4,620 in 1997, 1996 and
1995, respectively; and premiums paid on a disability policy of $2,050,
$1,363 and $419 in 1997, 1996 and 1995, respectively.
Ms. O'Gorman's bonus in 1996 included a $12,620 reimbursement of certain
relocation expenses.
(5) Mr. Keller's All Other Compensation includes the Company's contribution to a
401(k) savings plan of $8,000, $4,597, and $4,394 in 1997, 1996 and 1995,
respectively; and premiums paid on a disability policy of $2,050, $1,216 and
$357 in 1997, 1996 and 1995, respectively.
8
<PAGE> 12
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF
SECURITIES GRANTED TO STOCK APPRECIATION
UNDERLYING EMPLOYEES FOR OPTION TERM
OPTIONS DURING EXERCISE EXPIRY ---------------------
NAME GRANTED THE YEAR PRICE(1) DATE 5% 10%
---- ---------- ---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Clarke............... 300,000 23.62% $7.875 Mar. 4/02 $803,486 $1,822,905
R. M. Pearce................. 160,000 12.60% $7.875 Mar. 4/02 $428,526 $ 972,216
Eddie M. LeBlanc, III........ 150,000 11.81% $7.875 Mar. 4/02 $401,743 $ 911,453
Anne Marie O'Gorman.......... 100,000 7.87% $7.875 Mar. 4/02 $267,829 $ 607,635
Larry L. Keller.............. 15,000 1.18% $10.50 Dec. 2/03 $ 43,515 $ 108,240
15,000 1.18% $10.50 Dec. 2/04 $ 53,655 $ 134,805
15,000 1.18% $10.50 Dec. 2/05 $ 64,125 $ 164,040
</TABLE>
- ---------------
(1) The exercise price was equal to or above the fair market value of the Common
Stock on the date of grant.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE NON-EXERCISABLE EXERCISABLE NON-EXERCISABLE
---- -------- -------- ----------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Jeffrey Clarke............. 61,288 $347,993 638,712 $1,630,772
R. M. Pearce............... -- -- 420,000 $1,140,000
Eddie M. LeBlanc, III...... -- -- 250,000 $ 600,000
Anne Marie O'Gorman........ 14,827 $ 77,249 234,316 $ 630,155
Larry L. Keller............ 13,333 $ 78,331 86,667 45,000 $ 368,117 $0
</TABLE>
- ---------------
(1) Computed based upon the difference between the market price on December 31,
1997 of $9.125 per share and the exercise price per share.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement ("Employment
Agreement") with each of Messrs. Clarke, Pearce, and LeBlanc and Ms. O'Gorman,
which provide for minimum annual compensation in the amount of $300,000,
$225,000, $175,000 and $175,000, respectively, in each case to be reviewed
annually by the Board of Directors for possible increases. Each Employment
Agreement is for a term of three years, renewable annually for a term to extend
two years from such renewal date unless either party gives notice. Each
Employment Agreement entitles the officer to participate in such bonus,
incentive compensation and other programs as are created by the Board. In the
event any of Messrs. Clarke, Pearce, or LeBlanc or Ms. O'Gorman terminates his
or her employment for "Good Reason" (as defined below) or is terminated by the
Company for other than "Cause" (as defined below), the Company would: (i) pay
such individual a cash lump sum payment equal to two times the executive's then
current annual rate of total compensation; and (ii) continue, until the first
anniversary of the employment termination, health and medical benefits under the
Company's plans (or the equivalent thereof). In the event any of Messrs. Clarke,
Pearce or LeBlanc or Ms. O'Gorman terminates his or her employment for Good
Reason or is terminated by the Company for other than Cause within three years
of a "Change of Control", the Company will pay the executive an additional lump
sum equal to .99 times his or her then current annual rate of total compensation
and continue health benefits until the third anniversary of the employment
termination. In the event any of Messrs. Clarke, Pearce or LeBlanc or Ms.
O'Gorman becomes disabled or dies during the term of the respective Employment
Agreement, the Company will pay the executive or his or her estate compensation
under the Agreement for a six month period following such death or disability.
Under the Deficit Reduction Act of 1984, severance
9
<PAGE> 13
payments contingent upon a "Change of Control" (as defined below) that exceeded
a certain amount subject both the Company and the officer to adverse U.S.
Federal income tax consequences. Each of the Employment Agreement was amended on
March 17, 1997 to provide that the Company shall pay the officer a "gross-up"
payment to insure that the officer receives the total benefit intended by the
Employment Agreement.
The term "Good Reason" is defined in each Employment Agreement generally to
mean: (i) the failure by the Company to elect or re-elect such executive to his
or her existing office with the Company without Cause; (ii) a material change by
the Company of the executive's function, duties or responsibilities that would
cause his or her position with the Company to become of less dignity,
responsibility, importance or scope; (iii) the Company requires the executive to
relocate his or her primary office to a location that is greater than 50 miles
from the current location of the Company; or (iv) any other material breach of
the Agreement by the Company. The term "Cause" is defined in each Employment
Agreement generally to mean: (i) any material failure of the executive after
written notice to perform his or her duties; (ii) commission of fraud by the
executive against the Company, its affiliates or customers; (iii) a material
breach by the executive of the confidentiality or non-competition provisions in
the Employment Agreement; or (iv) conviction of the executive of a felony
offense or a crime involving moral turpitude. Under each Employment Agreement, a
"Change of Control" of the Company is deemed to have occurred if: (i) any person
or group of persons acting in concert becomes the beneficial owner of 20 percent
or more of the outstanding shares of Common Stock or the combined voting power
of the Company's voting securities, with certain exceptions; (ii) individuals
who as of the date of such agreement constitute the Board of Directors of the
Company (or their designated successors) cease for any reason to constitute at
least a majority thereof; or (iii) there occurs a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
Company's assets unless, after the transaction, all or substantially all of
those persons who were the beneficial owners of Common Stock prior to the
transaction beneficially own more than 60 percent of the then outstanding common
stock of the resulting corporation, no person who did not own Common Stock prior
to the transaction beneficially owns 40 percent or more of the then outstanding
common stock of the resulting corporation, and at least a majority of the Board
of Directors of the corporation resulting from such transaction were members of
the Board of Directors of the Company at the time of the execution of the
initial agreement or of the action by the Board of Directors providing for the
corporate transaction.
The Company currently has an Executive Severance Agreement (the "Severance
Agreement") with Larry L. Keller. The purpose of the Severance Agreement is to
encourage the executive officer to continue to carry out his duties with the
Company in the event of a "change of control" of the Company. Under the
Severance Agreement, a "change of control" of the Company is generally deemed to
have occurred if: (i) any person or group of persons acting in concert becomes
the beneficial owner of 20 percent or more of the outstanding shares of Common
Stock or the combined voting power of the Company's voting securities, with
certain exceptions; (ii) individuals who as of the date of such agreement
constitute the Board of Directors of the Company (or their designated
successors) cease for any reason to constitute at least a majority thereof;
(iii) there occurs a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the Company's assets unless, after
the transaction, all or substantially all of those persons who were the
beneficial owners of Common Stock prior to the transaction beneficially own more
than 60 percent of the then outstanding common stock of the resulting
corporation, except to the extent such ownership existed prior to the corporate
transaction, no person (with certain exceptions) beneficially owns 20 percent or
more of the then outstanding common stock of the resulting corporation, and at
least a majority of the board of directors of the corporation resulting from
such transaction were members of the Board of Directors of the Company at the
time of the execution of the initial agreement or of the action by the Board of
Directors providing for the corporate transaction; or (iv) the shareholders of
the Company approve a complete liquidation or dissolution of the Company.
The Severance Agreement provides for severance payments in the event of
termination of the executive officer's employment within two years after a
change in control of the Company, unless the executive's employment is
terminated by the Company or its successor for "cause" or because of the
executive's death, "disability" or "retirement" or by the executive's voluntary
termination for other than "good reason", in each case as such terms are defined
in the Severance Agreement. The benefits include: (a) a lump sum payment
10
<PAGE> 14
equal to 1.5 times the highest salary plus bonus paid to the executive in any of
the five years preceding the year of termination of employment; (b) salary to
the date of termination; and (c) immediate vesting of all stock options or
restricted stock awards that may have been granted to the executive under the
Company's employee benefit plans; provided that, such options or restricted
stock awards shall vest only to the extent the total payments to the executive
under the Severance Agreement or otherwise would not be subject to excise taxes
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At December 31, 1997 the members of the Compensation Committee were Douglas
R. Martin, Carl S. Quinn, Jake Taylor and Roy R. Baker. No member of the
Compensation Committee was an officer of the Company at any time during 1997.
During 1997 no executive officer of Coho served as: (i) a member of the
compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served on the
Compensation Committee of the Board of Directors; (ii) a director of another
entity, one of whose executive officers served on the Compensation Committee of
the Board of Directors; or (iii) a member of the compensation committee (or
other board committee performing equivalent functions) of another entity, one of
whose executive officers served as a director of Coho.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on a review of the copies of the
reports required pursuant to Section 16(a) of the Securities Exchange Act of
1934, as amended, that have been furnished to the Company and written
representations that no other reports were required, during the year ended
December 31, 1997 all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners have been
met.
11
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN
OF COMPANY, INDUSTRY INDEX AND BROAD MARKET
PERFORMANCE GRAPH
The following graph compares, as of December 31 for each of the dates
indicated, the percentage change in the cumulative total stockholder return on
the Common Stock with the cumulative total return of the Standard & Poor's 500
Index and the Standard Industrial Code Index for Crude Oil and Natural Gas
Producers. The graph assumes that the value of the investment in the Common
Stock and each index was $100 at December 31, 1992 and that all dividends paid
by those companies included in the indices were reinvested.
<TABLE>
<CAPTION>
Measurement Period Coho Energy, Industry
(Fiscal Year Covered) Inc. Index Broad Market
<S> <C> <C> <C>
1992 100 100 100
1993 90.48 119.15 110.08
1994 98.81 124.87 111.54
1995 92.86 137.33 153.45
1996 135.71 182.60 188.69
1997 173.81 185.09 251.64
</TABLE>
PROPOSAL TO AMEND THE 1993 STOCK OPTION PLAN
On June 28, 1993 the Board of Directors of Coho adopted and the
shareholders approved the Coho Energy, Inc. 1993 Stock Option Plan (as amended,
the "Option Plan") pursuant to which options to purchase up to 350,000 shares of
Common Stock could be granted. In 1994, 1995, 1996 and 1997, the Board and
shareholders of Coho approved amendments to the Option Plan to increase the
total number of shares of Common Stock with respect to which options may be
granted under the Option Plan to 680,000 shares, 1,080,000 shares, 1,269,500
shares and 2,044,500 shares, respectively, reflecting increases of 330,000
shares, 400,000 shares, 189,500 shares and 775,000 shares, respectively. On
November 11, 1997 the Board of Directors of Coho approved, subject to
ratification by the shareholders at the Meeting, an amendment to the Option Plan
to increase by 500,000 shares to 2,544,500 shares the total number of shares of
Common Stock with respect to which options may be granted under the Option Plan.
As of March 31, 1998 options to acquire 1,944,638 shares of Common Stock were
outstanding under the Option Plan and 9,419 shares of Common Stock were
available for future grant; provided, however, the Compensation Committee, which
administers the Option Plan (the "Committee"), has granted options for an
additional 407,500 shares of Common Stock at an exercise price of $10.50, which
grants are contingent on the approval of the foregoing amendment by the
12
<PAGE> 16
shareholders at the Meeting. If the shareholders approve the amendment, 101,919
shares of Common Stock will be available for future grant under the Option Plan.
SUMMARY DESCRIPTION
Following is a summary of certain major provisions of the Option Plan.
Types of Options. The Committee is empowered to grant "incentive stock
options" ("Incentive Options") within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-incentive stock
options ("Non-Incentive Options" and, together with the Incentive Options, the
"Options"), either of which may include stock appreciation rights.
The Board of Directors has the power to terminate or amend the Option Plan
from time to time as it deems advisable, except that the shareholders must
approve any amendment which increases the maximum number of shares subject
thereto, reduces the Option price permitted for Incentive Options, extends the
term during which an Incentive Option may be exercised or the termination date
of the Option Plan, or changes the class of employees eligible to receive
Options or stock appreciation rights thereunder.
Eligibility. All key employees, including officers and directors if they
are employees, of the Company or of any parent or subsidiary corporation (which
group includes approximately 31 persons) are eligible to be granted one or more
Options under the Option Plan.
Option Price. The exercise price of an Option may not be less than the fair
market value of a share of Common Stock on the date of grant as determined by
the Committee (the "Fair Market Value"), except that the exercise price of an
Incentive Option granted to a person possessing more than 10% of the total
combined voting power of all shares of stock of the Company or its affiliates (a
"10% Shareholder") may not be less than 110% of the Fair Market Value. The
aggregate Fair Market Value of shares of Common Stock subject to Incentive
Options granted to any grantee by the Company, which vest in any calendar year,
may not exceed $100,000. If, as a result of accelerated vesting provisions,
Incentive Options valued (as of the date of grant) in excess of $100,000 vest in
any calendar year, the excess will be considered a Non-Incentive Option.
Duration and Exercise of Options. Subject to the discretion of the
Committee, Options may be exercised over a period of ten years after the date of
grant except that an Incentive Option granted to a 10% Shareholder may not be
exercised after the expiration of five years after the date of grant. Unless
otherwise specified in the Option Agreement (in the case of grantees who are not
required to file reports under Section 16(a) of the Securities Exchange Act of
1934, as amended) or unless the grantee dies while in the employ of the Company,
Options may only be exercised during the continuance of the grantee's employment
with the Company or within a period of one day less than three months after the
termination thereof to the extent the Option does not otherwise expire according
to its terms. If the grantee dies while in the employ of the Company, his or her
Option may be exercised by his or her executors, administrators or any person to
whom the Option may be transferred by will or the laws of descent and
distribution within a period of six months after the date of the grantee's death
to the extent the Option does not otherwise expire according to its terms.
Options may be exercised by delivery of written notice to the Company together
with payment of the exercise price which may be made: (a) by cash, certified
check, bank draft or money order; (b) if not prohibited under the terms of the
Company's Articles of Incorporation, by delivery of Common Stock having a Fair
Market Value equal to the exercise price; or (c) otherwise as permitted by the
Committee.
Non Transferability. Options are not transferable except by will or the
laws of descent or distribution, or pursuant to a qualified domestic relations
order.
Stock Appreciation Rights. The Committee may, in its discretion, grant
stock appreciation rights with respect to shares subject to an Option at the
date of grant. Upon exercise of stock appreciation rights, the Company will pay
to the grantee an amount per share equal to the difference between the Fair
Market Value of a share of Common Stock on the date of exercise and the purchase
price thereof under the Option. Payments may be made in cash, Common Stock, or
both, at the discretion of the Committee. Stock appreciation rights are subject
to the same provisions with respect to vesting, termination and transfer as the
13
<PAGE> 17
Options with respect to which they have been issued. Upon exercise of either the
stock appreciation right or the underlying Option, the number of shares subject
thereto shall be reduced accordingly.
Tax Consequences. No optionee will recognize income upon the grant of an
Option under the Option Plan. Upon the exercise of any portion of a
Non-Incentive Option, the optionee will recognize taxable ordinary income equal
to the excess of the fair market value of the shares so acquired as of the date
of exercise over the option price paid for such shares. The Company receives a
deduction for compensation expense for the amount of such ordinary income, and
there is a withholding requirement on the date of exercise. Upon disposition of
the shares acquired upon the exercise of the Option, the optionee will generally
recognize a long-term or short-term capital gain or loss (depending on how long
the shares were held) equal to the excess of the amount realized by him or her
upon such disposition over the fair market value of the shares on the date he or
she exercised the Option.
In the case of Incentive Options, and except to the extent the excess of
the fair market value of the acquired shares as of the date of exercise over the
exercise price may constitute income for purpose of the optionee's alternative
minimum tax computation, if the optionee does not dispose of shares acquired
pursuant to the exercise of such Option within two years from the date the
Option was granted or within one year after the shares were transferred to such
optionee, no income would be recognized by the optionee by reason of the
optionee's exercise of the Option. The difference between the option price and
the amount realized upon a subsequent disposition of shares would be treated as
long-term capital gain or loss. In such event, the Company would not be entitled
to any deduction in connection with the grant or exercise of the Option or the
disposition of the shares so acquired. If, however, an optionee disposes of
shares acquired pursuant to his or her exercise of an Incentive Option before
the end of the two-year or one-year holding period noted above, the optionee
would be treated as having received at the time of disposition compensation
taxable as ordinary income. In such event, the Company may claim a deduction for
compensation paid at the same time in the same amount as compensation is treated
as being received by the optionee. The amount treated as compensation is the
excess of the fair market value of the shares at the time of exercise over (or,
in the case of a sale in which a loss, if sustained, would be recognized, the
amount realized on the sale, is less than) the Option price. Any amount realized
in excess of the fair market value of the shares at the time of exercise would
be treated as long-term or short-term capital gain, depending on how long the
shares were held.
New Plan Benefits. On November 11, 1997 the Committee granted options to
acquire 407,500 shares of Common Stock, at an exercise price of $10.50, under
the Option Plan subject to shareholder approval of the amendment increasing the
total number of shares available for grant thereunder. The grants to named
executive officers, to all current executive officers as a group, and to all
other employees as a group, are set forth in the following table:
<TABLE>
<CAPTION>
NAME AND POSITION DOLLAR VALUE NUMBER*
----------------- ------------ -------
<S> <C> <C>
Larry L. Keller............................................. N/A 45,000
Vice President, Exploitation
All executive officers as a group........................... N/A 159,500
All other employees......................................... N/A 248,000
</TABLE>
- ---------------
* Number of shares of Common Stock underlying option grants.
VOTE REQUIRED AND RECOMMENDATION FOR APPROVAL
The Board of Directors has unanimously adopted the amendment to the Option
Plan. However, the amendment to the Option Plan will not be implemented unless
holders of a majority of the outstanding shares of Common Stock vote "for" the
approval of the amendment to the Option Plan, as required by the rules of the
Nasdaq Stock Market. The enclosed form of proxy provides a means for a holder of
shares of Common Stock to vote for the approval of the amendment to the Option
Plan, to vote against such approval or to abstain from voting on the proposal. A
broker non-vote will have no effect on the outcome of the proposal. Shares that
are represented at the Meeting but abstain from voting will be counted as shares
entitled to vote on the proposal and will have the same effect as a vote against
the proposal. Each properly executed proxy
14
<PAGE> 18
received in time for the meeting will be voted as specified therein. If a
shareholder executes and returns a proxy but does not specify otherwise, the
shares represented by such shareholder's proxy will be voted "for" the approval
of the amendment to the Option Plan.
EXECUTIVE OFFICERS
The names of the executive officers of the Company and certain information
with respect to them are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey Clarke.............. 52 Chairman, President, Chief Executive Officer and
Director
R. M. Pearce................ 46 Executive Vice President and Chief Operating
Officer
Eddie M. LeBlanc, III....... 49 Senior Vice President and Chief Financial Officer
Anne Marie O'Gorman......... 39 Senior Vice President, Corporate Development and
Corporate Secretary
Keri Clarke................. 42 Vice President, Land and Environmental/Regulatory
Affairs
R. Lynn Guillory............ 50 Vice President, Human Resources and
Administration
Larry L. Keller............. 39 Vice President, Exploitation
Susan J. McAden............. 40 Vice President & Controller
Patrick S. Wright........... 41 Vice President, Operations
Joseph Ragusa............... 44 Treasurer
</TABLE>
- ---------------
For information concerning Jeffrey Clarke, see the table under "Election of
Directors" above.
R. M. Pearce has served as Executive Vice President and Chief Operating
Officer of the Company since August 1995 and has been an officer of Coho since
November 1993. From July 1991 to October 1993, Mr. Pearce served as President of
GRL Production Services Company.
Eddie M. LeBlanc, III joined the Company as Senior Vice President and Chief
Financial Officer when the Company acquired ING on December 8, 1994. From the
inception of ING in March 1992 through its acquisition by the Company, Mr.
LeBlanc was Senior Vice President and Chief Financial Officer of ING.
Anne Marie O'Gorman was appointed Senior Vice President, Corporate
Development, in March 1996 and was Vice President, Corporate Development, of
Coho (and CRI, prior to the Combination) from August 1993. Ms. O'Gorman had been
employed by CRI or CRL in various capacities since 1985. Ms. O'Gorman has served
as Secretary of the Company since the Combination.
Keri Clarke has served as Vice President, Land and Environmental/Regulatory
Affairs, of Coho (and CRI, prior to the Combination) since 1989. He has also
been employed by CRL in various positions since 1981.
R. Lynn Guillory joined the Company as Vice President, Human Resources and
Administration, when the Company acquired ING on December 8, 1994. Mr. Guillory
held that same position with ING since its inception in March 1992.
Larry L. Keller has served as Vice President, Exploitation, of Coho (and
CRI, prior to the Combination) from August 1993 and had been employed in various
engineering positions with CRI since July 1990.
Susan J. McAden was appointed Vice President and Controller in January 1998
and joined the Company as Controller in February 1995. From September 1993 to
February 1995, Ms. McAden was Vice President and Controller of Lincoln Property
Company (a property development and management company). From November 1990 to
September 1993, Ms. McAden was Chief Accounting Officer and Treasurer of Concap
Equities, Inc. ("Concap") (the acting general partner for sixteen public real
estate partnerships).
15
<PAGE> 19
Patrick S. Wright joined Coho as Vice President, Operations, in January
1996. From January 1991 until he joined Coho, Mr. Wright served in several
managerial positions with Snyder Oil Corporation (an international oil and gas
exploration and production company).
Joseph Ragusa was appointed Treasurer in January 1998 and joined the
Company as Assistant Treasurer, when the Company acquired ING on December 8,
1994. Mr. Ragusa held that same position with ING since January 1993.
Keri Clarke, Vice President, Land and Environmental/Regulatory Affairs, and
Jeffrey Clarke, Chairman, President and Chief Executive Officer of the Company,
are brothers.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as to persons or entities who,
to the knowledge of Coho based on information received from or on behalf of such
persons, were the beneficial owners of more than 5% of the outstanding shares of
Common Stock as of March 17, 1997. Unless otherwise specified, such persons have
sole voting power and sole dispositive power with respect to all shares
attributable to it.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------------------------ -------------------- -------------------
<S> <C> <C>
Morgan Stanley Leveraged Equity Fund II L.P..... 1,350,440(2) 5.3%
1221 Avenue of the Americas
New York, NY 10020
Wellington Management Company................... 1,295,857(3) 5.1%
75 State Street
Boston, Massachusetts 02109
</TABLE>
- ---------------
(1) Based on 25,603,512 shares issued and outstanding as of March 10, 1997.
(2) Morgan Stanley Leveraged Equity Fund II L.P., Morgan Stanley Leveraged
Equity Fund II Inc. and Morgan Stanley Group Inc. each have sole voting and
dispositive power with respect to the 1,350,440 shares of Common Stock that
were issued to MSLEF II in connection with the acquisition of ING and the
payment of dividends in exchange for cancellation of the Company's Series A
Preferred Stock in August 1995. The foregoing information is based solely on
a Schedule 13D dated December 16, 1994, as amended on September 11, 1995 and
November 10, 1997, filed by the foregoing entities with the Securities and
Exchange Commission (the "Commission").
(3) Based solely on information contained in a Schedule 13G dated January 13,
1998 filed with the Commission. Wellington Management Company acts as a
financial advisor and has shared voting power with respect to 630,467
shares, and shared dispositive power with respect to 1,295,857 shares, of
Common Stock that are owned by its clients.
The following table sets forth certain information with respect to Common
Stock beneficially owned as of March 10, 1997 by each director of Coho, by each
executive officer named in the Summary Compensation
16
<PAGE> 20
Table and by all directors and officers as a group. Unless otherwise specified,
such persons have sole voting power and sole dispositive power with respect to
all shares attributable to him or her.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF OF
BENEFICIAL OWNERSHIP(1) CLASS
----------------------- -------
<S> <C> <C>
Jeffrey Clarke................................................... 708,500 2.8%
Louis F. Crane................................................... 25,000 *
Howard I. Hoffen................................................. -- --
Larry L. Keller.................................................. 101,839 *
Eddie L. LeBlanc, III............................................ 251,000 *
Kenneth H. Lambert............................................... 444,237(2) 1.7%
Douglas R. Martin................................................ 19,000 *
Anne Marie O'Gorman.............................................. 250,650 *
R. M. Pearce..................................................... 425,000 1.6%
Carl S. Quinn.................................................... 149,744(3) 0
Jake Taylor...................................................... 60,400 *
All directors and executive officers as a group (16 persons)..... 2,618,165(1) 10.2%
</TABLE>
- ---------------
* Less than 1%
(1) Includes 638,712, 16,000, 86,667, 250,000, 18,000, 420,000, 15,000, 16,000,
234,316 and 1,941,059 shares that may be acquired within 60 days upon the
exercise of stock options held by Messrs. Clarke, Crane, Keller, LeBlanc,
Martin, Pearce, Quinn, and Taylor, Ms. O'Gorman and all directors and
executive officers as a group, respectively.
(2) Mr. Lambert is the beneficial owner of the shares held by Lambert Management
Ltd., Lambert Holdings, Ltd., Edmonton International Industries Ltd., 372268
Alberta Ltd., 249172 Alberta Ltd., and 297139 Alberta Ltd. The number of
shares shown as beneficially owned by Mr. Lambert include the shares owned
by such entities and also include 63,569 shares that may be acquired by Mr.
Lambert within 60 days upon the exercise of stock options. Included in Mr.
Lambert's total shares are 31,984 which are held by family members; Mr.
Lambert claims no beneficial interest in these shares.
(3) Quinn Oil Company Ltd. and Carl S. Quinn each have sole voting and
dispositive power with respect to the 134,744 shares of Common Stock that
were issued to Quinn in connection with the acquisition of ING and the
payment of dividends in exchange for cancellation of the Company's Series A,
Preferred Stock in August, 1995.
In addition to the foregoing options, Messrs. Crane, Keller, Lambert,
Martin, Quinn and Taylor, and all executive officers and directors as a group
held options to acquire 1,000, 45,000, 1,000, 1,000, 1,000, 1,000 and 204,666
shares of Common Stock, respectively, which options were not exercisable within
60 days.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Frederick Campbell, a director of Coho until the annual meeting date of
May 12, 1998, through a corporation he controls, owns an approximate 2.5%
working interest in certain of the properties in the Laurel field in which Coho
has an interest and owns an approximate 5% working interest in substantially all
of the properties in the Glazier field in which CRI has an interest.
In May 1990 the Company made a non-interest bearing loan in the amount of
$205,000 to Mr. Jeffrey Clarke, Chairman, President and Chief Executive Officer
of Coho, to assist him in the purchase of a house in Dallas, Texas. The loan is
unsecured and repayable when Mr. Clarke ceases to be employed by Coho or its
subsidiaries.
In October 1997 the Company made non-interest bearing loans to Jeffrey
Clarke, Chairman, President and Chief Executive Officer, Anne Marie O'Gorman,
Senior Vice President Corporate Development, Larry Keller, Vice President
Exploitation and Kenneth Lambert a director of Coho in the amounts of $383,064,
17
<PAGE> 21
$84,006, $66,665 and $88,375, respectively to assist them in the exercise of
expiring options. At the time of the expiration of such options all of the
officers and directors of Coho were subject to a ninety day lock up agreement
with the underwriters of the Company's 1997 equity offering. Under the terms of
this agreement the officers and directors were not able to sell any shares of
Coho and these individuals would not have had the funds necessary to purchase
the stock without the loan. In addition to the loan, the Company also provided a
guaranteed price of $10.50 (the price of the Common Stock in the 1997 equity
offering) to be received by Messrs. Clark, Keller and Lambert and Ms. O'Gorman
when they are permitted to sell the shares.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 19, 1998 the Board of Directors appointed the firm of Arthur
Andersen L.L.P. as independent auditors for the year ending December 31, 1998
subject to ratification by shareholders at the Meeting. Representatives of
Arthur Andersen L.L.P. are expected to attend the Meeting, will be afforded an
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions by shareholders.
Approval of the ratification of Arthur Andersen L.L.P. as independent
auditors for the year ending December 31, 1998 will require the affirmative vote
of a majority of the shares represented and voting at the Meeting. Abstentions
will not be treated as either a vote for or against the proposal, but will have
the same effect as a vote against the proposal.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of holders of Common Stock intended to be presented at the
annual meeting of shareholders of the Company to be held in 1999 must be
received by the Company at its principal executive offices, 14785 Preston Road,
Suite 860, Dallas, Texas 75240, Attention: Secretary, not later than December
12, 1998 in order to be included in the proxy statement and form of proxy
relating to such meeting.
PROXY SOLICITATION
The cost of preparing, assembling and mailing the material in connection
with the solicitation of proxies will be borne by the Company. It is expected
that the solicitation of proxies will be primarily by mail, but solicitations
may also be made personally or by telephone or telegraph by officers and other
employees of the Company. Arrangements will also be made with brokerage firms
and other custodians, nominees and fiduciaries who hold the voting securities of
record for the forwarding of solicitation materials to the beneficial owners
thereof.
By order of the Board of Directors,
/s/ JEFFREY CLARKE
Jeffrey Clarke
Chairman, President and
Chief Executive Officer
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<PAGE> 22
COHO ENERGY, INC.
PROXY-ANNUAL MEETING OF SHAREHOLDERS-MAY 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jeffrey Clarke and Anne Marie O'Gorman, and
each of them, as proxies, with full power of substitution, to vote as
designated on the reverse side, all shares of common stock, $0.01 par value
("Common Stock"), of Coho Energy, Inc. (the "Company") that the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Shareholders of the Company to be held at 2:00 p.m., Dallas, Texas time, on May
12, 1998, at the Westin Hotel Galleria, Johnson 2 Room, 13340 Dallas Parkway,
Dallas, Texas, or at any adjournments thereof.
With respect to the election of directors under item 1 on the reverse
side, each share of Common Stock represented by this proxy entitles the holder
thereof to seven votes, which may be allocated among one or more of the
nominees. Unless otherwise indicated, one vote for each share of Common Stock
represented by this proxy will be voted for each nominee. To exercise
cumulative voting, indicate the number of votes for each nominee. With respect
to all other matters, the holders of common stock will have one vote per share.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME.
(Continued and to be signed on other side)
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oFOLD AND DETACH HEREo
<PAGE> 23
The shares represented hereby will be voted Please mark
as specified below. WHERE NO SPECIFICATIONS ARE your votes as [X]
GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE indicated in
DIRECTOR NOMINEES NAMED IN ITEM 1 AND FOR PROPOSALS 2 AND 3. this example
1. Election of Directors
FOR all WITHHOLD Number of Votes
nominees listed AUTHORITY to be voted
below (except as to vote for all if Cumulative
marked to the nominees Voting
contrary) listed below Exercised
[ ] [ ]
Jeffrey Clarke
Louis F. Crane
Howard I. Hoffen
Kenneth H. Lambert
Douglas R. Martin
Carl S. Quinn
Jake Taylor
2. Proposal to approve an amendment to the 1983 Stock Option Plan that would
increase the number of shares issuable thereunder by 500,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to ratify the selection by the Board of Directors of the firm of
Arthur Andersen LLP as independent auditors of the Company for 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote on such other
matters as may properly come before the meeting or any adjournment thereof.
All of the above matters are more particularly described in the accompanying
Proxy Statement dated April 9, 1998, receipt of which is hereby acknowledged.
Date: , 1998
----------------------------------
- --------------------------------------------
Signature of Shareholder
- --------------------------------------------
Signature of Shareholder
PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON. JOINT OWNERS SHOULD EACH
SIGN. WHEN SIGNING AS AN ATTORNEY, ADMINISTRATOR, EXECUTOR, GUARDIAN OR TRUSTEE,
PLEASE ADD YOUR TITLE AS SUCH. IF EXECUTED BY A CORPORATION, THE PROXY SHOULD
BE SIGNED BY A DULY AUTHORIZED OFFICER.
PLEASE DATE, SIGN, AND MAIL THIS PROXY IN THE ENCLOSED ENVELOPE; NO POSTAGE IS
NECESSARY IF MAILED IN THE UNITED STATES.
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oFOLD AND DETACH HEREo
