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:
[ ] 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 sec. 240.14a-11(c) or sec. 240.14a-12
COHO ENERGY, INC.
- --------------------------------------------------------------------------------
(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)(l) 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:
- --------------------------------------------------------------------------------
2
[COHO LOGO]
April 11, 1997
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, 1997 at the Westin Hotel Galleria, Panorama West Suite, 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
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, 1997 at 2:00 p.m. Dallas, Texas time, at the Westin
Hotel Galleria, Panorama West Suite 13340 Dallas Parkway, Dallas, Texas for the
following purposes:
1. To elect a board of ten 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 775,000;
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 1997; 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 7, 1997
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 CLARK
Jeffrey Clarke
Chairman, President and
Chief Executive Officer
4
COHO ENERGY, INC.
14785 Preston Road, Suite 860
Dallas, Texas 75240
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 12, 1997
------------------------
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 ("Meeting") scheduled to be held on May 12, 1997 at 2:00 p.m.,
Central Daylight Time, at the Westin Hotel Galleria, Panorama West Suite, 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 7, 1997 (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 20,375,126 shares of Common Stock outstanding. With respect to the
election of directors, each share of Common Stock entitles the holder thereof to
ten 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 11, 1997 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
Ten 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.
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) by distributing 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.
Certain information concerning the nominees for election as directors is
set forth below.
DIRECTOR
NOMINEE AGE SINCE*
------- --- --------
Robert B. Anderson(a)...................................... 70 1993
Roy R. Baker(b)............................................ 75 1990
Frederick K. Campbell(a)................................... 59 1990
Jeffrey Clarke............................................. 51 1982
Louis F. Crane(a).......................................... 56 1993
Howard I. Hoffen(a)........................................ 33 1994
Kenneth H. Lambert(a)...................................... 52 1980
Douglas R. Martin(b)....................................... 51 1990
Carl S. Quinn(b)........................................... 66 1994
Jake Taylor(b)............................................. 50 1993
- ---------------
(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
Robert B. Anderson has served as President of R. B. Anderson Energy Company
(a private oil and gas and real estate company) since 1989.
Roy R. Baker has been an independent consultant in the oil and gas industry
since 1984.
Frederick K. Campbell served as Vice Chairman of the Board of Directors of
CRI from June 1990 until the Combination, served as a director of CRL from 1980
until the Combination and served as CRL's Chairman of the Board from 1982 until
June 1992. Mr. Campbell has served as Chairman of the Board and Chief Executive
Officer of Campco International Capital Ltd. (private investment company) since
1984.
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 from May
1990 to October 1992 and as President and Chief Executive Officer of CRI since
October 1992. He has served as Senior Vice President, Chief Operating Officer
and a director of CRL since 1984 and has been engaged by CRL in various
capacities since 1980.
2
6
Louis F. Crane has served as President and Chief Executive Officer of
Orleans Capital (investment portfolio management firm) since November 1991. Mr.
Crane is a director of Offshore Logistics Inc. and Columbia Universal Corp.
Howard I. Hoffen has been a Principal since January 1996, and was a Vice
President from 1994 to January 1996, of Morgan Stanley & Co. (an investment
banking firm). Mr. Hoffen joined Morgan Stanley in 1985 and became a member of
the Merchant Banking Division in 1986. Mr. Hoffen is currently a director of
Amerin Guaranty Corporation and Highlands Gas Corporation.
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 a director of Edmonton International Industries Ltd. (a Canadian
public investment holding company) and the Chairman of the Board of Destination
Resorts, Inc. (a Canadian public resort development corporation).
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
was Chairman of the Board, President and Chief Executive Officer of Arkla
Exploration Company (an oil and gas company) from October 1989 through December
1991. Mr. Quinn is a director of Atmos Energy Corporation.
Jake Taylor has been an independent financial consultant since 1989.
Messrs. Hoffen and Quinn were elected to the Board of Directors upon the
issuance of Common Stock and Series A Preferred Stock for the acquisition of
ING. Each were 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 (the "ING
Shareholder Agreement"), among MSLEF II and Quinn Oil Company Ltd. ("Quinn")
(the previous stockholders of ING), and the Company. For so long as MSLEF II or
Quinn holds shares of Common Stock issued in exchange for the Series A Preferred
Stock that was initially issued in connection with the ING acquisition, they are
entitled under the ING Shareholder Agreement to have a third designee nominated
for election as a director, and, if so requested by MSLEF II or Quinn, as the
case may be, the Company's Board of Directors has agreed to take such action as
may be reasonably required and legally permissible to cause such designee to be
so elected. No such action has been taken as of the Record Date. If a third
designee was requested, the Board of Directors would include such person on the
slate nominated for election at the Meeting or, if a request was made after the
Meeting, the number of directors would be increased by one and the Board would
elect the designee.
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 the 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)
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
3
7
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 or the third designee 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.
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 1996 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 respecting 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 twice during 1996.
During 1996 the Board of Coho met seven times (two of which were telephonic
meetings). Each incumbent director of the Company, during his term as a director
in 1996, 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 ("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 the 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
4
8
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 reelected 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 death.
During the year ended December 31, 1996, Messrs. Anderson, Baker, Campbell,
Crane, Lambert, Martin, Quinn and Taylor were granted options under the Director
Plan to acquire 1,000, 1,000, 1,000, 1,000, 1,000, 1,000, 5,000 and 1,000 shares
of Common Stock, respectively, at an exercise price of $6.625 per share. Mr.
Hoffen has declined to accept options.
5
9
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 which 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 interest 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.
Each of the executive officers named in the Summary Compensation Table
received salary increases for 1996 reflecting increased job responsibilities.
Annual Incentives
On March 20, 1996, all executive officers and several non-executive full
time employees as a group were awarded special bonuses aggregating $500,000. The
bonus was in recognition of the fulfillment of several corporate objectives
which included the significant improvement in the Company's balance sheet and
the reduction of operating and general and administrative expenses related to
the assets that were acquired in the Interstate Natural Gas Company acquisition
in 1994. The bonus was to be paid only after the completion of the sale of the
Company's natural gas marketing and transportation segment, which was finalized
on April 3, 1996.
6
10
In addition to the special bonus during 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 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 and operating costs 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
until; $750,000 if the return is 7%, increasing pro rata until; 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 will continue with an executive bonus pool based upon
return on beginning shareholders' equity; however, to set higher goals for
management and to continue to incentivize 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.
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 1996 options for 150,000 shares of Common Stock were granted under the
1993 Stock Option Plan to the executive officers of the Company named in the
Summary Compensation Table. The stock options granted in 1996 vest over a
three-year period and expire five years after the date of vesting.
Compensation of the Chief Executive Officer
Effective March 1, 1996 Mr. Jeffrey Clarke's base compensation was
increased to $265,000 per annum. The Committee believes Mr. Clarke's base
compensation for 1997 is in line with his level of responsibility, as well as
salaries paid to CEO's of other companies in the industry group, as determined
by independent compensation surveys for the oil and gas industry.
In 1996 Mr. Clarke did not receive options to acquire additional shares of
Common Stock. Mr. Clarke currently holds options to acquire 400,000 shares of
Common Stock. As of March 4, 1997 all of such options are immediately
exercisable. In addition on March 4, 1997 the Compensation Committee granted,
subject to shareholder approval of amendments to the 1993 Stock Option Plan,
options to acquire an additional 300,000 shares of Common Stock.
7
11
On April 15, 1996 Mr. Clarke received a special bonus of $100,000 upon the
achievement by Coho of several corporate objectives as discussed above.
On March 6, 1997 Mr. Clarke received $250,000 as his share of the annual
executive officers bonus pool for the year ended December 31, 1996.
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
8
12
The following tables set forth information with respect to the five most
highly compensated executive officers, including the Chief Executive Officer, in
1996.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS(#) COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
Jeffrey Clarke.................. 1996 $258,333 $350,000 -- -- $47,811
President and Chief 1995 $225,000 $ 75,000 -- -- $23,070
Executive Officer(1).......... 1994 $223,686 -- -- 100,000 $30,042
R. M. Pearce.................... 1996 $192,250 $212,000 -- 100,000 $ 7,768
Executive Vice President and 1995 $178,500 $ 48,000 -- -- $ 4,965
Chief Operating Officer(2) 1994 $163,224 $ 18,894 -- 40,000 $ 4,620
Eddie M. LeBlanc, III........... 1996 $160,125 $136,000 -- -- $ 7,014
Senior Vice President and 1995 $155,433 $ 97,335 $28,568 -- $47,647
Chief Financial Officer(3) 1994 $ 12,708 -- -- 100,000 --
Anne Marie O'Gorman............. 1996 $153,875 $148,620 -- 50,000 $ 6,112
Senior Vice President 1995 $115,000 $ 22,000 -- -- $ 5,003
Corporate Development and 1994 $ 90,000 -- -- 25,000 $ 3,607
Corporate Secretary(4)
Larry L. Keller................. 1996 $141,750 $103,000 -- -- $ 5,813
Vice President Exploitation(5) 1995 $135,000 $ 18,000 -- -- $ 4,751
1994 $100,730 -- -- 25,000 $ 4,029
- ---------------
(1) Mr. Clarke's All Other Compensation includes the Company's contributions to
a 401(k) savings plan of $4,750, $4,620, and $4,620 in 1996, 1995 and 1994,
respectively; premiums paid on a disability and life insurance policy of
$31,910, $18,450, and $25,422 in 1996, 1995 and 1994, respectively; and
$11,152 in 1996 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 $4,750, $4,620 and $4,620 in 1996, 1995 and 1994,
respectively; and premiums paid on a disability policy of $3,018 and $345 in
1996 and 1995, respectively.
Mr. Pearce's bonus in 1994 constituted reimbursements of certain relocation
expenses.
(3) Mr. LeBlanc's All 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 $4,750 and $4,620 in 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 $2,264 and $437 in 1996 and 1995, respectively.
(4) Ms. O'Gorman's All Other Compensation includes the Company's contributions
to a 401(k) savings plan of $4,750, $4,620 and $3,607 in 1996, 1995 and
1994, respectively; and premiums paid on a disability policy of $1,363 and
$419 in 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 $4,597, $4,394 and $4,029 in 1996, 1995 and 1994,
respectively; and premiums paid on a disability policy of $1,216 and $357 in
1996 and 1995, respectively.
9
13
OPTIONS GRANTED IN LAST FISCAL YEAR
% OF TOTAL POTENTIAL REALIZABLE VALUE
NUMBER OF OPTIONS AT ASSUMED ANNUAL RATES
SECURITIES GRANTED TO OF STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS DURING EXERCISE EXPIRY ---------------------------
NAME GRANTED THE YEAR PRICE(1) DATE 5% 10%
---- ---------- ---------- -------- ---------- ----------- ------------
Jeffrey Clarke............ -- -- -- -- -- --
R. M. Pearce.............. 33,334 16.50% $5.125 Feb. 22/02 $52,518 $124,436
33,334 16.50% $5.125 Feb. 22/03 $63,685 $153,953
33,333 16.50% $5.125 Feb. 22/04 $75,416 $186,431
Eddie M. LeBlanc, III..... -- -- -- -- -- --
Anne Marie O'Gorman....... 16,668 8.25% $5.125 Feb. 22/02 $26,260 $ 62,222
16,666 8.25% $5.125 Feb. 22/03 $31,840 $ 76,972
16,666 8.25% $5.125 Feb. 22/04 $37,707 $ 93,213
Larry L. Keller........... -- -- -- -- -- --
- ---------------
(1) The exercise price was 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(1)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
ACQUIRED ON VALUE -------------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE NON-EXERCISABLE(2) EXERCISABLE NON-EXERCISABLE
---- ----------- -------- ----------- ------------------ ----------- ---------------
Jeffrey Clarke........... -- -- 366,666 33,334 $625,659 $ 70,835
R. M. Pearce............. -- -- 180,000 80,000 $258,333 $161,667
Eddie M. LeBlanc, III.... -- -- 33,333 66,667 $ 70,833 $141,667
Anne Marie O'Gorman...... 857 $3,552 107,477 41,666 $173,785 $ 84,374
Larry L. Keller.......... -- -- 91,666 8,334 $159,790 $ 17,710
- ---------------
(1) Computed based upon the difference between the market price on December 31,
1996 of $7.125 per share and the exercise price per share.
(2) As of March 4, 1997, all of such shares became exercisable.
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 $265,000,
$195,000, $161,250 and $161,250, 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
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 and 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
10
14
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
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 Agreements was amended
March 17, 1997 to provide that the Company shall pay the officer, the "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
11
15
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 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, 1996 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 1996.
During 1996 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, 1996 all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 10% beneficial owners have been
met.
12
16
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, 1991 and that all dividends paid
by those companies included in the indices were reinvested.
[GRAPH]
Measurement Period COHO Energy,
(Fiscal Year Covered) Inc. Industry Index Broad Market
1991 100.00 100.00 100.00
1992 210.00 94.95 107.64
1993 190.00 113.13 118.50
1994 207.50 118.56 120.06
1995 195.00 130.39 165.18
1996 285.00 173.38 203.11
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 and 1996, 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 and 1,269,500
shares, respectively, reflecting increases of 330,000 shares, 500,000 shares and
189,500 shares, respectively. On March 4, 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 775,000 shares to 2,044,500 shares
the total number of shares of Common Stock with respect to which options may be
granted under the Option Plan to 2,044,500 shares. As of March 31, 1997 options
to acquire 1,226,997 shares of Common Stock were outstanding under the Option
Plan and 2,169 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 761,000 shares of Common
Stock, which grants are contingent on the approval of the foregoing amendment by
the shareholders at the Meeting. If the shareholders approve the amendment,
16,169 shares of Common Stock will be available for future grant under the
Option Plan.
13
17
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 parents or
subsidiaries (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
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.
14
18
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 March 3, 1997 the Committee granted options to
acquire 761,000 shares of Common Stock under the Option Plan subject to
shareholder approval of the amendment increasing the total number of shares
available for grant thereunder. The grants to each of the 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:
NAME AND POSITION DOLLAR VALUE NUMBER*
----------------- ------------ -------
Jeffrey Clarke.............................................. N/A 300,000
Chairman, President and Chief Executive Officer
R. M. Pearce................................................ N/A 160,000
Executive Vice President and Chief Operating Officer
Eddie M. LeBlanc, III....................................... N/A 100,000
Sr. Vice President and Chief Financial Officer
Anne Marie O'Gorman......................................... N/A 100,000
Sr. Vice President, Corporate Development, and Corporate
Secretary
Larry L. Keller............................................. N/A -0-
Vice President, Exploitation
All executive officers as a group........................... N/A 660,000
All other employees......................................... N/A 101,000
- ---------------
* Number of shares of Common Stock underlying option grants.
15
19
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 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:
NAME AGE POSITION
---- --- --------
Jeffrey Clarke................. 51 Chairman, President, Chief Executive Officer and
Director
R. M. Pearce................... 45 Executive Vice President and Chief Operating Officer
Eddie M. LeBlanc, III.......... 48 Senior Vice President and Chief Financial Officer
Anne Marie O'Gorman............ 38 Senior Vice President, Corporate Development, and
Corporate Secretary
Keri Clarke.................... 41 Vice President, Land and Environmental/Regulatory
Affairs
R. Lynn Guillory............... 50 Vice President, Human Resources and Administration
Larry L. Keller................ 38 Vice President, Exploitation
Patrick S. Wright.............. 41 Vice President, Operations
Susan J. McAden................ 39 Controller
- ---------------
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. From
August 1991 until March 1992, Mr. LeBlanc was an independent businessman.
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. From August
1991 until the inception of ING, Mr. Guillory was an independent businessman.
16
20
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.
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).
Susan J. McAden 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) and from November 1989 to November
1990, Ms. McAden was Vice President-Controller of Concap Equities, Inc. Ms.
McAden was an officer of Concap within two years of the filing by seventeen real
estate limited partnerships in which Concap served as general partner of
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. The
last case before the U.S. Bankruptcy Court was settled in July 1994.
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.
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT OF
OF BENEFICIAL OWNER OWNERSHIP CLASS(1)
------------------- ------------ ----------
Morgan Stanley Leveraged Equity Fund II L.P................. 5,597,653(2) 27.5%
1221 Avenue of the Americas
New York, NY 10020
Metropolitan Life Insurance Company......................... 2,012,700(3) 9.9%
One Madison Avenue
New York, NY 10010-3690
Neuberger & Berman.......................................... 1,045,800(4) 5.1%
605 Third Avenue
New York, NY 10158-3698
Wellington Management Company............................... 1,115,857(5) 5.5%
75 State Street
Boston, Massachusetts 02109
- ---------------
(1) Based on 20,375,126 shares issued and outstanding as of March 17, 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 5,597,653 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 and as amended on September 11, 1995
filed by the foregoing entities with the Securities and Exchange Commission
(the "Commission").
(3) Based solely on information contained in a Schedule 13G dated February 5,
1997 filed with the Commission. Metropolitan Life Insurance Company has sole
voting power with respect to 1,835,300
17
21
shares of Common Stock and sole dispositive power with respect to 2,012,700
shares of Common Stock owned. State Street Research & Management Company
acts as an investment advisor for Metropolitan Life Insurance Company and in
a Schedule 13G dated February 13, 1997 filed with the Commission, disclaims
any beneficial interest in these securities.
(4) Based solely on information contained in a Schedule 13G dated February 10,
1997 filed with the Commission. Neuberger & Berman acts as investment
advisor for its clients and has sole voting power with respect to 192,000
shares of Common Stock, shared voting power with respect to 623,000 shares
and shared dispositive power with respect to 1,045,800 shares of Common
Stock owned by its clients.
(5) Based solely on information contained in a Schedule 13G dated January 24,
1997 filed with the Commission. Wellington Management Company acts as a
financial advisor and has shared voting power with respect to 470,467
shares, and shared dispositive power with respect to 1,115,857 shares, of
Common Stock that are owned by its clients.
The following table sets forth certain information with respect to Common
Stock beneficially owned by each director of Coho, by each executive officer
named in the Summary Compensation Table and by all directors and officers as a
group 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 him or her.
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
OWNERSHIP(1) CLASS
------------ ----------
Robert B. Anderson.......................................... 17,000 *
Roy R. Baker................................................ 19,000 *
Frederick K. Campbell....................................... 593,068 2.9%
Jeffrey Clarke.............................................. 408,500 2.0%
Louis F. Crane.............................................. 24,000 *
Howard I. Hoffen............................................ -- --
Larry L. Keller............................................. 93,503 *
Eddie L. LeBlanc, III....................................... 151,000 *
Kenneth H. Lambert.......................................... 631,280(2) 3.1%
Douglas R. Martin........................................... 19,000 *
Anne Marie O'Gorman......................................... 150,650 *
R. M. Pearce................................................ 265,000 1.3%
Carl S. Quinn............................................... 569,685(3) 2.8%
Jake Taylor................................................. 59,400 *
All directors and officers as a group (19 persons).......... 3,130,549(1) 15.4%
- ---------------
* Less than 1%
(1) Includes 15,000, 17,000, 21,156, 400,000, 15,000, 91,666, 150,000, 17,000,
260,000, 10,000, 15,000, 149,143 and 1,367,484 shares that may be acquired
within 60 days upon the exercise of stock options held by Messrs. Anderson,
Baker, Campbell, Clarke, Crane, Keller, LeBlanc, Martin, Pearce, Quinn,
Taylor, Ms. O'Gorman and all executive officers and directors 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 77,058 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 35,984 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 559,685 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.
18
22
In addition to the foregoing options, Messrs. Anderson, Baker, Campbell,
Crane, Keller, Lambert, Martin, Quinn and Taylor, and all executive officers and
directors as a group held options to acquire 1,000, 1,000, 1,000, 1,000, 8,334,
1,000, 1,000, 5,000, 1,000 and 85,334 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, 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.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
On March 4, 1997 the Board of Directors appointed the firm of Arthur
Andersen L.L.P. as independent auditors for the year ending December 31, 1997
subject to ratification by shareholders at the Meeting. Arthur Anderson L.L.P.
were the independent auditors of ING prior to the acquisition by Coho.
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.
The accounting firm of KPMG Peat Marwick L.L.P. ("Peat Marwick") served as
independent accountant for the Company from 1990 until dismissed by the Company
on April 25, 1995. The decision to change accountants was recommended by the
Audit Committee of the Board of Directors of the Company. Peat Marwick's report
on the financial statements of the Company for the year ended December 31, 1994
contained no adverse opinion or disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope or accounting principles, or as to any
other matter. Furthermore, during the Company's 1994 fiscal year and any
subsequent interim periods, there were no disagreements with Peat Marwick on any
matter of accounting principles or practices, financial statement disclosure or
accounting scope or procedure, which disagreement if not resolved to the
satisfaction of Peat Marwick would have caused them to make reference thereto in
their reports on the financial statements of the Company for such year.
Additionally, no reportable event as defined in paragraph 304 of Regulation S-K
promulgated by the Commission under the Securities Act of 1934, as amended,
occurred during the year ended December 31, 1994 or any subsequent interim
period.
Approval of the ratification of Arthur Andersen L.L.P. as independent
auditors for the year ending December 31, 1997 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 1998 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, 1997 in order to be included in the proxy statement and form of proxy
relating to such meeting.
19
23
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
20
24
The shares represented hereby will be voted as specified below. WHERE NO
SPECIFICATIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
DIRECTOR NOMINEES NAMED IN ITEM 1 AND FOR PROPOSALS 2 AND 3
Please mark your votes as indicated in this example [X]
1. Election of Directors
FOR all WITHHOLD Number of
nominees listed AUTHORITY Votes to
below (except as to vote be voted
marked to the for all if Cumulative
contrary) nominees Voting
listed below Exercised
[ ] [ ] [ ]
Robert B. Anderson
Roy R. Baker
Frederick K. Campbell
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 1993 Stock Option Plan that would
increase the number of shares issuable thereunder by 775,000
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 1997.
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 11, 1997, receipt of which is hereby acknowledged.
Date: _______________________________________, 1997
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.
25
COHO ENERGY, INC.
PROXY-ANNUAL MEETING OF SHAREHOLDERS-May 12, 1997
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, 1997, at the Westin Hotel Galleria, Panorama West Suite, 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 ten 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)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE