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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>
[ ] 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>
BLUE RIDGE ENERGY, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act 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: ...........................................................
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BLUE RIDGE ENERGY, INC.
10777 WESTHEIMER ROAD
HOUSTON, TEXAS 77042
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2003
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Blue
Ridge Energy, Inc. (the "Company") will be held at 10 a.m., Central Daylight
Time, on May 20, 2003 at 10777 Westheimer Road, Suite 170, Houston, Texas 77042
for the following purposes:
(1) To elect six directors to serve a term of one year; and,
(2) To transact such other business as may properly be brought before the
Annual Meeting or any adjournment(s) thereof.
Information regarding the matters to be acted upon at the Annual Meeting is
contained in the Proxy Statement accompanying this Notice. The Annual Meeting
may be adjourned from time to time without notice other than the announcement of
the adjournment at the Annual Meeting or any adjournment(s) thereof. All
business for which notice is hereby given may be transacted at any such
adjourned Annual Meeting.
All stockholders are encouraged to read the accompanying Proxy Statement
carefully prior to completion of the enclosed proxy card for further information
concerning the proposals that will be presented at the Annual Meeting.
Only holders of record of outstanding shares of the Company's Common Stock
at the close of business on March 31, 2003 are entitled to notice of and to vote
at the Annual Meeting or any adjournment(s) thereof. A list of stockholders
entitled to vote will be made available. All stockholders are invited to attend
the Annual Meeting in person; however, to ensure your representation, whether or
not you plan to attend the Annual Meeting, please promptly complete, date, sign
and return the enclosed proxy card.
Gregory B. Shea
Corporate Secretary
Houston, Texas
April 29, 2003
BLUE RIDGE ENERGY, INC.
10777 WESTHEIMER ROAD
HOUSTON, TEXAS 77042
PROXY STATEMENT
THE ANNUAL MEETING
This Proxy Statement is furnished to stockholders of Blue Ridge Energy,
Inc. (the "Company") in connection with the solicitation of proxies by and on
behalf of the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held at 10 a.m., Central Daylight Time, on May 20, 2003, at
10777 Westheimer Road, Suite 170, Houston, Texas 77042 and at any adjournment(s)
thereof (the "Annual Meeting"). Commencing on or about April 29, 2003, this
Proxy Statement, the enclosed proxy card and the Company's Annual Report on Form
10-KSB are being mailed to stockholders of record of the Company as of March 31,
2003 (the "Record Date"). The Company will bear the cost of this solicitation
which, in addition to mail, may include personal interviews, telephone calls or
telegrams by directors, officers and regular employees of the Company and its
affiliates.
VOTING
The stock transfer book will not be closed but only record holders of
outstanding shares of the Company's Common Stock, par value $.005 per share (the
"Common Stock"), at the close of business on the Record Date, March 31, 2003,
are entitled to notice of and to vote at the Annual Meeting. As of such record
date, 7,516,094 shares of Common Stock were outstanding and entitled to be
voted. The holders of Common Stock are entitled to cast one vote for each share
of Common Stock owned of record. Cumulative voting is not permitted with respect
to any proposal to be acted upon at the Annual Meeting.
The presence in person or by proxy of the holders of shares of Common Stock
entitled to cast a majority of the votes entitled to be cast at the Annual
Meeting will constitute a quorum. If a quorum should not be present, the Annual
Meeting may be adjourned from time to time until a quorum is obtained.
Stockholders are urged to sign the accompanying proxy card and return it
promptly.
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the Record Date to vote in the election of
directors as described in the Proxy Statement. The proxy card provides a space
for a stockholder to vote in favor of or withhold voting for any or all nominees
for the Board of Directors or to abstain from voting for any proposal if the
stockholder chooses to do so.
To ensure representation at the Annual Meeting, each holder of outstanding
shares of Common Stock entitled to be voted at the Annual Meeting is requested
to complete, date, sign and return to the Company the enclosed proxy card, which
requires no postage if mailed in the United States. Stockholders are urged to
sign the accompanying proxy card and return it promptly. Banking institutions,
brokerage firms, custodians, trustees, nominees and fiduciaries who are record
holders of Common Stock entitled to be voted at the Annual Meeting are requested
to forward all proxy cards, this Proxy Statement and the accompanying materials
to the beneficial owners of such shares and to seek authority as required to
execute proxies with respect to such shares. Upon request, the Company will
reimburse such record holders for their reasonable out-of-pocket forwarding
expenses. The costs of this solicitation will be borne by the Company, including
the costs of preparing, assembling and mailing the enclosed proxy card and this
Proxy Statement.
If properly executed and received by the Company before voting at the
Annual Meeting, or any adjournment(s) thereof, any proxy representing shares of
Common Stock entitled to be voted at the Annual Meeting that specifies how it is
to be voted will be voted accordingly. Shares as to which authority to vote has
been withheld with respect to the election of any nominee for director will not
be counted as a vote for such nominee and neither an abstention nor a broker
nonvote will be counted as a vote for a proposal. Any properly executed proxy
received that does not specify how it is to be voted on a proposal for which a
specification may be made will be voted FOR such proposal or nominee at the
Annual Meeting and any adjournment(s) thereof.
Each stockholder returning a proxy card to the Company has the right to
revoke it at any time before it is voted by submitting a later dated proxy in
proper form, by notifying the Secretary of the Company in writing (signed and
dated by the stockholder) of such revocation, or by appearing at the Annual
Meeting and voting the shares in person.
1
When a signed proxy card is returned with choices specified with respect to
voting matters, the shares represented will be voted by the Proxy designated on
the proxy card in accordance with the stockholder's instructions. The Proxy is
Robert D. Burr, Chairman of the Board of the Company. A stockholder wishing to
name another person as his or her proxy may do so by crossing out the name of
the designated Proxy and inserting the name(s) of such person(s) to act as his
or her proxy. In that case, the stockholder must sign the proxy card and deliver
it to the person(s) designated as his or her proxy and the person(s) so named
must be present and vote at the Annual Meeting. Proxy cards marked to reflect
such proxies should not be mailed to the Company.
PROPOSAL NO. 1 -- TO ELECT SIX DIRECTORS TO SERVE FOR A TERM OF ONE YEAR
The affirmative vote of the holders of a majority of the combined voting
power of all of the issued and outstanding shares of Common Stock voted at the
Annual Meeting is required to elect each director.
In accordance with the Company's Bylaws, the Board of Directors has fixed
the number of directors at six. The terms of all current directors, Robert D.
Burr, Patrick A. Kelleher, Forrest E. Ebbs, Gregory B. Shea, Harry J. Peters,
and Richard M. Hewitt expire in 2003 and their successors will be elected at the
Annual Meeting.
The Board of Directors has nominated Robert D. Burr, Patrick A. Kelleher,
Forrest E. Ebbs, Gregory B. Shea, Harry J. Peters, and Richard M. Hewitt for
election as directors at the Annual Meeting to serve a term of one year. THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THESE NOMINEES.
Gregory B. Shea is the son-in-law of Robert D. Burr. Each of the nominees
has consented to being named as a nominee and to serve as a director if elected.
However, if, for any reason any nominee for director is not a candidate at the
election, the enclosed proxy will be voted for the election of a substitute
nominee at the discretion of the person or persons voting the enclosed proxy.
The Board of Directors has no reason to believe that any nominee named herein
will be unable to serve.
Information regarding the nominees and the directors of the Company as of
March 31, 2003 is provided below. If elected, the term of each director would
expire in 2004.
Nominees Age Company Position or Office Director Since
- -------- --- -------------------------- --------------
Robert D. Burr 57 Chairman of the Board 1996
Patrick A. Kelleher 48 Director, President & Chief Executive Officer 2002
Forrest E. Ebbs 52 Director, Chief Financial Officer 2002
Harry J. Peters 59 Director, Senior Vice President-Acquisitions 2000
Gregory B. Shea 40 Director, Senior Vice President-Operations 1999
Richard M. Hewitt 66 Director 2002
ROBERT D. BURR, age 57, Bowling Green, Kentucky, has been Chairman of the
Board of the Company since May 1996. He served as President and Chief Executive
Officer from May 1996 until March 1, 2000. Mr. Burr has also been the Chairman
of the Board, President and Chief Executive Officer of Blue Ridge Group, Inc.
since August 1993. Mr. Burr is a native of Port Arthur, Texas and attended
McNeese State College, Lake Charles, Louisiana. He has been active for over 25
years in the oil and gas business with a myriad of companies.
PATRICK A. KELLEHER, age 48, Houston, Texas, joined the Company on March 1,
2002 as a Director, President and Chief Executive Officer. Mr. Kelleher has over
twenty-three years of experience in the oil and gas business predominately in
the Gulf Coast region of Texas. Mr. Kelleher has been an independent consulting
geologist since January 2000 and he was the co-owner and principal of Pecos
Petroleum Company from October 1987 until January 2000. From 1978 until 1987, he
functioned as a geologist/geophysicist for Edge Petroleum Corporation, Cockrell
Oil Corporation and Exxon Corporation USA. He is a graduate of University of
Southern California with a BS in Geological Sciences.
2
FORREST E. EBBS, age 52, Rolling Hills Estates, California, joined the
Company on March 1, 2002 as a Director, Vice President-Finance and Chief
Financial Officer. He is a seasoned professional with senior leadership
experience and a talented developer of strategic plans. Mr. Ebbs was an owner
and Chief Executive Officer from 1980 until 2001, when he sold his holdings, in
the business of Martin Brothers Marcowall, a commercial construction
subcontractor. Mr. Ebbs is a graduate of San Diego State University and has an
MBA from Pepperdine University.
HARRY J. PETERS, age 59, Bowling Green, Kentucky, has been Senior Vice
President, Acquisitions since August 2000. Mr. Peters served the Company as
Senior Vice President-Sales and Marketing from April 2000 to July 2000 and has
served as a director since April 2000. A native of New York, he has over 30
years of experience in sales and marketing, both domestic and international.
Over the years, he has developed close working relationships with investment
bankers, institutional investors and securities dealers while directing market
financing of reserve purchases, and raising drilling risk capital and venture
capital for wells in Texas, Kentucky, Oklahoma, Louisiana, Colorado, West
Virginia and Utah. Mr. Peters has been a director and Senior Vice
President-Sales and Marketing of Blue Ridge Group, Inc. since April of 1999. He
is a graduate of St. Michaels College in Sante Fe, New Mexico.
GREGORY B. SHEA, age 40, Bowling Green, Kentucky, has been a director and
Senior Vice President-Operations of the Company since August 1999. Since that
time, Mr. Shea has managed Blue Ridge Group, Inc.'s Kentucky drilling and field
operations. Mr. Shea has been President of Blue Ridge Builders, Inc., a
residential and commercial builder in Bowling Green, Kentucky and a
majority-owned subsidiary of Blue Ridge Group, Inc. since November 1994. He was
elected a director of Blue Ridge Group, Inc. in February 1995. Between 1981 and
1986, he attended North Texas State University. Mr. Shea is a son-in-law of Mr.
Burr.
RICHARD M. HEWITT, age 66, Trophy Club, Texas, is an attorney with a
private practice focusing on securities matters and advising small publicly
owned companies in dealing with agencies such as the SEC, Federal Trade
Commission, and various state securities regulatory entities. He has been in
private practice in the Dallas-Fort Worth area for the last twenty (20) years,
first with Glast Allen & Miller (1981-1987), then Hewitt & Jerome (1987-1992),
and then as Richard M. Hewitt, P.C. He is a graduate of Grinnell College, and
holds a LLB degree from Southern Methodist University, College of Law, Dallas,
Texas.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than 10% of a registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Securities and Exchange Commission ("SEC"). Officers,
directors and greater than 10% stockholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms filed by them.
Based solely upon a review of the copies of such forms furnished to the
Company or written representations that no other reports were required, the
Company believes that during the 2002 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% stockholders have
been complied with.
EXECUTIVE COMPENSATION
The following compensation was paid directly to the executive officers of
the Company during the years ended December 31, 2002, 2001 and 2000:
Annual Compensation Long-Term Compensation
-------------------------------- -------------------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Awards Options/SARs Payouts Compensation
------------------ ---- ------ ----- ------------ ------ ------------ ------- ------------
Patrick A. Kelleher(1) 2002 $150,000 $0 $14,000 $0 20,000 $0 $0
President and 2001 $0 $0 $0 $0 0 $0 $0
CEO 2000 $0 $0 $0 $0 0 $0 $0
Edward L. Stillie(1) 2002 $120,000 $28,265 $0 $0 $0 $0 $0
President and 2001 $180,000 $37,172 $0 $0 $0 $0 $0
CEO 2000 $155,000 $0 $0 $0 $0 $0 $0
3
(1) Mr. Stillie resigned as President and CEO in March 2002 and Mr. Kelleher
became President and CEO in March 2002 (See Executive Employment Agreements)
None of the other senior executives received salaries from the Company, but were
self employed or employed by Blue Ridge Group, Inc. ("BR Group"). See "Certain
Relationships and Related Transactions".
SECURITIES OWNERSHIP OF 5% BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth each stockholder who is known to the Company to
be the beneficial owner of more than 5% of the Common Stock of the Company at
March 31, 2003.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ------------------- -------------------- ----------------
Indirect Ownership:
Common Stock Robert D. Burr
632 Adams Street, Suite 710 7,643,316 (1) 64.1%
Bowling Green, KY 42101
Direct Ownership:
Common Stock Blue Ridge Group, Inc.
632 Adams Street, Suite 710 7,474,466 (2) 62.7%
Bowling Green, KY 42101
(1) By virtue of his position as Chairman of the Board of Blue Ridge Group,
Inc., Mr. Burr may be deemed to beneficially own the 7,474,666 shares of the
Company's Common Stock beneficially owned by Blue Ridge Group, Inc. Mr. Burr
disclaims beneficial ownership of these shares except to the extent described in
the following sentence. Mr. Burr beneficially owns approximately 26.8% of the
outstanding shares of Blue Ridge Group, Inc., which beneficially owns
approximately 62.7% of the Company. Mr. Burr also holds vested options for
168,750 shares.
(2) Blue Ridge Group, Inc.'s beneficial ownership is attributable to its direct
ownership of 4,141,233 shares of the Company's Common Stock and 250,000 shares
of the Company's Series E Preferred Stock. The 250,000 shares of Preferred Stock
will convert into 3,333,333 shares of Common Stock thereby bringing BR Groups
total beneficial ownership to 7,474,466 shares of Common Stock.
The table below sets forth the beneficial ownership of the Company's Common
Stock by each executive officer, director and director nominee of the Company as
of March 31, 2003.
Name of Beneficial Amount and Nature of
Title of Class Owner Beneficial Ownership(1) Percent of Class
- -------------- -------------------- ----------------------- ----------------
Common Stock Robert D. Burr (2) 7,643,316 64.1%
Common Stock Patrick A. Kelleher 20,000 0.0%
Common Stock Harry Peters 566,375 4.8%
Common Stock Gregory B. Shea 566,375 4.8%
Common Stock Forrest E. Ebbs -0- 0.0%
Common Stock Richard M. Hewitt -0- 0.0%
Common Stock All directors, nominees 8,776,066 73.6%
and officers as a group
(6 persons)
4
(1) Beneficial ownership includes vested options for the following shares: Mr.
Burr - 168,750; Mr. Kelleher - 20,000; Mr. Peters - 112,500; and Mr. Shea -
112,500. Beneficial ownership of all directors and officers reflects the
7,474,466 shares beneficially held by Blue Ridge Group, Inc. (without
attributing such shares to more than one person) plus the vested options for
413,750 shares held by the directors and officers.
(2) By virtue of his position as Chairman of the Board of Blue Ridge Group,
Inc., Mr. Burr may be deemed to beneficially own the 7,474,466 shares of the
Company's Common Stock beneficially owned by Blue Ridge Group, Inc. Mr. Burr
disclaims beneficial ownership of these shares except to the extent described
in the following sentence. Mr. Burr beneficially owns approximately 26.8% of
the outstanding shares of Blue Ridge Group, Inc., which beneficially owns
approximately 62.7% of the Company. Mr. Burr also holds vested options for
168,750 shares.
STOCK OPTIONS
On August 8, 2001, the Shareholders of the Company approved the Blue Ridge
Energy Stock Option Plan (the Plan) which allows for the granting of stock
options to eligible employees and directors. The Company accounts for the Plan
in accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees permitted by SFAS No. 123, Accounting for Stock-Based
Compensation. Accordingly, the Company has not recognized compensation expense
for stock options granted.
The stock option plan originally authorized the issuance to officers,
directors, and key employees of up to 1,000,000 options to purchase shares of
common stock at the fair value of the common stock on the date of grant.
Pursuant to the terms of the Plan the number of options available increased to
1,144,850 as of December 31, 2002. These options generally become exercisable
33% annually beginning on the date of grant and expire not later than ten years
from the date of grant.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options/SARs
granted during 2002 to the named executives:
INDIVIDUAL GRANTS
- ----------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES % OF TOTAL OPTIONS/SARS EXERCISE OF
UNDERLYING GRANTED TO EMPLOYEES BASE PRICE EXPIRATION
NAME OPTIONS/SARS GRANTED IN FISCAL YEAR ($/SHARE) DATE
-------- --------------------- ----------------------- ----------- ----------
Robert D. Burr 281,250 33.34% $0.40 04/25/2012
James T. Cook, Jr.** 187,500 22.22% $0.40 04/25/2012
Gregory B. Shea 187,500 22.22% $0.40 04/25/2012
Harry J. Peters 187,500 22.22% $0.40 04/25/2012
**Mr.Cook resigned as a director and officer of the Company in May, 2002, but
has retained his options due to the continued employment of his services by the
Company.
AGGREGATE OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-ENDED 2002 OPTION/SAR VALUES
The following table summarizes options and SARs exercised during 2002 and
presents the value of unexercised options and SARs held by directors and
officers set forth below at fiscal year-end:
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS/SARS THE-MONEY OPTIONS/SARS
SHARES AT FISCAL YEAR-END (#) AT FISCAL YEAR-END (S)
ACQUIRED VALUE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME ON EXERCISE ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
---- ----------- -------------- ------------------------------- ------------------------
Edward L. Stillie * 0 0 0 E 0
0 U 0
Robert D. Burr 0 0 143,750 E 0
212,500 U 0
James T. Cook, Jr. 0 0 95,833 E 0
141,667 U 0
Gregory B. Shea 0 0 95,833 E 0
141,667 U 0
Harry J. Peters 0 0 95,833 E 0
141,667 U 0
Russell L. Vera * 0 0 0 E 0
0 U 0
5
* Mr. Stillie and Mr. Vera resigned as directors and officers of the Company in
March and April, 2002, respectively and have forfeited their options.
**Mr.Cook resigned as a director and officer of the Company in May, 2002, but
has retained his options due to the continued employment of his services by the
Company.
BOARD MEETINGS AND BOARD COMPENSATION
During the year ended December 31, 2002, the Board of Directors of the
Company met on eight occasions, either in person or telephonically. The Company
does not have any director committees such as an audit committee or compensation
committee. Each of the Company's directors attended at least 75% of the meetings
of the Board of Directors held in 2002.
REPORT OF THE AUDIT COMMITTEE
The entire Board of Directors performs the duties of an Audit Committee and
oversees the Company's financial reporting process. Management has the primary
responsibility for the financial statements and the reporting process including
the systems of internal controls. In fulfilling its oversight responsibilities,
the Board of Directors reviewed the audited financial statements in the Annual
Report with management including a discussion of the quality, not just the
acceptability, of the accounting principles, the reasonableness of Significant
Judgments, and the clarity of disclosures in the financial statements.
The Board of Directors reviewed with the independent auditors, who are
responsible for expressing an opinion on the conformity of those audited
financial statements with generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of the Company's
accounting principles and such other matters as are required to be discussed
with the Committee under generally accepted auditing standards. In addition, the
Board of Directors has discussed with the independent auditors the auditors'
independence from management and the Company including the matters in the
written disclosures required by the Independence Standards Board and considered
the compatibility of nonaudit services with the auditors' independence.
The Board of Directors discussed with the Company's independent auditors
the overall scope and plans for their respective audits. The Board of Directors
meet with the independent auditors, with and without management present, to
discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Board of
Directors has approved the audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 2002 for filing with the
Securities and Exchange Commission. The Board of Directors has also approved the
selection of the Company's independent auditors.
Robert D. Burr, Chairman of the Board of Directors
Patrick A. Kelleher, Director
Gregory B. Shea, Director
Harry J. Peters, Director
Forrest E. Ebbs, Director
Richard M. Hewitt, Director
March 19, 2003
During 2002, none of the directors received compensation for their services
as directors of the Company.
6
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
On March 1, 2002, the Company entered into a five-year employment agreement
with Mr. Kelleher, its President and Chief Executive Officer. Mr. Kelleher's
primary duties are to: (1) develop top quality oil and gas prospects; and (2)
serve in a management capacity for the Company. The agreement provides for an
annual salary of 180,000, such additional compensation as the Board of
Directors deems appropriate and a stock option plan to award Mr. Kelleher up to
20,000 shares of the Company's Common Stock, per year, at $0.47 per share. Mr.
Kelleher will receive a 2% Carried Working Interest on all new oil and gas
prospects developed by him for The Company and he will receive a 0.5% Carried
Working Interest on all oil and gas prospects developed from the seismic
acquisition completed in 2002.
The agreement may be terminated by either party upon 60 days written
notice. Such termination by the Company will require the affirmative vote of a
majority of the members of the Board of Directors then in office who have been
or will have been directors for the two year period ending on the date of the
meeting or written consent to take such action is first provided.
On March 1, 2002, Mr. Stillie resigned as President and CEO of the Company.
Mr. Stillie received $90,000 in severance pay and purchased several Kentucky oil
and gas properties at cost inasmuch as the Company was shifting its focus to the
Texas Gulf Coast region. The Company was compensated for these transactions by
the assumption of $146,000 in debt and the payment of $641,750 cash.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK TRANSACTIONS
In March, 2002, BR Group committed to extending the Company a $1,500,000 line of
credit to facilitate the purchase of an interest in 48,000 miles of seismic data
in the Texas Gulf Coast area. This line of credit had a term of one year, bore
interest at 9% per annum on all unpaid balances and was secured by all of the
Company's interests in the seismic data and any oil and gas properties acquired
through the implementation of this data. As of September 30, 2002 approximately
$1,500,000 had been advanced by BR Group to the Company under this arrangement.
This balance was paid in full on September 30, 2002 via the sale of 150,000
shares of The Company's Series E Preferred Stock to BR Group for $1,500,000 and
BR Group committed to the purchase of an additional 100,000 shares for
$1,000,000 to be paid in four quarterly installments.
CONTRACTUAL AGREEMENTS
BR Group provides various management, administrative, accounting and
geological services for The Company at a rate of $20,750 per month, which has
been determined on a proportional basis because specific identification of
expenses is not practical. The Company believes that this cost allocation method
of expenses is reasonable and that this management fee represents the fair
market value of the services rendered.
The Company contracted with BR Group to manage and operate the two drilling
rigs it purchased in 1999. BR Group collected all drilling revenues and paid all
expenses related to the drilling operations and accounted to The Company on a
periodic basis for the net profits from operations for the two rigs owned by the
Company. The Company discontinued the operation of the drilling rigs during
2002.
The Company receives advances from its sponsored limited partnerships for
turnkey drilling and completion services prior to completing such activities.
These amounts are recorded as drilling advances and reflected as current
liabilities until such drilling and completion activities have been completed
and such amounts have been earned as income. As of December 31, 2002 and 2001,
drilling advances received related to future obligations to be completed were $0
and $1,469,811, respectively.
During 2002 and 2001, the Company had no significant customers or
suppliers, other than its major stockholder, Blue Ridge Group, Inc., the loss of
which could individually have a significant adverse effect on the Company's
operations.
Management believes that the contracts or transactions that the Company
entered into with Blue Ridge Group, Inc. were on terms that were no more
favorable to Blue Ridge Group, Inc. than those that could have been obtained
from unaffiliated parties.
7
INDEPENDENT AUDITORS
Ernst and Young, LLP ("EY") is engaged as the Company's independent public
accountants to audit its financial statements. EY has audited the financial
statements of the Company for 2002 and 2001. Stockholder ratification of the
appointment of auditors is not required. It is not anticipated that EY will be
represented at the Annual Meeting.
AUDIT FEES
Ernst and Young, LLP billed the Company $80,300 and $85,600, respectively
for the fiscal year ended December 31, 2002 and 2001 audits. Ernst and Young,
LLP also billed the Company $20,000 during 2002 for review of quarterly 10Q
filings, $6,000 for the audit of two of the Company's partnerships and $5,000
for receiving the Company's private placement memorandum for Series E Preferred
Stock and Common Stock Warrants.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
Ernst & Young, LLP billed the Company $-0- related to financial systems
design and implementation for the fiscal years ended December 31, 2002 and 2001.
ALL OTHER FEES
Ernst and Young billed the Company $10,000 for the preparation of the
Company's 2001 federal and state income tax filings. The Board of Directors has
considered the provision of the services described above by Ernst and Young,
LLP and considers the provision of these services consistent with maintaining
their independence.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder of the Company intends to present at the
2004 Annual Meeting of Stockholders must be received by the Secretary of the
Company at the Company's offices at 10777 Westheimer Road, Suite 170, Houston,
Texas 77042, by December 31, 2003 in order to be considered by the Board of
Directors for inclusion in the proxy solicitation materials for the 2004 Annual
Meeting.
ANNUAL REPORT
Please refer to the Company's enclosed 2002 Annual Report on Form 10-KSB
for financial statements, other financial information, and management's
discussion and analysis of the financial condition and results of operations of
the Company.
OTHER MATTERS
We know of no other business other than the matters discussed in this proxy
statement that will be presented for action before the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
BLUE RIDGE ENERGY, INC.
GREGORY B. SHEA
CORPORATE SECRETARY
Houston Texas
April 29, 2003
8
BLUE RIDGE ENERGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
Annual Meeting to be held on
May 20, 2003 at 10:00 a.m. CDT
For stockholders as of Control No.
3/31/03 ___________
The undersigned appoints Robert D. Burr as proxy to attend the Annual Meeting of
Stockholders of the Company set forth above and to vote as specified in this
proxy all shares of Common Stock of the company held of record by the
undersigned on March 31, 2003.
This proxy, when properly executed, will be voted in the manner specified herein
by the undersigned stockholder. If no directions are indicated, this proxy will
be voted for Proposals 1 and 2.
PROPOSALS
1. ELECTION OF DIRECTORS
---------------------
1. Robert D. Burr 4. Harry J. Peters
2. Patrick A. Kelleher 5. Gregory B. Shea
3. Forrest E. Ebbs 6. Richard M. Hewitt
2. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE ON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The Board of Directors recommends a vote for Proposals 1 and 2.
BLUE RIDGE ENERGY, INC.
Annual Meeting to be held on
May 20, 2003 at 10:00 a.m. CDT
1. Directors
---------
(Mark "X" for only one box)
[ ] For all Nominees
[ ] Withhold all Nominees
[ ] Withhold authority to vote for any individual Nominee.
Write number(s) of Nominees below:
Use numbers only ____________________
2. Authorization for proxy to vote other business
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[ ] For [ ] Against [ ] Abstain
- ------------------------------ ----------
Signature Date
Blue Ridge Energy, Inc.
632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
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