-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SGM/4S1xjyILsWtxFVL9x+XzuWakn1otbpfpr01jQFe4bxPRrSQwyfe9BvrRby+V rEnBSaKs0JP/am55D8Q9Qg== 0000899243-97-000365.txt : 19970314 0000899243-97-000365.hdr.sgml : 19970314 ACCESSION NUMBER: 0000899243-97-000365 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19970313 SROS: NASD GROUP MEMBERS: CALAWAY JOHN E GROUP MEMBERS: CALAWAY OIL AND GAS CORPORATION GROUP MEMBERS: CALAWAY PARTNERS GROUP MEMBERS: NELL G. CALAWAY SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: EDGE PETROLEUM CORP CENTRAL INDEX KEY: 0001021010 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 760511037 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-50653 FILM NUMBER: 97556227 BUSINESS ADDRESS: STREET 1: 1111 BAGBY CITY: HOUSTON STATE: TX ZIP: 77002 BUSINESS PHONE: 7136548960 MAIL ADDRESS: STREET 1: 1111 BAGBY CITY: HOUSTON STATE: TX ZIP: 77002 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CALAWAY JOHN E CENTRAL INDEX KEY: 0001035492 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: TEXACO HERITAGE BLDG STREET 2: 1111 BAGBY CITY: HOUSTON STATE: TX ZIP: 77002 MAIL ADDRESS: STREET 1: TEXACO HERITAGE BLDG STREET 2: 1111 BAGBY CITY: HOUSTON STATE: TX ZIP: 77002 SC 13D 1 SCHEDULE 13D - JOHN E. CALAWAY SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934* Edge Petroleum Corporation - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, par value $.01 per share - -------------------------------------------------------------------------------- (Title of Class of Securities) 279862 10 6 - -------------------------------------------------------------------------------- (CUSIP Number) John E. Calaway Edge Petroleum Corporation 1111 Bagby, Suite 2100 Houston, Texas 77002 (713) 654-8960 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 3, 1997 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box []. Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page should be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ----------------------- CUSIP NO. 279862 10 6 - ----------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON JOHN E. CALAWAY - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------- SOURCE OF FUNDS 4 00 - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO 5 ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 UNITED STATES OF AMERICA - ------------------------------------------------------------------------------ SOLE VOTING POWER 133,646 SHARES 7 NUMBER OF SHARES ----------------------------------------------------------- SHARED VOTING POWER 481,541 SHARES BENEFICIALLY 8 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 133,646 SHARES 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER 364,938 SHARES WITH 10 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 615,187 SHARES - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [ ] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 8.7% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN 14 - ------------------------------------------------------------------------------ -2- - ----------------------- CUSIP NO. 279862 10 6 - ----------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CALAWAY OIL AND GAS CORPORATION - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------- SOURCE OF FUNDS 4 00 - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO 5 ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 TEXAS - ------------------------------------------------------------------------------ SOLE VOTING POWER -0- 7 NUMBER OF SHARES ----------------------------------------------------------- SHARED VOTING POWER 481,541 SHARES BENEFICIALLY 8 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER -0- 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER 364,938 SHARES WITH 10 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 481,541 SHARES - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [ ] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 6.5% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) CO 14 - ------------------------------------------------------------------------------ -3- - ----------------------- CUSIP NO. 279862 10 6 - ----------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON CALAWAY PARTNERS - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------- SOURCE OF FUNDS 4 00 - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO 5 ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 TEXAS - ------------------------------------------------------------------------------ SOLE VOTING POWER -0- 7 NUMBER OF SHARES ----------------------------------------------------------- SHARED VOTING POWER -0- BENEFICIALLY 8 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER -0- 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER -0- WITH 10 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 -0- - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [ ] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 -0- - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN 14 -4- - ------------------------------------------------------------------------------ - ----------------------- CUSIP NO. 279862 10 6 - ----------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON NELL G. CALAWAY - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [X] - ------------------------------------------------------------------------------ SEC USE ONLY 3 - ------------------------------------------------------------------------------- SOURCE OF FUNDS 4 00 - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO 5 ITEMS 2(d) OR 2(e) [ ] - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 UNITED STATES OF AMERICA - ------------------------------------------------------------------------------ SOLE VOTING POWER -0- 7 NUMBER OF SHARES ----------------------------------------------------------- SHARED VOTING POWER -0- BENEFICIALLY 8 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 116,603 SHARES 9 REPORTING PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER -0- WITH 10 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 116,603 SHARES - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [ ] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 1.6% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN 14 - ------------------------------------------------------------------------------ -5- ITEM 1. SECURITY AND ISSUER The class of securities to which this statement relates is common stock, par value $.01 per share (the "Common Stock"), of Edge Petroleum Corporation, a Delaware corporation (the "Company"). The address of the principal executive offices of the Company is Texaco Heritage Plaza, 1111 Bagby, Suite 2100, Houston, Texas 77002. ITEM 2. IDENTITY AND BACKGROUND This statement is filed by John E. Calaway ("Mr. Calaway"), Nell G. Calaway ("Ms. Calaway"), Calaway Oil and Gas Corporation, a Texas corporation that is wholly owned by Mr. Calaway ("COGC"), and Calaway Partners, a Texas general partnership that is 50% owned by COGC and 50% owned by Ms. Calaway ("CP" and collectively with Mr. Calaway, Ms. Calaway and COGC, the "Calaway Parties"). Mr. Calaway is a citizen of the United States of America, and his principal occupation and employment is acting as Chairman of the Board and Chief Executive Officer of the Company. The principal business of the Company is the exploration for oil and natural gas, and the address of the Company's principal executive offices is as set forth in Item 1, Security and Issuer. Ms. Calaway is a citizen of the United States of America, and her principal occupation and employment is acting as a fitness instructor. Ms. Calaway is the ex-wife of Mr. Calaway. The principal business of COGC is holding its general partner interest in CP and its shares of Common Stock. Mr. Calaway is the sole director and the sole executive officer of COGC. The principal business of CP is holding its shares of Common Stock. Pursuant to the Partnership Agreement of CP dated June 29, 1994 (the "CP Partnership Agreement"), a copy of which has been filed as Exhibit A hereto and is incorporated herein by reference, actions by CP require the agreement of a majority in interest of its partners, subject to certain exceptions -6- specified in the Partnership Agreement and in Item 6, Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. The business address of Mr. Calaway and the address of the principal business of each of COGC and CP is Texaco Heritage Plaza, 1111 Bagby, Suite 2100, Houston, Texas 77002. The residence address of Ms. Calaway is 2152 Watts Road, Houston, Texas 77030. During the last five years, none of the Calaway Parties has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) or has been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION See Item 4, Purpose of Transaction, and Item 6, Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. ITEM 4. PURPOSE OF TRANSACTION On March 3, 1997, the Company issued 364,938 shares of Common Stock to COGC and 116,603 shares of Common Stock to CP pursuant to an Amended and Restated Combination Agreement dated as of January 13, 1997 (the "Combination Agreement"), among the Company, Edge Petroleum Corporation, a Texas corporation ("Old Edge"), Edge Group II Limited Partnership, a Connecticut limited partnership ("Edge Group II"), Gulfedge Limited Partnership, a Texas limited partnership ("Gulfedge"), Edge Mergeco, Inc., a Texas corporation ("Mergeco"), and Edge Group Partnership, a Connecticut general partnership ("Edge Group"), a copy of which has been filed as Exhibit B hereto and is incorporated herein by reference, and -7- as contemplated by the Company's Registration Statement on Form S-4 (Registration Statement No. 333-17269), as amended (the "Form S-4 Registration Statement"). Such shares were issued in a merger of Old Edge with Mergeco, a wholly owned subsidiary of the Company organized solely to effect the merger, in respect of 16,359.14 shares and 5,227 shares of common stock of Old Edge held by COGC and CP, respectively. On that date, the Company also issued 133,646 restricted shares of Common Stock and granted options for 133,646 shares of Common Stock to Mr. Calaway pursuant to the Employment Agreement dated March 3, 1997 (the "Employment Agreement") between the Company and Mr. Calaway and the Company's Incentive Plan, copies of which have been filed as Exhibit C and Exhibit D hereto, respectively, and are incorporated herein by reference. 66,823 of such restricted shares of Common Stock vest ratably over five years, beginning on the first anniversary of the date of grant, and 66,823 of such restricted shares of Common Stock vest on the earlier to occur of 10 years from the date of grant or the achievement of certain performance goals. Such options are exercisable in cumulative annual increments of one-fifth of the total number of shares of Common Stock subject thereto, beginning on the first anniversary of the date of grant, at a purchase price of $16.50 per share and expire ten years from the date of their issuance. The Calaway Parties will review on a continuous basis their investment in the Common Stock and the Company's business affairs and financial condition, as well as conditions in the securities markets and general economic and industry conditions. The Calaway Parties may in the future take such actions in respect of their investment in the Common Stock as they deem appropriate in light of the circumstances existing from time to time. Currently, these actions include continuing to hold the shares they now beneficially own or disposing of shares. Such -8- dispositions could be effected in private transactions, through a public offering or, upon compliance with the rules under the Securities Act of 1933, as amended (the "Securities Act"), in the open market. Additionally, it is possible that the Calaway Parties could seek to acquire additional shares, although they have no current plans to do so, other than through employee benefit plans or arrangements with the Company. Any acquisition of shares could be effected in the open market, in privately negotiated transactions, or otherwise. Shares may be transferred from time to time among the Calaway Parties and to other entities or trusts controlled by them and to family members. Any sales, purchases or transfers or other actions described herein may be made at any time without further prior notice. In reaching any conclusion as to the foregoing matters, the Calaway Parties may take into consideration various factors, such as the Company's business and prospects, other developments concerning the Company, the obligations of, cash and financial resources and needs of, investment goals of and other business opportunities available to the Calaway Parties, developments with respect to the Calaway Parties' businesses, general economic conditions, the market price for shares of Common Stock and stock market conditions. Dispositions of the 481,541 shares of Common Stock received by the Calaway Parties pursuant to the Combination Agreement are restricted (subject to certain limitations) by the Company's Bylaws, a copy of which has been filed as Exhibit F hereto and is incorporated herein by reference, until August 25, 1997 without the prior written consent of the underwriters for the IPO and the Company. Additionally, in a Lock-up Agreement dated February 25, 1997 of Mr. Calaway (the "Lock-up Agreement"), a copy of which has been filed as Exhibit E hereto and is incorporated herein by reference, delivered pursuant to the Underwriting Agreement of the Company dated February 25, 1997, Mr. Calaway agreed not to sell (subject to certain limitations) -9- any shares of Common Stock until August 25, 1997 (180 days after February 25, 1997 (the date of the Prospectus of the Company (the "Prospectus") relating to the initial public offering of shares of Common Stock (the "IPO") as described in the Company's Registration Statements on Form S-1 (Registration Nos. 333- 17269 and 333-22363), as amended (collectively, the "Form S-1 Registration Statement)) without the prior written consent of the underwriters for the IPO. Except as set forth in Item 6, Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer, the Calaway Parties have no present plans or proposals which relate to or would result in any of the actions described in subparagraphs (a) through (h) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER As of March 3, 1997, Mr. Calaway beneficially owned an aggregate of 615,187 shares of Common Stock (approximately 8.7% of the 7,351,932 shares outstanding, determined by reference to the approximately 7,351,932 shares of Common Stock the Company reported in the Prospectus would be outstanding following the consummation of the Combination Agreement, assuming no exercise of the underwriters' overallotment option). Except as set forth in this Schedule 13D, to the best of each of the Calaway Parties' knowledge, none of the Calaway Parties have effected any transaction in Common Stock during the past sixty days. Mr. Calaway owns all of the outstanding capital stock of COGC. Mr. Calaway has the sole power to vote and dispose of the Common Stock held by COGC and therefore may be deemed to be the beneficial owner of such Common Stock. -10- Pursuant to the CP Partnership Agreement, COGC exercises sole voting power with respect to the Common Stock held by CP, and Ms. Calaway exercises the sole power to dispose or direct the disposition of such Common Stock (except as described in Item 6, Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer). Each of Ms. Calaway, COGC and Mr. Calaway (through COGC) may therefore be deemed to be the beneficial owner of the shares held by CP. As a result of the foregoing, a group consisting of the Calaway Parties may be deemed to exist pursuant to Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such group would be deemed to have beneficial ownership, for purposes of Sections 13(g) and 13(d) of the Exchange Act, of all equity securities of the Company beneficially owned by such parties. Such parties would, as of March 3, 1997 be deemed to beneficially own an aggregate of 615,187 shares of Common Stock or approximately 8.7% of the foregoing total number of shares reported to be outstanding (based in part on information provided by the Company). Mr. Calaway and COGC disclaim beneficial ownership of the shares of Common Stock held by CP, and Ms. Calaway disclaims beneficial ownership of the shares of Common Stock held by CP, COGC and Mr. Calaway, and nothing herein shall be deemed an admission that a group exists. Mr. Calaway has the power to vote the 133,646 restricted shares of Common Stock issued to him pursuant to the Employment Agreement and the Company's Incentive Plan, but will only have the power to dispose of such shares as they vest as described in Item 6, Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. -11- ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Except as described in this statement or in the documents referred to herein, there are no contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 of this statement or between such persons and any person with respect to any securities of the Company. The Company was formed in August 1996 as a subsidiary of Old Edge. Prior to consummation of the Combination Agreement, Old Edge conducted its operations through Edge Joint Venture II, a Texas general partnership (the "Joint Venture"). Interests in the Joint Venture were held by Old Edge, Edge Group II, Gulfedge and Edge Group. On March 3, 1997, pursuant to the Combination Agreement and as contemplated by the Form S-4 Registration Statement, the Company acquired, directly or indirectly, all of the interests in the Joint Venture through its completion of (i) a merger of Old Edge with Mergeco, a wholly owned subsidiary of the Company organized solely to effect the merger, in which the shareholders of Old Edge (including the Calaway Parties) received Common Stock, (ii) an exchange offer to the general and limited partners of Edge Group II in which such partners exchanged their interests in Edge Group II for Common Stock, (iii) an exchange offer to the limited partners of Gulfedge in which such limited partners exchanged their interests in Gulfedge for Common Stock and (iv) a purchase from Edge Group of its interests in the Joint Venture for consideration consisting of Common Stock. The closing of the transactions under Combination Agreement occurred simultaneously with the closing of the sale of 2,400,000 shares of Common Stock pursuant to the Company's IPO as described in the Form S-1 Registration Statement. -12- The current directors of the Company are John E. Calaway, James D. Calaway, Vincent Andrews, David B. Benedict, Nils P. Peterson, Stanley S. Raphael, John Sfondrini and Robert W. Shower. Prior to the consummation of the Combination Agreement, the Company's sole stockholder at such time (Old Edge, of which Mr. Calaway was at such time and currently is the Chairman of the Board and Chief Executive Officer) appointed each of such directors to the Board of Directors of the Company (except for Mr. Shower, who was appointed by the Board of Directors of the Company). Pursuant to the CP Partnership Agreement, COGC exercises sole voting power with respect to the Common Stock held by CP, and Ms. Calaway exercises the sole power to dispose or direct the disposition of such Common Stock, except that the CP Partnership Agreement provides that Ms. Calaway will not sell any shares of Common Stock without first offering to sell such shares to COGC on the same terms and conditions as any bona fide third party offer. Pursuant to the Employment Agreement and the Company's Incentive Plan, on March 3, 1997, the Company issued 133,646 restricted shares of Common Stock and granted options for 133,646 shares of Common Stock to Mr. Calaway. 66,823 of such restricted shares of Common Stock vest ratably over five years, beginning on the first anniversary of the date of grant, and 66,823 of such restricted shares of Common Stock vest on the earlier to occur of 10 years from the date of grant or the achievement of certain performance goals. Such options are exercisable in cumulative annual increments of one-fifth of the total number of shares of Common Stock subject thereto, beginning on the first anniversary of the date of grant, at a purchase price of $16.50 per share and expire ten years from the date of their issuance. Mr. Calaway will be -13- deemed to be the beneficial owner of such shares 60 days prior to the exercisability of the options related to such shares. The Company's Bylaws restrict the disposition of the 481,541 shares of Common Stock received by the Calaway Parties pursuant to the Combination Agreement (subject to certain limitations) until August 25, 1997 without the prior written consent of the underwriters for the Company's IPO and the Company. The Lock-up Agreement restricts the disposition by Mr. Calaway of shares of Common Stock until August 25, 1997 (subject to certain limitations) without the prior written consent of the underwriters for the Company's IPO. Pursuant to a Promissory Note dated January 24, 1995 by Mr. Calaway and COGC to Mr. James C. Calaway and a Pledge and Security Agreement dated December 13, 1994 by Mr. Calaway and COGC to Mr. James C. Calaway (collectively, the "Loan Documents"), copies of which have been filed as Exhibit G hereto and are incorporated herein by reference, Mr. Calaway pledged 46,965 shares of Common Stock to Mr. James C. Calaway to secure borrowings of $300,000 by Mr. Calaway thereunder. The foregoing are summaries of certain provisions of the Partnership Agreement, the Combination Agreement, the Employment Agreement, the Company's Incentive Plan, the Lock-up Agreement, the Company's Bylaws and the Loan Documents, copies of which have been filed as Exhibits A, B, C, D, E, F and G, respectively, hereto and are incorporated by reference herein; and such summaries are qualified by, and subject to, the more complete information contained in such agreements. -14- ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit A. Partnership Agreement dated June 29, 1994 by and among COGC and Mr. Calaway and Assignment of Partnership Interest dated June 29, 1994 by and among Mr. Calaway, Ms. Calaway and COGC. Exhibit B. Amended and Restated Combination Agreement dated as of January 13, 1997 among the Company, Old Edge, Edge Group II, Gulfedge, Mergeco and Edge Group (Incorporated by reference to Exhibit 2.1 to the Company's Registration Statement on Form S-4 (Registration No. 333-17269)). Exhibit C. Employment Agreement dated March 3, 1997 between the Company and Mr. Calaway. Exhibit D. Incentive Plan of the Company (Incorporated by reference to Exhibit 10.9 to the Company's Registration statement on Form S-4 (Registration No. 333-17269)). Exhibit E. Lock-up Agreement dated February 25, 1997 of Mr. Calaway. Exhibit F. Bylaws of the Company (Incorporated by reference to Exhibit 3.2 to the Company's Registration Statement on Form S-4 (Registration No. 333-17269)). Exhibit G. Promissory Note dated January 24, 1995 by Mr. Calaway and COGC to Mr. James C. Calaway and Pledge and Security Agreement dated December 13, 1994 by Mr. Calaway and COGC to Mr. James C. Calaway. Exhibit H. Joint Filing Agreement dated March 13, 1997 among the Calaway Parties. -15- After reasonable inquiry and to the best of their knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. Date: March 13, 1997. /s/ John E. Calaway ------------------------- John E. Calaway CALAWAY OIL AND GAS CORPORATION By:/s/ John E. Calaway ---------------------- John E. Calaway President and Secretary CALAWAY PARTNERS, by CALAWAY OIL AND GAS CORPORATION, its general partner By:/s/ John E. Calaway ---------------------- John E. Calaway President and Secretary /s/ Nell G. Calaway ------------------------- Nell G. Calaway -16- EX-99.A 2 EXHIBIT A EXHIBIT A =============================================================================== PARTNERSHIP AGREEMENT BY AND AMONG CALAWAY OIL AND GAS, INC. AND JOHN E. CALAWAY EFFECTIVE JUNE 29, 1994 =============================================================================== TABLE OF CONTENTS Article I Formation of Partnership Section 1.1 Formation of Partnership.................................... 1 Section 1.2 Name of Partnership......................................... 1 Section 1.3 Purpose of the Partnership.................................. 1 Section 1.4 Term........................................................ 1 Section 1.5 Statutory Compliance........................................ 1 Section 1.6 Title to Property........................................... 2 Section 1.7 Payments of Individual Obligations.......................... 2 Section 1.8 Independent Activities; Transactions With Affiliates........ 2 Section 1.9 Place of Business........................................... 2 Article II Definitions Section 2.1 "Act"....................................................... 2 Section 2.2 "Adjusted Capital Account Deficit".......................... 3 Section 2.3 "Agreement"................................................. 3 Section 2.4 "Bankruptcy"................................................ 3 Section 2.5 "Calaway"................................................... 3 Section 2.6 "Calaway Assets"............................................ 3 Section 2.7 "Capital Account"........................................... 3 Section 2.8 "Capital Contribution"...................................... 4 Section 2.9 "Code" or "Internal Revenue Code"........................... 4 Section 2.10 "Company"................................................... 4 Section 2.11 "Depreciation".............................................. 4 Section 2.12 "Edge Stock"................................................ 5 Section 2.13 "Fiscal Year"............................................... 5 Section 2.14 "Gross Asset Value"......................................... 5 Section 2.15 "Involuntary Bankruptcy".................................... 6 Section 2.16 "Partner" or "Partners"..................................... 6 Section 2.17 "Partnership"............................................... 6 Section 2.18 "Net Cash Flow"............................................. 6 Section 2.19 "Person".................................................... 6 Section 2.20 "Profits" or "Losses"....................................... 6 Section 2.21 "Regulations"............................................... 7 Section 2.22 "Sharing Ratio"............................................. 7 Section 2.23 "Transfer".................................................. 7 Section 2.24 "Voluntary Bankruptcy"...................................... 7 Section 2.25 "Wholly Owned Affiliate".................................... 7 (i) Article II Capital Contributions Section 3.1 Initial Capital Contributions............................... 8 Section 3.2 Additional Capital Contributions............................ 8 Section 3.3 Return on Contributions..................................... 8 Section 3.4 Additional Partners......................................... 8 Article IV Allocations Section 4.1 Profits and Losses.......................................... 8 Section 4.2 Special Allocations......................................... 9 Section 4.3 Curative Allocations........................................ 9 Section 4.4 Tax Allocations: Code Section 704(c)........................ 10 Article V Distributions Section 5.1 Net Cash Flow............................................... 10 Section 5.2 Amounts Withheld............................................ 10 Article VI Management Section 6.1 General Authority of Partners............................... 11 Section 6.2 Specific Authority of Partners.............................. 11 Section 6.3 Compensation and Expenses................................... 11 Article VII Indemnification of Partners Section 7.1 General..................................................... 11 Section 7.2 Unauthorized Acts........................................... 12 Section 7.3 Limitations................................................. 12 Article VIII Accounting, Books and Records Section 8.1 Accounting, Books and Records............................... 12 Section 8.2 Tax Returns; Information.................................... 12 Section 8.3 Tax Elections............................................... 12 Section 8.4 Tax Matters Person.......................................... 12 (ii) Article IX Amendments and Meetings Section 9.1 Amendments.................................................. 13 Section 9.2 Meetings of the Partners.................................... 13 Section 9.3 Unanimous Consent in Lieu of Meeting........................ 13 Article X Transfers Section 10.1 Restrictions on Transfers................................... 14 Section 10.2 Permitted Transfers......................................... 14 Section 10.3 Right of First Refusal...................................... 16 Section 10.4 Distribution Among Partners................................. 17 Article XI Withdrawals; Action for Partition; Breaches Section 11.1 Waiver of Partition......................................... 18 Section 11.2 Covenant Not to Withdraw or Dissolve........................ 18 Section 11.3 Consequences of Violation of Covenants...................... 18 Section 11.4 Breach Payments............................................. 19 Section 11.5 No Bonding.................................................. 20 Article XII Dissolution and Winding Up Section 12.1 Liquidating Events.......................................... 20 Section 12.2 Winding Up.................................................. 21 Section 12.3 Deemed Distribution and Recontribution...................... 21 Section 12.4 Rights of Partners.......................................... 21 Article XIII Miscellaneous Section 13.1 Binding Arbitration......................................... 22 Section 13.2 Notices..................................................... 22 Section 13.3 Binding Effect.............................................. 22 Section 13.4 Headings.................................................... 22 Section 13.5 Severability................................................ 23 Section 13.6 Further Action.............................................. 23 Section 13.7 Variation of Pronouns....................................... 23 Section 13.8 Governing Law............................................... 23 Section 13.9 Counterpart Execution....................................... 23 Section 13.10 Specific Performance........................................ 24 (iii) Section 13.11 Set-off..................................................... 24 Section 13.12 Loans....................................................... 24 (iv) PARTNERSHIP AGREEMENT FOR CALAWAY PARTNERS This Partnership Agreement (this "Agreement") is made and entered into by and between Calaway Oil & Gas Corporation, a Texas corporation ("Company"), and John E. Calaway, a resident of Harris County, Texas ("Calaway"). Calaway and the Company are sometimes referred to herein collectively as the "Partners" and individually as a "Partner". ARTICLE I FORMATION OF PARTNERSHIP SECTION 1.1 FORMATION OF PARTNERSHIP. The Company and Calaway hereby form, pursuant to the provisions of the Act, a partnership (the "Partnership") for the purposes and scope hereinafter set forth. Except as provided to the contrary in this Agreement, the rights, duties, status, and liabilities of the Partners, and the formation, administration, dissolution, and continuation or termination of the Partnership, shall be as provided in the Act. SECTION 1.2 NAME OF PARTNERSHIP. The name of the Partnership shall be "Calaway Partners" and all business of the Partnership shall be conducted in such name. The Partnership shall hold all of its property in the name of the Partnership and not in the name of any Partner. SECTION 1.3 PURPOSE OF THE PARTNERSHIP. (a) Subject to the terms of this Agreement, the purpose of the Partnership is to acquire, own, mortgage, encumber, hypothecate, lease, sell, maintain, improve, alter, remodel, expand, manage and otherwise operate and deal with the property being contributed to the Partnership and any property subsequently acquired by the Partnership. (b) The Partnership shall be a partnership only for the purpose specified in this Section 1.3. Except as otherwise provided in this Agreement, the Partnership shall not engage in any other activity or business and no Partner shall have any authority to hold himself out as a general agent of another Partner in any other business or activity. SECTION 1.4 TERM. The term of the Partnership shall commence on the date hereof and shall continue until the winding up and liquidation of the Partnership and its business is completed following a "Liquidating Event," as provided in Article XII hereof. SECTION 1.5 STATUTORY COMPLIANCE. The Partnership shall exist under and be governed by, and this Agreement shall be construed in accordance with, the applicable laws of the State of Texas. The Partners shall make all filings and disclosures required by, and shall otherwise comply with, all such laws. The Partners shall execute and file in the appropriate records any assumed or fictitious name certificates and other documents and instruments as may be necessary or appropriate with respect to the formation of, and conduct of business by, the Partnership. SECTION 1.6 TITLE TO PROPERTY. All real and personal property owned by the Partnership shall be owned by the Partnership as an entity and no Partner shall have any ownership interest in such property in its individual name or right, and each Partners's interest in the Partnership shall be personal property for all purposes. SECTION 1.7 PAYMENTS OF INDIVIDUAL OBLIGATIONS. The Partnership's credit and assets shall be used solely for the benefit of the Partnership, and no asset of the Partnership shall be transferred or encumbered for or in payment of any individual obligation of a Partner. SECTION 1.8 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES. (a) The Company and any of its affiliates shall be required to devote only such time to the affairs of the Partnership as the Company determines in its sole discretion may be necessary to manage and operate the Partnership, and each such Person shall be free to serve any other Person or enterprise in any capacity that it may deem appropriate in its discretion. Calaway shall not be required to devote any time to the affairs of the Partnership. (b) Insofar as permitted by applicable law, each Partner (acting on his own behalf) and its affiliates may, notwithstanding this Agreement, engage in whatever activities they choose, whether the same are competitive with the Partnership or otherwise, without having or incurring any obligation to offer any interest in such activities to the Partnership or any Partner and neither this Agreement nor any activity undertaken pursuant hereto shall prevent any Partner or his affiliates from engaging in such activities, or require any Partner to permit the Partnership or any Partner or his affiliates to participate in any such activities, and as a material part of the consideration for the execution of this Agreement by each Partner, each Partner hereby waives, relinquishes, and renounces any such right or claim of participation. SECTION 1.9 PLACE OF BUSINESS. The principal office of the Partnership shall be the office of Calaway, which is now 1111 Bagby, Suite 2100, Houston, Texas 77002. ARTICLE II DEFINITIONS As used in this Agreement, the following terms shall have the respective meanings indicated. SECTION 2.1 "ACT" means the Texas Revised Partnership Act, Article 6132b-1.01, et seq., of the Texas Revised Civil Statutes Annotated, as amended from time to time. -2- SECTION 2.2 "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) Credit to such Capital Account any amounts which such Partner is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and (b) Debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704- 1(b)(2)(ii)(d)(6) of the Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted and applied consistently therewith. SECTION 2.3 "AGREEMENT" means this Partnership Agreement of Calaway Partners. SECTION 2.4 "BANKRUPTCY" means, with respect to any Person, a Voluntary Bankruptcy or an Involuntary Bankruptcy. SECTION 2.5 "CALAWAY" means John E. Calaway and his heirs, legal representatives and permitted assigns. SECTION 2.6 "CALAWAY ASSETS" means those assets being contributed to the Partnership by Calaway in accordance with Section 3.1(b) hereof and any assets purchased with the proceeds from any Transfer of the Calaway Assets. SECTION 2.7 "CAPITAL ACCOUNT" means, with respect to any Partner, the Capital Account maintained for such Person in accordance with following provisions: (a) To each Person's Capital Account there shall be credited such Person's Capital Contributions, such Person's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 4.2 or Section 4.3 hereof, and the amount of any Partnership liabilities which are assumed by such Person or which are secured by any assets of the Partnership distributed to such Person. (b) To each Person's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any assets of the Partnership distributed to such Person pursuant to any provision of this Agreement, such Person's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 4.2 or Section 4.3 hereof, and the amount of any liabilities of such Person which are assumed by the Partnership or which are secured by any property contributed by such Person to the Partnership. -3- (c) In the event all or a portion of an interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. (d) In determining the amount of any liability for purposes of Sections 2.7(a) and 2.7(b) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-1(b) of the Regulations, and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Partners shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Partnership or the Partners), are computed in order to comply with such Regulations, the Partners may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article XII hereof upon the dissolution of the Partnership. The Partners also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Partners and the amount of Partnership capital reflected on the Partnership's balance sheet, as computed for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(q) of the Regulations, and (ii) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Section 1.704-1(b) of the Regulations. SECTION 2.8 "CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership with respect to the interest in the Partnership held by such Partner pursuant to the terms of this Agreement. SECTION 2.9 "CODE" or "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time. SECTION 2.10 "COMPANY" means Calaway Oil & Gas Corporation and its successors and permitted assigns. SECTION 2.11 "DEPRECIATION" means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period; provided, however, that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, further that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be -4- determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Partners. SECTION 2.12 "EDGE STOCK" means 8,172 shares of the common stock, $.01 par value per share, of Edge Petroleum Corporation, which stock is being contributed to the Partnership by the Company in accordance with Section 3.1(a) hereof, and any assets purchased with the proceeds from any Transfer of the Edge Stock. SECTION 2.13 "FISCAL YEAR" means (i) the period commencing on the effective date of this Agreement and ending on December 31, 1994, (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clause (ii) for which the Partnership is required to allocate Profits, Losses and other items of Partnership income, gain, less or deduction pursuant to Article IV hereof. SECTION 2.14 "GROSS ASSET VALUE" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the contributing Partner and the Partnership; (b) The Gross Asset Values of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the Partners, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership assets as consideration for an interest in the Partnership; and (c) the liquidation of the Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations; provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Partners reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; (c) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution; and (d) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704- 1(b)(2)(iv)(m) of the Regulations and Section 4.2(c) hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this Section 2.14 to the extent the Partners determines that an adjustment pursuant to Section 2.14(b) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 2.14(d). -5- If the Gross Asset Value of an asset has been determined or adjusted pursuant to Section 2.14(a), 2.14(b), or 2.14(d) hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profit and Losses. SECTION 2.15 "INVOLUNTARY BANKRUPTCY" means, with respect to any Person, without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or other similar relief under any present or future bankruptcy, insolvency, or similar statute, law, or regulation, or the filing of any such petition against such Person, which petition shall not be dismissed within 90 days, or, without the consent or acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver, or liquidator of such Person or of all or any substantial part of the property of such Person, which order shall not be dismissed within 60 days. SECTION 2.16 "PARTNER" OR "PARTNERS" means Calaway and the Company, together with each other Person (if any) that subsequently becomes an additional or substituted Partner in accordance with this Agreement, but excluding any such Person that subsequently ceases to be a Partner pursuant to the provisions of this Agreement. "Partners" means all such Persons. All references in this Agreement to a majority or a specified percentage in interest of the Partners shall mean Partners holding Sharing Ratios more than 50% or such specified percentage, respectively, of the Sharing Ratios then held by all of the Partners. SECTION 2.17 "PARTNERSHIP" has the meaning attributed to it in Section 1.1. SECTION 2.18 "NET CASH FLOW" means the gross cash proceeds of the Partnership less the portion thereof used to pay or establish reserves for all Partnership expenses, debt payments, capital improvements, replacements, and contingencies, all as determined by the Partners. Net Cash Flow shall not be reduced by depreciation, amortization, cost recovery deductions, or similar allowances, but shall be increased by any reductions of reserves previously established. SECTION 2.19 "PERSON" means an individual, partnership, corporation, trust, unincorporated association, or other entity or association. SECTION 2.20 "PROFITS" OR "LOSSES" means, for each Fiscal Year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section 2.20 shall be added to such taxable income or loss; -6- (b) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations and not otherwise taken into account in computing Profits or Losses pursuant to this Section 2.20 shall be subtracted from such taxable income or loss; (c) In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to Section 2.14(b) or Section 2.14(d) hereof, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; and (d) Gain or loss resulting from any disposition of Partnership assets with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value. SECTION 2.21 "REGULATIONS" means the Income Tax Regulations, including Temporary Regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). SECTION 2.22 "SHARING RATIO" means, at all times, the ratio that such Partner's interest in the Partnership bears to the interest in the Partnership of all Partners. Calaway and the Company shall each have an initial Sharing Ratio of 50%. SECTION 2.23 "TRANSFER" means, as a noun, any voluntary or involuntary transfer, sale, pledge, hypothecation, or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate, or otherwise dispose of. SECTION 2.24 "VOLUNTARY BANKRUPTCY" means, with respect to any Person, the inability of such Person generally to pay its debts as such debts become due, or an admission in writing by such Person of its inability to pay its debts generally or a general assignment by such Person for the benefit of creditors; the filing of any petition or answer by such Person seeking to adjudicate it a bankrupt or insolvent, or seeking for itself any liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Person or its debts under any law relating to bankruptcy, insolvency, or reorganization or relief of debtors, or seeking, consenting to, or acquiescing in the entry of an order for relief or the appointment of a receiver, trustee, custodian, or other similar official for such Person or for any substantial part of its property; or corporate action taken by such Person to authorize any of the actions set forth above. SECTION 2.25 "WHOLLY OWNED AFFILIATE" of any Person shall mean (i) any partnership, corporation, trust, or other entity or association at least 90% of the voting interests or beneficial ownership of which is owned, directly or indirectly, by such Person, or (ii) any Person who, directly or indirectly, owns at least 90% of the voting stock or beneficial ownership of such Person. -7- ARTICLE III CAPITAL CONTRIBUTIONS SECTION 3.1 INITIAL CAPITAL CONTRIBUTIONS. (a) COMPANY. The Company shall contribute to the capital of the Partnership the Edge Stock, free and clear of any lien, claim, security interest, charge, pledge, encumbrance, call, commitment, option, conversion right or privilege of any character whatsoever. SEE APPENDIX B FOR RETENTION OF VOTING RIGHTS AND RIGHT OF FIRST REFUSAL. (b) CALAWAY. Calaway shall contribute to the capital of the Partnership the building and land, subject to the liens and encumbrances, identified on Appendix A attached hereto. SECTION 3.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Without the unanimous consent of the Partners, no Partner shall be required to contribute additional cash or capital to the Partnership or pay to the Partnership or any other Partner any deficit or negative balance that may exist from time to time in such Partner's Capital Account; provided, however, that the Company shall be required to contribute any cash or capital required by the Partnership to fund any taxes or other expenses associated with the Calaway Assets. SECTION 3.3 RETURN OF CONTRIBUTIONS. Except as may expressly be provided herein, no Partner shall be entitled to the return of its Capital Contribution or any other contribution to the Partnership nor entitled to be paid any interest, salary or drawing in respect of either its Capital Account or an Capital Contribution made by it to the Partnership. No unrepaid Capital Contribution shall be deemed or considered to be a liability of the Partnership or of any Partner. Except as expressly provided herein, no Partner shall be required to contribute or loan any cash or property to the Partnership to enable the Partnership to return any Partner's contributions to the Partnership or to balance Capital Accounts. SECTION 3.4 ADDITIONAL PARTNERS. No additional Partners shall be admitted to the Partnership without the unanimous consent of the Partners. ARTICLE IV ALLOCATIONS SECTION 4.1 PROFITS AND LOSSES. After giving effect, to the special allocations set forth in Sections 4.2 and 4.3 hereof, Profits or Losses for any Fiscal Year shall be allocated among the Partners as follows: (a) if attributable to the Edge Stock, 99% to Calaway and 1% to the Company; (b) if attributable to the Calaway Assets, 99% to the Company and 1% to Calaway; and -8- (c) all other Profits or Losses shall be allocated among the Partners in proportion to their Sharing Ratios. SECTION 4.2 SPECIAL ALLOCATIONS. The following special allocations shall be made in the following order: (a) QUALIFIED INCOME OFFSET. In the event any Partner unexpectedly receives any adjustments, allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), Section 1.704- 1(b)(2)(ii)(d)(5), or Section 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership income and gain shall be specially allocated to each such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as possible, provided that an allocation pursuant to this Section 4.2(a) shall be made only if and to the extent that such Partner has an Adjusted Capital Account Deficit after all other allocations provided for in this Article IV have been tentatively made as if this Section 4.2(a) were not in this Agreement. (b) GROSS INCOME ALLOCATION. In the event any Partner has a deficit Capital Account at the end of any Partnership Fiscal Year which is in excess of the sum of (i) the amount such Partner is obligated to restore pursuant to any provision of this Agreement and (ii) the amount such Partner is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Partner shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 4.2(b) shall be made only if and to the extent that such Partner has a deficit Capital Account in excess of such sum after all other allocations provided for in this Article IV have been tentatively made as if Section 4.2(a) hereof and this Section 4.2(b) were not in this Agreement. (c) SECTION 754 ADJUSTMENTS. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Section 1.704- 1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Partners in accordance with their interest in the Partnership in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations applies, or to the Partner to whom such distribution was made in the event Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies. SECTION 4.3 CURATIVE ALLOCATIONS. The allocations set forth in Section 4.2 hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Partners that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Partnership income, gain, loss, or deduction pursuant to this -9- Section 4.3 Therefore, notwithstanding any other provision of this Article IV (other than the Regulatory Allocations), the Partners shall make such offsetting special allocations of Partnership income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Partner's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Partner would have had if the Regulatory Allocations were not part of this Agreement and all Partnership items were allocated pursuant to Section 4.1 hereof. SECTION 4.4 TAX ALLOCATIONS: CODE SECTION 704(C). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Gross Asset Value (computed in accordance with Section 2.14(a) hereof). In the event the Gross Asset Value of any Partnership asset is adjusted pursuant to Section 2.14(b) hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Partners in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.4 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Person's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Agreement. ARTICLE V DISTRIBUTIONS SECTION 5.1 NET CASH FLOW. Except as otherwise provided in Article XII hereof, Net Cash Flow shall be distributed as follows: (a) if attributable to the Edge Stock, 100% to Calaway; (b) if attributable to the Calaway Assets, 100% to the Company; and (c) all other Net Cash Flow shall be allocated among the Partners in proportion to their Sharing Ratios. SECTION 5.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment, distribution, or allocation to the Partnership or the Partners shall be treated as amounts distributed to the Partners pursuant to this Article V for all purposes under this Agreement. The Partners are authorized to withhold from distributions, and to pay over to any federal, state, or local government, any amounts required to be so withheld pursuant to the Code or any provisions -10- of any other federal, state, or local law, and may allocate any such amounts among the Partners in any manner that is in accordance with applicable law. ARTICLE VI MANAGEMENT SECTION 6.1 GENERAL AUTHORITY OF PARTNERS. Subject to any provision in this Agreement to the contrary, any actions by the Partnership shall require the agreement of a majority in interest of the Partners. Thus, if the Partnership has only two Partners (each having a 50% Sharing Ratio), actions by the Partnership shall require the unanimous agreement of the Partners. If the Partners are unable to agree on the proper course of action for the Partnership to take with respect to any matter, the matter shall be submitted to arbitration in accordance with Section 13.1 hereof. SECTION 6.2 SPECIFIC AUTHORITY OF PARTNERS. Notwithstanding the provisions of Section 6.1: (a) Calaway shall have the authority to cause a disposition of the Edge Stock without the consent or agreement of the Company and the Company shall have the authority to cause a disposition of the Calaway Assets without the consent or agreement of Calaway. Prior to either Partner causing a Transfer of the Edge Stock or the Calaway Assets in accordance with the foregoing sentence, the Partner who has authority to cause a disposition of such asset shall first offer to sell the Edge Stock or Calaway Asset, as the case may be, to the other Partners upon terms no less favorable than those being contemplated or negotiated with a third party. Any subsequent disposition of the Edge Stock or the Calaway Asset, as the case may be, to a third party shall be on terms substantially similar to those offered to the other Partners. (b) The Company shall have the exclusive authority to cause the Partnership to vote the Edge Stock in any manner that the Company shall determine. SECTION 6.3 COMPENSATION AND EXPENSES. No Partner shall receive any salary, fee, or draw for services rendered to or on behalf of the Partnership, nor shall any Partner be reimbursed for any expenses incurred by such Partner on behalf of the Partnership. ARTICLE VII INDEMNIFICATION OF PARTNERS SECTION 7.1 GENERAL. The Partnership shall indemnify, save harmless, and pay all judgments and claims against each Partner or any officers or directors of such Partner relating to any liability or damage incurred by reason of any act performed or omitted to be performed by such Partner, officer or director in connection with the business of the Partnership, including attorneys' fees incurred by such Partner, officer or director in connection with the defense of any action based on any such act or omission, which -11- attorneys' fees may be paid as incurred, including all such liabilities under federal and state securities laws (including the Securities Act of 1933, as amended) as permitted by law. SECTION 7.2 UNAUTHORIZED ACTS. If any Partner purports to do any act on behalf of the Partnership or to bind the Partnership, in violation of the Provisions of this Agreement or takes any actions which are outside the authority of such Partner as established under this Agreement, then such Partner shall, at his or its cost and expense, indemnify and hold harmless the other Partners and the Partnership from all claims, causes of action, costs, expenses, obligations and liabilities thereby arising, and, without limiting the generality of the foregoing, shall cause the release and discharge of all mechanic's and materialmen's liens or other liens, arising as a result of such unauthorized acts and which shall have cast a cloud on the title of the Partnership to any property. SECTION 7.3 LIMITATIONS. Notwithstanding anything to the contrary in any of Sections 7.1 and 7.2 above, no Partner shall be indemnified from any liability for fraud, bad faith, willful misconduct, or gross negligence. ARTICLE VIII ACCOUNTING, BOOKS AND RECORDS SECTION 8.1 ACCOUNTING, BOOKS AND RECORDS. The Partnership shall maintain at its principal place of business separate books of account for the Partnership which shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the operation of the Partnership business in accordance with generally accepted accounting principles consistently applied and, to the extent inconsistent therewith, in accordance with this Agreement. The Partnership shall use the cash or accrual method of accounting, as the Partners shall determine, in preparation of its annual reports and for tax purposes and shall keep its books accordingly. Each Partner shall, at his sole expense, have the right, at any time without notice to any other Partner, to examine, copy, and audit the Partnership's books and records during the normal business hours. SECTION 8.2 TAX RETURNS; INFORMATION. The Partners shall cause the Partnership's accountants to prepare all income and other tax returns of the Partnership and shall cause the same to be filed in an timely manner. Each Partner shall be provided with a copy of each such return, together with any schedules or other information which may be required in connection with such Partners' own tax affairs. SECTION 8.3 TAX ELECTIONS. In connection with any Permitted Transfer (as such term is defined in Article X) of an interest in the Partnership, the Partners shall cause the Partnership, at the written request of the transferor or the transferee, to make an election to adjust the basis of the Partnership's property in the manner provided in Code Sections 734(b) and 743(b) and Section 1.754-1(b) of the Regulations. SECTION 8.4 TAX MATTERS PERSON. The Company is specially authorized to act as the "Tax Matters Person" under the Code and in any similar capacity under state or local law. -12- ARTICLE IX AMENDMENTS AND MEETINGS SECTION 9.1 AMENDMENTS. (a) Amendments to this Agreement may be proposed by any Partner submitting to the other Partners a verbatim statement of any proposed amendment. The proposing Partner shall seek the written vote of the Partners on the proposed amendment or shall call a meeting to vote thereon and to transact any other business that it may deem appropriate. For purposes of obtaining a written vote, the proposing Partner may require response within a reasonable specified time, but not less than 15 business days, and failure to respond in such time period shall constitute a vote in favor of the proposed amendment. A proposed amendment shall be adopted and be effective as an amendment hereto if it receives the affirmative vote of a majority in interest of the Partners. (b) Notwithstanding Section 9.1(a) hereof, this Agreement shall not be amended without the consent of each Person adversely affected if such amendment would alter the interest of a Partner in Profits, Losses, other items, or any Partnership distributions. SECTION 9.2 MEETINGS OF THE PARTNERS. (a) Meetings of the Partners may be called by any Partner. Notice of any such meeting shall be given to all Partners not less than 7 business days nor more than 30 business days prior to the date of such meeting and shall state the nature of any business to be transacted thereof. Partners may vote in person or by proxy at such meeting. Whenever the vote or consent of Partners is permitted or required under this Agreement, such vote or consent may be given at a meeting of Partners or may be given in accordance with the procedure prescribed in Section 9.3 hereof. Except as otherwise expressly provided in this Agreement, the vote of a majority in interest of the Partners shall control. (b) Each Partner may authorize any Person or Persons to act for it by proxy on all matters in which a Partner is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Partner or its attorney-in-fact. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Partner executing it. (c) Each meeting of the Partners shall be conducted by the Partner who called the meeting. SECTION 9.3 UNANIMOUS CONSENT IN LIEU OF MEETING. The Partnership may take any action contemplated under this Agreement if approved by the unanimous consent of the Partners acting without a meeting, such consent to be provided in writing, or by telephone or facsimile, if such telephone conversation or facsimile is followed by a hard copy of the -13- telephone conversation or facsimilied communication sent by registered or certified mail, postage and charges prepaid, addressed as described in Section 13.2, or to such other address as such Person may from time to time specify by notice to the Partners. ARTICLE X TRANSFERS SECTION 10.1 RESTRICTIONS ON TRANSFERS. Except as expressly permitted or required by this Agreement, no Partner shall Transfer all or any portion of his interest in the Partnership or any rights therein without the unanimous consent of the Partners. Any Transfer or attempted Transfer by any Partner in violation of the preceding sentence shall be null and void and of no force or effect whatever. Each Partner hereby acknowledges the reasonableness of the restrictions on Transfer imposed by this Agreement in view of the Partnership purposes and the relationship of the Partners. Accordingly, the restrictions on Transfer contained herein shall be specifically enforceable. Each Partner hereby further agrees to hold the Partnership and each Partner (and each Partner's successors and assigns) wholly and completely harmless from any cost, liability, or damage (including, without limitation, liabilities for income taxes and costs of enforcing this indemnity) incurred by any of such indemnified Persons as a result of a Transfer or an attempted Transfer in violation of this Agreement. SECTION 10.2 PERMITTED TRANSFERS. (a) GENERAL. Subject to the conditions and restrictions set forth in this Section 10.2, a Partner shall have the right to Transfer all or any portion of his interest in the Partnership by means of a Permitted Transfer. (b) DEFINITION OF PERMITTED TRANSFER; PERMITTED TRANSFEREES. (i) A "Permitted Transfer" is any Transfer by a Partner of all or any portion of his interest in the Partnership to a Permitted Transferee, provided that such Transfer otherwise complies with the conditions and restrictions of this Section 10.2. (ii) A "Permitted Transferee" of a Partner is any Person who is (1) a Wholly Owned Affiliate of such Partner, (2) a member of such Partner's Family, (3) any other Partner, (4) a Personal Representative of such Partner, (5) any Purchaser in accordance with Section 10.3 hereof, or (6) any Person approved as a Permitted Transferee by the unanimous consent of the Partners. (iii) A Partner's "Family" includes only any Person who, at the time of the Permitted Transfer, is such Partner's spouse (which in the case of Calaway shall specifically include Nell Calaway, notwithstanding any pending divorce proceeding), natural or adoptive lineal ancestors or descendants, and trusts for his or their exclusive benefit. -14- (iv) A Partner's "Personal Representative" includes only any Person who succeeds to such Partner's estate as a result of such Partner's death, legal incompetence, or Bankruptcy and any transferee of such Partner's interest from any such Person. (C) CONDITIONS TO PERMITTED TRANSFERS. A Transfer otherwise permitted under this Section 10.2 shall not be a Permitted Transfer and any attempted Transfer of a Partner's interest to a Permitted Transferee shall be null and void and of no force or effect whatever unless and until the following conditions are satisfied or waived by the other Partners: (i) Except in the case of a Permitted Transfer to a Partner's Personal Representative, the transferor and transferee shall execute such documents and instruments of conveyance and assumption as may be necessary or appropriate in the opinion of counsel to the Partnership to effect such Transfer and to confirm the Permitted Transferee's agreement to be bound by the provisions of this Article X and assumption of all monetary obligations of the transferor Partner with respect to the interest being transferred and the transferor Partner's agreement to guarantee the prompt payment and performance of such assumed obligations. (ii) In the case of a Permitted Transfer to a Partner's Personal Representative, the Permitted Transferee shall deliver such assurances as may be necessary or appropriate in the opinion of counsel to the Partnership to confirm such Transfer and that such transferor Partner (and/or his estate) remains liable to perform all monetary obligations with respect to such interest. (iii) Except in the case of a Permitted Transfer to a Partner's Personal Representative, the Partnership shall receive, prior to such Transfer, an opinion of counsel satisfactory to the Partnership confirming that such Transfer will not terminate the Partnership for federal income tax purposes. (iv) The transferor and transferee shall furnish the Partnership with the transferee's taxpayer identification number, sufficient information to determine the transferee's initial tax basis in the interest transferred, and any other information reasonably necessary to permit the Partnership to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Partnership shall not be required to make any distribution otherwise provided for in this Agreement with respect to any transferred interest until it has received such information. (v) A Partner making a Permitted Transfer of all or a portion of his Partnership interest and the Permitted Transferee thereof shall pay all reasonable costs and expenses incurred by the Partnership in connection with such Transfer. -15- (d) ADMISSION OF PERMITTED TRANSFEREE AS A PARTNER. A Permitted Transferee (other than a Partner's Personal Representative) of an interest in the Partnership will be admitted as a Partner in the Partnership. A Permitted Transferee who is a Partner's Personal Representative shall be admitted as a Partner in the Partnership only upon the unanimous consent of the Partners. The rights of a Permitted Transferee who is not admitted as a Partner shall be limited to the right to receive allocations and distributions from the Partnership with respect to the interest transferred, as provided by this Agreement. The transferor of such interest shall not be a partner with respect to such interest, and, without limiting the foregoing, shall not have the right to inspect the Partnership's books, act for or bind the Partnership, or otherwise interfere in its operations. (e) EFFECT OF PERMITTED TRANSFER ON PARTNERSHIP. The Partners intend that the Permitted Transfer of an interest in the Partnership shall not cause the dissolution of the Partnership under the Act; however, notwithstanding any such dissolution, the Partners shall continue to hold the Partnership's assets and operate its business in Partnership form under this Agreement as if no such dissolution had occurred. SECTION 10.3 RIGHT OF FIRST REFUSAL. Except as permitted by Section 10.2 hereof, no Partner shall Transfer all or any portion of its interest in the Partnership (the "Offered Interest") unless such Partner (the "Seller") first offers to sell the Offered Interest pursuant to the terms of this Section 10.3. (a) LIMITATION ON TRANSFERS. No Transfer may be made under this Section 10.3 unless the Seller has received a bona fide written offer (the "Purchase Offer") from a Person (the "Purchaser") to purchase the Offered Interest for a purchase price (the "Offer Price") denominated and payable in United States dollars at closing or according to specified terms, with or without interest, which offer shall be in writing signed by the Purchaser and shall be irrevocable for a period ending no sooner than the business day following the end of the Offer Period, as hereinafter defined. (b) OFFER NOTICE. Prior to making any Transfer that is subject to the terms of this Section 10.3, the Seller shall give to each other Partner written notice (the "Offer Notice") which shall include a copy of the Purchase Offer and an offer (the "First Offer") to sell the Offered Interest to the other Partners (the "Offerees") for the Offer Price, payable according to the same terms as (or more favorable terms than) those contained in the Purchase Offer, provided that the First Offer shall be made without regard to the requirement of any earnest money or similar deposit required of the Purchaser prior to closing, and without regard to any security (other than the Offered Interest) to be provided by the Purchaser for any deferred portion of the Offer Price. (c) OFFER PERIOD. The First Offer shall be irrevocable for a period (the "Offer Period") ending at 11:59 p.m. (local time at the Partnership's principal office) on the 30th day following the day of the Offer Notice. -16- (d) ACCEPTANCE OF FIRST OFFER. Any Offeree may accept the First Offer as to that portion of the Offered Interest that corresponds to the ratio of its Sharing Ratio to the total Sharing Ratio held by all Offerees by giving written notice of such acceptance to the Seller on or before the expiration of the Offer Period. In the event that the Offerees ("Accepting Offerees"), in the aggregate, accept the First Offer with respect to all of the Offered Interest, the First Offer shall be deemed to be accepted. If the Offerees do not accept the First Offer as to all of the Offered Interest during the Offer Period, the First Offer shall be deemed to be rejected in its entirety. (e) CLOSING OF PURCHASE PURSUANT TO FIRST OFFER. In the event that the First Offer is accepted, the closing of the sale of the Offered Interest shall take place within 30 days after the First Offer is accepted or, if later, the date of closing set forth in the Purchase Offer. The Seller and all Accepting Offerees shall execute such documents and instruments as may be necessary or appropriate to effect the sale of the Offered Interest pursuant to the terms of the First Offer and this Article X. (f) SALE PURSUANT TO PURCHASE OFFER IF FIRST OFFER REJECTED. If the First Offer is not accepted in the manner provided hereinabove, the Seller may sell the Offered Interest to the Purchaser at any time within 60 days after the last day of the Offer Period, provided that such sale shall be made on terms no more favorable to the Purchaser than the terms contained in the Purchase Offer and provided further that such sale complies with conditions of Section 10.2(c) hereof. In the event that the Offered Interest is not sold in accordance with the terms of the preceding sentence, the Offered Interest shall again become subject to all of the conditions and restrictions of this Section 10.3. SECTION 10.4 DISTRIBUTION AMONG PARTNERS. If a Permitted Transfer of an interest in the Partnership occurs during any Fiscal Year, Profits, Losses, each item thereof, and all other items attributable to such interest for such Fiscal Year shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Partners. All distributions on or before the date of a Permitted Transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of making such allocations and distributions, the Partnership shall recognize a Permitted Transfer not later than the end of the calendar month during which it is given notice stating the date such interest was transferred and such other information as the Partners may reasonably require. If a Transfer is not a Permitted Transfer then all of such items shall be allocated, and all distributions shall be made, to the Person who, according to the books and records of the Partnership, on the last day of the Fiscal Year during which the Transfer occurs, was the owner of the Partnership interest. The Partners and the Partnership shall incur no liability for making allocations and distributions in accordance with the provisions of this Section 10.4, whether or not the Partners or the Partnership have knowledge of any Transfer of ownership of any interest in the Partnership. -17- ARTICLE XI WITHDRAWALS; ACTION FOR PARTITION; BREACHES SECTION 11.1 WAIVER OF PARTITION. No Partner shall, either directly or indirectly, take any action to require partition, file a bill for Partnership accounting or appraisement of the Partnership or of any of its assets or properties or cause the sale of any Partnership property, and notwithstanding any provisions of applicable law to the contrary, each Partner (and each of his legal representatives, successors, or assigns) hereby irrevocably waives any and all rights it may have to maintain any action for partition or to compel any sale with respect to his Partnership interest, or with respect to any assets or properties of the Partnership, except as expressly provided in this Agreement. SECTION 11.2 COVENANT NOT TO WITHDRAW OR DISSOLVE. Notwithstanding any provision of the Act, each Partner hereby covenants and agrees that the Partners have entered into this Agreement based on their mutual expectation that all Partners will continue as Partners and carry out the duties and obligations undertaken by them hereunder and that, except as otherwise expressly required or permitted hereby, each Partner hereby covenants and agrees not to (a) take any action to file a certificate of dissolution or its equivalent with respect to itself, (b) take any action that would cause a Voluntary Bankruptcy of such Partner, (c) withdraw or attempt to withdraw from the Partnership, (d) exercise any power under the Act to dissolve the Partnership, (e) transfer all or any portion of his interest in the Partnership, (f) petition for judicial dissolution of the Partnership, or (g) demand a return of such Partner's contributions or profits (or a bond or other security for the return of such contributions or profits) without the unanimous consent of the Partners. SECTION 11.3 CONSEQUENCES OF VIOLATION OF COVENANTS. Notwithstanding anything to the contrary in the Act, if a Partner (a "Breaching Partner") attempts to (i) cause a partition in breach of Section 11.1 hereof or (ii) withdraw from the Partnership or dissolve the Partnership to take any action in breach of Section 11.2 hereof, the Partnership shall continue and such Breaching Partner shall be subject to this Section 11.3. In such event, the following shall occur: (a) The Breaching Partner shall immediately cease to be a Partner and shall have no further power to act for or bind the Partnership; (b) The other Partners shall continue to have the right to possess the Partnership's property and goodwill and to conduct its business and affairs; (c) The Breaching Partner shall be liable in damages, without requirement of a prior accounting, to the Partnership for all costs and liabilities that the Partnership or any Partner may incur as a result of such breach; (d) The Partnership shall have no obligation to pay to the Breaching Partner his contributions, capital, or profits, but may, by notice to the Breaching Partner within 30 days of his withdrawal, elect to make Breach Payments (as -18- hereinafter defined) to the Breaching Partner in complete satisfaction of the Breaching Partner's interest in the Partnership; (e) If the Partnership does not elect to make Breach Payments pursuant to Section 11.3(d) hereof, the Partnership shall treat the Breaching Partner as if he were an unadmitted assignee of the interest of the Breaching Partner and shall make distributions to the Breaching Partner only of those amounts otherwise payable with respect to such interest hereunder; (f) The Partnership may apply any distributions otherwise payable with respect to such interest (including Breach Payments) to satisfy any claims it may have against the Breaching Partner; (g) The Breaching Partner shall have no right to inspect the Partnership's books or records or obtain other information concerning the Partnership's operations; (h) The Breaching Partner shall continue to be liable to the Partnership for any unpaid Capital Contributions required hereunder with respect to such interest and to be jointly and severally liable with the other Partners for any debts and liabilities (whether actual or contingent, known or unknown) of the Partnership existing at the time the Breaching Partner withdraws or dissolves; and (i) Notwithstanding anything to the contrary hereinabove provided, unless the Partnership has elected to make Breach Payments to the Breaching Partner in satisfaction of his interest, the Partnership may offer and sell (on any terms that are not manifestly unreasonable) the interest of the Breaching Partner to any other Partners or other Persons on the Breaching Partner's behalf, provided that any Person acquiring such interest becomes a Partner with respect to such interest and agrees to perform the duties and obligations imposed by this Agreement on the Breaching Partner. SECTION 11.4 BREACH PAYMENTS. (a) For purposes hereof, "Breach Payments" shall mean payments made in four annual installments, each equal to one-fourth of the Breach Amount, payable on the next four (4) consecutive anniversaries of the breach by the Breaching Partner, with simple interest accrued from the date of such breach through the date each such installment is paid on the unpaid balance of such Breach Amount at the prime rate then in effect as Texas Commerce Bank or its successor. The "Breach Amount" shall be an amount equal to the greater of $1 or the Net Equity of the Breaching Partner's interest on the day of such breach, computed in accordance with Section 11.4(b) hereof. The Partnership may, at its sole election, prepay all or any portion of the Breach Payments or interest accrued thereon at any time without penalty. (b) NET EQUITY. The "Net Equity" of a Partner's interest in the Partnership, as of any day, shall be the amount that would be distributed to such Partner in -19- liquidation of the Partnership pursuant to Section 12.2 hereof if (1) all of the Partnership's assets were sold for their Gross Asset Values, (2) the Partnership paid its accrued, but unpaid, liabilities and established reserves for the payment of reasonably anticipated contingent or unknown liabilities, and (3) the Partnership distributed the remaining proceeds to the Partners in liquidation, all as of such day. The Net Equity of a Partner's interest in the Partnership shall be determined, without audit or certification, from the books and records of the Partnership by the firm of independent certified public accountants regularly employed by the Partnership. The Net Equity of a Partner's interest shall be determined within 30 days of the day upon which such accountants are apprised in writing of the Gross Asset Value of the Partnership's assets, and the amount of such Net Equity shall be disclosed to the Partnership and each of the Partners by written notice. The Net Equity determination of such accountants shall be final and binding in the absence of a showing of gross negligence or willful misconduct. SECTION 11.5 NO BONDING. Notwithstanding anything to the contrary in the Act, the Partnership shall not be obligated to secure the value of the Breaching Partner's interest by bond or otherwise; provided, however, that if a court of competent jurisdiction determines that, in order to continue the business of the Partnership such value must be so secured, the Partnership may provide such security. If the Partnership provides such security, the Breaching Partner shall not have any right to participate in Partnership profits or distributions during the term of the Partnership, or to receive any interest on the value of such interest. For this purpose, the value of the interest of the Breaching Partner shall be the greater of $1 or the Net Equity of such interest as of the effective date of the Breaching Partner's withdrawal. ARTICLE XII DISSOLUTION AND WINDING UP SECTION 12.1 LIQUIDATING EVENTS. The Partnership shall dissolve and commence winding up and liquidating upon the first to occur of any of the following ("Liquidating Events"): (a) December 31, 2000; (b) The unanimous vote of the Partners to dissolve, wind up, and liquidate the Partnership; (c) The happening of any other event that makes it unlawful or impossible to carry on the business of the Partnership; or (d) Any event which causes there to be only one Partner. The Partners hereby agree that, notwithstanding any provision of the Act, the Partnership shall not dissolve prior to the occurrence of a Liquidating Event. If it is determined, by a court of competent jurisdiction, that the Partnership has dissolved prior to the occurrence -20- of a Liquidating Event, the Partners hereby agree to continue the business of the Partnership without a winding up or liquidation. SECTION 12.2 WINDING UP. Upon the occurrence of a Liquidating Event, the Partnership shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Partners and no Partner shall take any action that is inconsistent with, or not necessary to or appropriate for, winding up the Partnership's business and affairs. To the extent not inconsistent with the foregoing, all covenants and obligations in this Agreement shall continue in full force and effect until such time as the Partnership assets have been distributed pursuant to this Section 12.2 and the Partnership has terminated. The Partners shall be responsible for overseeing the winding up and liquidation of the Partnership, shall take full account of the Partnership's assets and liabilities, shall cause the Partnership assets to be liquidated as promptly as is consistent with obtaining the fair market value thereof, and shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed in the following order: (a) First, to the payment and discharge of all of the Partnership's debts and liabilities to creditors (including any of the Partners); (b) The balance, if any, to the Partners in accordance with their Capital Accounts, after giving effect to all contributions, distributions, and allocations for all periods. The Partners shall not receive any additional compensation for any services performed pursuant to this Article XII. Each Partner understands and agrees that by accepting the provisions of this Section 12.2 setting forth the priority of the distribution of the assets of the Partnership to be made upon its liquidation, such Partner expressly waives any right which it, as a creditor of the Partnership, might otherwise have under the Act to receive distributions of assets pari passu with the other creditors of the Partnership in connection with a distribution of assets of the Partnership in satisfaction of any liability of the Partnership, and hereby subordinates to said creditors any such right. SECTION 12.3 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other provisions of this Article XII, in the event the Partnership is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations but no Liquidating Event has occurred, the Partnership assets shall not be liquidated, the Partnership's liabilities shall not be paid or discharged, and the Partnership's affairs shall not be wound up. Instead, the Partnership shall be deemed to have distributed the Partnership assets in kind to the Partners, who shall be deemed to have assumed and taken such property subject to all Partnership liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Partners shall be deemed to have recontributed the Partnership assets in kind to the Partnership, which shall be deemed to have assumed and taken such property subject to all such liabilities. SECTION 12.4 RIGHTS OF PARTNERS. Except as otherwise provided in this Agreement, (a) each Partner shall look solely to the assets of the Partnership for the return of his -21- Capital Contributions and shall have no right or power to demand or receive property other than cash from the Partnership and (b) no Partner shall have priority over any other Partner as to the return of his Capital Contributions, or any distribution, or allocations. ARTICLE XIII MISCELLANEOUS SECTION 13.1 BINDING ARBITRATION. Upon the request of any party (whether made before or after the institution of any legal proceeding), any action, dispute, claim, or controversy of any kind (including, but not limited to, actions in contract or in tort, statutory or common law, legal or equitable) now existing or hereafter arising between any of the parties hereto in any way arising out of, pertaining to or in connection with this Agreement shall be resolved by binding arbitration. All arbitration proceedings between the parties shall be conducted in Houston, Texas and shall be administered by the American Arbitration Association, in accordance with the Commercial Arbitration Rules of the American Arbitration Association and, to the maximum extent applicable, the Federal Arbitration Act (Title 9 of the United States Code). The decision rendered in the arbitration proceeding shall be final and conclusive upon the parties and may be enforced by any court of competent jurisdiction. SECTION 13.2 NOTICES. Any and all notices, requests, consents or other communications permitted or required to be given under the terms of this Agreement shall be in writing and shall be deemed received (a) if given by telecopier, when transmitted and the appropriate telephonic confirmation received if transmitted on a business day and during normal business hours of the recipient, and otherwise on the next business day following transmission, (b) if given by certified mail, return receipt requested, postage prepaid, three business days after being deposited in the United States mails, and (c) if given by Federal Express service or other means, when received or personally delivered. The mailing address and facsimile number of each of the parties is as follows or at such other addresses as may be provided to the other parties by notice given in accordance with the foregoing: (a) If to the Partnership or the Company, to the address set forth in Section 1.9 or facsimile number (713) 654-7722; and (b) If to Calaway, 1111 Bagby, Suite 2100, Houston, Texas 77002. Any Person may from time to time specify a different address or facsimile number by notice given in the manner provided in this Section 13.2. SECTION 13.3 BINDING EFFECT. Except as otherwise provided in this Agreement, every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the Partners and their respective heirs, legal representatives, successors, transferees, and assigns. SECTION 13.4 HEADINGS. Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof. -22- SECTION 13.5 SEVERABILITY. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, such provision shall be fully severable; and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provisions there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable and that shall not be more restrictive than the one severed herefrom. SECTION 13.6 FURTHER ACTION. Each Partner, upon the request of the Partners, agrees to perform all further acts and execute, acknowledge, and deliver any documents which may be reasonably necessary, appropriate, or desirable to carry out the provisions of this Agreement. SECTION 13.7 VARIATION OF PRONOUNS. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, singular or plural, as the identity of the Person or Persons may require. SECTION 13.8 GOVERNING LAW. This Agreement shall be governed by the laws of the State of Texas (regardless of the laws that might otherwise govern under applicable Texas principles of conflicts of law) and the parties agree to bring any legal proceeding arising out of or under this Agreement only in one of the courts specified herein. All actions or proceedings with respect to this Agreement or any other instrument or document executed in connection herewith or as security herefor may be instituted in either the courts of Harris County, Texas or the United States District Court for the Southern District of the State of Texas, and by execution and delivery of this Agreement, the parties hereto each unconditionally submit to the jurisdiction (both subject matter and personal) of each such court, and irrevocably and unconditionally waive (i) any objection they may now or hereafter have to the laying of venue in any such courts, and (ii) any claim that any action or proceeding brought in any of such courts has been brought in an inconvenient forum. In addition to all other agents of service, each Partner hereby appoints the Secretary of State of the State of Texas as their agent for service of process for any suit brought in any court of proper jurisdiction in the State of Texas under or by reason of this Agreement, provided that the foregoing shall be in addition to and not in limitation of any other means of service of process in the State of Texas or hereunder. Service of the foregoing may be made by registered letter with a copy of the Petition or Complaint attached thereto addressed to the Secretary of State for forwarding to the parties in the manner provided in Section 13.2 hereof. The parties hereto further agree that the mailing to their last known address by certified or registered mail of any process shall constitute lawful and valid process and service thereof. SECTION 13.9 COUNTERPART EXECUTION. This Agreement may be executed in any number of counterparts with the same effect as if all of the Partners had signed the same document. All counterparts shall be construed together and shall constitute one and the same agreement. -23- SECTION 13.10 SPECIFIC PERFORMANCE. Each Partner agrees with the other Partners that the other Partners will be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages will not provide an adequate remedy in such event. Accordingly, it is agreed that in addition to any other remedy to which the nonbreaching Partners may be entitled, at law or in equity, the nonbreaching Partners shall be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof. SECTION 13.11 SET-OFF. In the event that any sum is payable to any Partner pursuant to this Agreement, any amounts owed by such Partner to the Partnership shall be deducted from said sum before payment to such Partner. SECTION 13.12 LOANS. Any Partner may, with the approval of the Partners, lend or advance money to the Partnership. If any Partner shall make any loan or loans to the Partnership or advance money on its behalf, the amount of any such loan or advance shall not be treated as a contribution to the capital of the Partnership but shall be a debt due from the Partnership. The amount of any such loan or advance by a lending Partner shall be repayable out of the Partnership's cash and shall bear interest at the rate agreed between the Partnership and the lending Partner. None of the Partners shall be obligated to make any loan or advance to the Partnership. [SIGNATURES ON FOLLOWING PAGE] -24- IN WITNESS WHEREOF, this Agreement has been executed as of the date indicated below each Partner's signature. COMPANY: Calaway Oil & Gas Corporation By: /s/ John E. Calaway -------------------------------- John E. Calaway, President Dated: 6/29/94 CALAWAY: /s/ John E. Calaway ----------------------------------- John E. Calaway Dated: 6/29/94 -25- APPENDIX A TO PARTNERSHIP AGREEMENT BY AND AMONG CALAWAY OIL AND GAS CORPORATION AND JOHN E. CALAWAY Calaway shall contribute to the capital of the Partnership the real property located at 2409 Commerce, Houston, Harris County, Texas, more particularly described as follows: Being TRS 2, 3 & 4, block forty-one (41), ABST 87 SM Williams Survey Harris County, Texas, Tax Appraisal Number 037-142-000-0002. Said real property is subject only to the following described liens, claims, security interests, charges, pledges, encumbrances, calls, commitments, options, conversion rights or privileges of any character whatsoever: 1. 2409 Commerce-Sullivan Note. The balance due, including principal, interest, tax and insurance escrow, and all other charges, on that certain promissory note executed by John E. and Nell G. Calaway, in the original principal sum of $51,750.00, dated April 18, 1989, payable to Mary Sullivan, Houston, Texas, and secured by deed of trust on the real property located at 2409 Commerce, Houston, Texas, recorded in the Real Property Records of Harris County, Texas. 2. 2409 Commerce-Southwest Minerals, Inc. Note. The balance due, including principal, interest and all other charges, on that certain promissory note executed by John E. Calaway, in the original principal amount of $75,383.56, dated October 1, 1993, payable to Southwest Minerals, Inc., secured by a second lien on the real property located at 2409 Commerce, Houston, Texas, recorded in the Real Property Records of Harris County, Texas. APPENDIX B TO PARTNERSHIP AGREEMENT BY AND AMONG CALAWAY OIL AND GAS CORPORATION AND JOHN E. CALAWAY Notwithstanding anything herein to the contrary, the Company is perpetually retaining 100% of the voting rights with respect to the Edge Stock, subject to all existing voting agreements. This reservation of voting rights will survive liquidation, dissolution or termination of this Agreement. The Company is also retaining a Right of First Refusal to purchase the Edge Stock on the same terms and conditions as any bona fide third party offer for a period of five (5) business days after receiving notice in accordance with the terms of this agreement of the terms of any proposed sale. The Partnership and Nell G. Calaway will give such notice to the Company within three (3) business days of receipt of any such offer they desire to accept. ASSIGNMENT OF PARTNERSHIP INTEREST This Assignment of Partnership Interest (the "Agreement") is made and entered into this 29th of June, 1994, by and among John E. Calaway ("Assignor"), Nell Calaway ("Assignee"), and Calaway Oil & Gas Corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company and Assignor entered into that Partnership Agreement, dated June 29, 1994 (the "Partnership Agreement"), forming Calaway Partners, a Texas general partnership (the "Partnership"); WHEREAS, incident to their divorce, Assignor has agreed to convey his interest in the Partnership to Assignee; and WHEREAS, as a condition of Assignee's acceptance of the assignment and her agreement to the divorce decree, Assignor, on his own behalf and on behalf of the Company (of which he is the sole shareholder), has agreed that Assignee will have certain rights to require the Partnership to redeem her interest therein with certain of the Partnership's assets; and WHEREAS, the parties hereto wish to confirm such conveyance, assignment, and assumption by Assignee of Assignor's right, title, and interest under the Partnership Agreement; NOW, THEREFORE, in consideration of the mutual promises herein contained and as a gift without other consideration, the parties hereby agree as follows: ARTICLE I CONVEYANCE, ASSIGNMENT, AND ASSUMPTION SECTION 1.1 Assignor hereby unconditionally and irrevocably assigns, conveys, transfers and delivers to Assignee and Assignee hereby accepts from Assignor, at and as of the date hereof, Assignor's entire right, title, and interest as a partner of the Partnership (the "Transferred Interest"). SECTION 1.2 Assignee hereby unconditionally and irrevocably (i) accepts and assumes, at and as of the date hereof, all of the liabilities and obligations of Assignor now or hereafter existing under or in connection with the Partnership Agreement and attributable to the Transferred Interest, and (ii) agrees to be bound by the terms and conditions of the Partnership Agreement, a copy of which is attached hereto as Exhibit "A". SECTION 1.3 The parties hereby agree that from and after the date hereof and for all purposes under the Partnership Agreement, Assignee shall become and be a substituted Partner of the Partnership, and all references to the Partners in the Partnership Agreement shall be deemed to refer to Assignee as a Partner, and Assignee shall be entitled to the full benefits and be bound thereby as a Partner to the same extent as if an original party thereto. ARTICLE II CONSENT TO ASSIGNMENT SECTION 2.1 The Company acknowledges and agrees that the assignment contemplated by this Agreement is a Permitted Transfer within the meaning of Section 10.2(b)(i) of the Partnership Agreement and that all actions or deliveries required by Section 10.2(c) of the Partnership Agreement have been satisfied or are hereby waived. SECTION 2.2 The Company hereby consents to the conveyance, assignment, and assumption contemplated herein, and acknowledges and agrees that Assignee shall be admitted as a substituted Partner in the Partnership. ARTICLE III RIGHT OF REDEMPTION SECTION 3.1 At any time after June 30, 1999 and prior to a Liquidating Event (as such term is defined in Section 13.1 of the Partnership Agreement), Assignee shall have the option to cause the Partnership to distribute the Edge Stock (as such term is defined in the Partnership Agreement) to Assignee in complete redemption of her interest in the Partnership. Assignee's option to cause a redemption of her interest pursuant to this Article III shall be exercised by delivering written notice to the Partnership and the other partners of her desire to cause such a redemption. The Edge Stock shall be delivered to Assignee within ten business days of the Partnership's receipt of such notice and Assignee's interest in the Partnership and her rights under the Partnership Agreement shall completely terminate upon her receipt of the Edge Stock. SECTION 3.2 The Company hereby consents to Assignee's right of redemption hereunder and agrees that it shall cause the Partnership to distribute the Edge Stock to Assignee if Assignee exercises the option set forth in Section 3.1 hereof. ARTICLE IV MISCELLANEOUS SECTION 4.1 This Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without regard to principles of conflicts of law. SECTION 4.2 This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. -2- SECTION 4.3 This Agreement and the rights and obligations hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF, this Agreement has been executed and shall take effect as of the date first above written. ASSIGNEE: /s/ Nell Calaway ---------------------------------- Nell Calaway ASSIGNOR: /s/ John E. Calaway ---------------------------------- John E. Calaway, Individually and on behalf of Calaway Partners, as a Partner thereof COMPANY: Calaway Oil & Gas Corporation, Individually and on behalf of Calaway Partners, as a Partner thereof By: /s/ John E. Calaway ------------------------------- John E. Calaway, President -3- EX-99.C 3 EXHIBIT C EXHIBIT C EMPLOYMENT AGREEMENT TABLE OF CONTENTS
Page ---- 1. Employment Period........................................................................... 1 2. Terms of Employment......................................................................... 1 (a) Position and Duties.................................................................... 1 (b) Compensation........................................................................... 2 (i) Base Salary.................................................................... 2 (ii) Annual Bonus................................................................... 2 (iii) Incentive, Savings and Retirement Plans........................................ 3 (iv) Welfare Benefit Plans.......................................................... 3 (v) Expenses....................................................................... 3 (vi) Fringe Benefits and Perquisites................................................ 3 (vii) Office and Support Staff....................................................... 3 (viii) Vacation....................................................................... 4 (ix) Stock Option Grants............................................................ 4 (x) Restricted Stock and Other Equity-Based Grants................................. 4 (xi) Life Insurance................................................................. 4 3. Termination of Employment................................................................... 5 (a) Death or Disability.................................................................... 5 (b) Cause.................................................................................. 5 (c) Good Reason; Window Period............................................................. 6 (d) Notice of Termination.................................................................. 7 (e) Date of Termination.................................................................... 7 4. Obligations of the Company upon Termination................................................. 7 (a) Disability, Good Reason or During a Window Period; Other than for Cause................ 7 (b) Death (except during a Window Period).................................................. 10 (c) Cause; Other than for Disability, Good Reason or During a Window Period................ 7 5. Non-exclusivity of Rights................................................................... 11 6. Full Settlement; Resolution of Disputes..................................................... 11 7. Certain Additional Payments by the Company.................................................. 12 8. Confidential Information.................................................................... 15 9. Change of Control........................................................................... 15 10. Covenant Not to Compete..................................................................... 19 11. Successors.................................................................................. 20 12. Miscellaneous............................................................................... 21
EMPLOYMENT AGREEMENT This AGREEMENT (the "Agreement") by and between Edge Petroleum Corporation, a Delaware corporation (the "Company"), and John E. Calaway (the "Executive"), dated as of the 3rd day of March, 1997 and to be effective as of the Agreement Effective Date (as defined in Section 12(h) hereof). In entering into this Agreement, the Board of Directors of the Company (the "Board") desires to provide the Executive with substantial incentives to serve the Company as one of its senior executives performing at the highest level of leadership and stewardship, without distraction or concern over minimum compensation, benefits or tenure, to manage the Company's future growth and development, and maximize the returns to the Company's stockholders. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Employment Period. As of the Agreement Effective Date (hereinafter defined), the Company hereby agrees to employ the Executive and the Executive hereby agrees to accept employment with the Company, in accordance with, and subject to, the terms and provisions of this Agreement, for the period (the "Employment Period") commencing on the Agreement Effective Date and ending on the fifth anniversary of the Agreement Effective Date; provided, on the second anniversary of the Agreement Effective Date and each anniversary of the Agreement Effective Date thereafter, the Employment Period shall automatically renew for an additional one year without any further action by either the Company or the Executive, it being the intention of the parties that there shall be continuously a remaining term of not less than three years' duration of the Employment Period until an event has occurred as described in, or one of the parties shall have made an appropriate election pursuant to, the provisions of Section 3. 2. Terms of Employment. (a) Position and Duties. (i) During the Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned on the Agreement Effective Date, which shall in any event include status as Chairman of the Board and Chief Executive Officer of the Company, and (B) the Executive's services shall be performed within the Houston, Texas metropolitan area. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote full attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use 1 the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period, it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Agreement Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Agreement Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, the Executive shall receive an annual base salary equal to the base salary in effect immediately prior to the Agreement Effective Date ("Annual Base Salary"), which shall be paid on a semimonthly basis. During the Employment Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to executives of the Company and its affiliated companies. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term "Annual Base Salary," as utilized in this Agreement, shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include, when used with reference to the Company, any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded, for each fiscal year or portion thereof during the Employment Period, an Annual Bonus (the "Annual Bonus"), in cash equal to the amount determined in the following table based on the Company's audited annual net cash flow increase relative to the audited net cash flow of the Company for the prior calendar year: Percent of Increase In Audited Net Cash Flow Bonus Amount ------------------------ ------------ Less than 15% 0 Greater than 15% and less than 25% 50,000 Greater than 25% 105,000 (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans that 2 are tax-qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended ("Code"), and all plans that are supplemental to any such tax-qualified plans, in each case to the extent that such plans are applicable generally to other executives of the Company and its affiliated companies, but in no event shall such plans provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities that are, in each case, less favorable to the Executive, in the aggregate, than the most favorable plans of the Company and its affiliated companies. As used in this Agreement, the term "most favorable" shall, when used with reference to any plans, practices, policies or programs of the Company and its affiliated companies, be deemed to refer to the plans, practices, policies or programs of the Company and its affiliated companies, as in effect at any time during the Employment Period and provided generally to other executives of the Company or its affiliated companies, which are most favorable to the Executive. (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company or its affiliated companies (including, without limitation, medical, prescription, dental, vision, disability, salary continuance, group life and supplemental group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other executives of the Company or its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits that are less favorable, in the aggregate, than the most favorable such plans, practices, policies and programs of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies. (vi) Fringe Benefits and Perquisites. During the Employment Period, the Executive shall be entitled to fringe benefits and perquisites in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies applicable to similarly situated executives. (vii) Office and Support Staff. During the Employment Period, the Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance to the extent needed to fulfill his corporate responsibilities, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the Employment Period. 3 (viii) Vacation. During the Employment Period, the Executive shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies. (ix) Stock Option Grants. Prior to or contemporaneously with the execution of this Agreement, Executive has been granted stock options on 133,645 shares of Company common stock, par value $.01 per share ("Common Stock"), at an exercise price equal to the IPO Price ("Initial Stock Option"). The Initial Stock Option has a term of 10 years and is exercisable in cumulative annual increments of one-fifth of the total number of shares subject to the option, beginning on the first anniversary of the Date of Grant. "IPO" shall mean the initial public offering of Common Stock pursuant to which the Company receives payment in cash for shares of its Common Stock that it sells pursuant to a registration statement on Form S-1 filed and declared effective under the Securities Act of 1933. "IPO Price" shall mean the per share price to the public for the Common Stock sold in the IPO, as set forth on the cover page of the final prospectus for the IPO. (x) Restricted Stock and Other Equity-Based Grants. Prior to or contemporaneously with the execution of this Agreement, Executive has been granted a restricted stock award of 66,823 shares of Company Common Stock that will vest ratably over five years, beginning with the first anniversary of the date of grant, and an additional 66,823 shares of Company Common Stock that will vest on the earlier to occur of 10 years from the date of grant or the achievement of certain performance goals ("Initial Restricted Stock Grant"). The tranche of Initial Restricted Stock Grant subject to performance goals will vest earlier than 10 years only if the average closing price per share of Common Stock for the month of December of any year, as compared with the month of January for the same year (the "Annual Growth"), has increased by 25% or more, then only 20% of the tranche will vest. If the Annual Growth for a particular year is not at least 25% and as a result none of the tranche vests for such a year (a "Nonachieving Year"), then a deficit equal to 25% less the Nonachieving Year Annual Growth shall exist. In the year subsequent to a Nonachieving Year, an additional 20% of the performance share tranche will vest if the Annual Growth for such subsequent year is at least 25% plus the deficit for the Nonachieving Year. (xi) Life Insurance. Within 60 days of the Agreement Effective Date, Executive shall be provided term life insurance coverage in an amount not less than $2,000,000 during the succeeding portion of the Employment Period; provided that such coverage can be purchased at standard rates within such 60 days of the Agreement Effective Date. 3. Termination of Employment. (a) Death or Disability. The Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written 4 notice in accordance with Section 11(d) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full- time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for either (i) 180 consecutive business days or (ii) in any two-year period 270 nonconsecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Executive's employment during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean for the Company's termination of the Executive's employment: (i) the Executive's final conviction of a felony crime that enriched the Executive at the expense of the Company; provided, however, that after indictment, the Company may suspend Executive from the rendition of services, but without limiting or modifying in any other way the Company's obligations under this Agreement; (ii) a material breach by Executive of a material fiduciary duty owed to the Company; (iii) a material breach by Executive of any of the covenants made by him in Sections 8 and 10 hereof; (iv) the willful and gross neglect by Executive of the material duties specifically and expressly required by this Agreement; or (v) the Executive's continuing failure to substantially perform his duties and responsibilities hereunder (except by reason of the Executive's incapacity due to physical or mental illness or injury) for a period of 45 days after the Required Board Majority, as defined herein, has delivered to the Executive a written demand for substantial performance hereunder which specifically identifies the bases for the Required Board Majority's determination that the Executive has not substantially performed his duties and responsibilities hereunder (that period being the "Grace Period"); provided, that for purposes of this clause (v), the Company shall not have Cause to terminate the Executive's employment unless (A) at a meeting of the Board called and held following the Grace Period in the city in which the Company's principal executive offices are located, of which the Executive was given not less than 10 days' prior written notice and at which the Executive was afforded the opportunity to be represented by counsel, appear and be heard, the Required Board Majority shall adopt a written resolution which (1) sets forth the Required Board Majority's determination that the failure of the Executive to substantially perform his duties and responsibilities hereunder has (except by reason of his incapacity due to physical or mental illness or injury) continued past the Grace Period and (2) specifically identifies the bases for that determination, and (B) the Company, at the written direction of the Required Board Majority, shall deliver to the Executive a Notice of Termination for Cause to which a copy of that resolution, certified as being true and correct by the secretary or any assistant secretary of the Company, is attached. "Required Board Majority" means at any time a majority of the members of the Board at that time which includes at least a majority of the Directors, each of whom has not been an employee of the Company or any subsidiary of the Company. 5 (c) Good Reason; Window Period. The Executive's employment may be terminated during the Employment Period by the Executive for Good Reason, or during a Window Period by the Executive without any reason. For purposes of this Agreement, "Window Period" shall mean the 60-day period immediately following elapse of one year after any Change of Control as defined in Section 9 of this Agreement. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties materially inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any material failure by the Company to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office outside the Houston metropolitan area; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; (v) any failure by the Company to comply with and satisfy the requirements of Section 11 of this Agreement, provided that (A) the successor described in Section 11(c) has received, at least 10 days prior to the Date of Termination (as defined in subparagraph (e) below), written notice from the Company or the Executive of the requirements of such provision and (B) such failure to be in compliance and satisfy the requirements of Section 11 shall continue as of the Date of Termination; or (vi) any failure to reelect Executive as a member of the Board and Chairman of the Board. (d) Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason or without any reason during a Window Period, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(d) of this Agreement. The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company hereunder or preclude the 6 Executive or the Company from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. For purposes of this Agreement, the term "Date of Termination" means (i) if the Executive's employment is terminated by the Company for Cause, or by the Executive during a Window Period or for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 4. Obligations of the Company upon Termination. (a) Disability, Good Reason or During a Window Period; Other than for Cause or Death (except during a Window Period). If, during the Employment Period, the Company shall terminate the Executive's employment other than for Cause, including a termination by reason of Disability (but not by reason of death), or the Executive shall terminate employment for Good Reason or his employment shall be terminated during a Window Period by the Company for Cause, by the Executive without any reason, or by reason of death: (i) the Company shall pay or provide to or in respect of the Executive the following amounts and benefits: A. in a lump sum in cash, within 10 days after the Date of Termination, an amount equal to the sum of (1) the Executive's Annual Base Salary through the Date of Termination, (2) any deferred compensation previously awarded to or earned by the Executive (together with any accrued interest or earnings thereon) and (3) any compensation for unused vacation time for which the Executive is eligible in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to as the "Accrued Obligation"); B. in a lump sum in cash, discounted at 6%, within 10 days after the Date of Termination, an amount equal to 125% of Annual Base Salary that would have been paid to the Executive pursuant to this Agreement for the period (the "Remaining Employment Period") beginning on the Date of Termination and ending on the latest possible date of termination of the Employment Period in accordance with the provisions of Section 1 hereof (the "Final Expiration Date") if the Executive's employment had not been terminated; 7 C. continuation for the Remaining Employment Period of life insurance and medical benefits coverages, but with the Company's medical benefits coverages being secondary to any coverages provided by another employer; D. effective as of the Date of Termination, (1) immediate vesting and exercisability of, and termination of any restrictions on sale or transfer (other than any such restriction arising by operation of law) with respect to, each and every stock option, restricted stock award, restricted stock unit award and other equity-based award and performance award (each, a "Compensatory Award") that is outstanding as of a time immediately prior to the Date of Termination except that the portion of any restricted stock award described in Section 2(b)(x) that would vest only by reason of a achievement of performance goals and not solely by reason of continued employment shall vest only if termination is by the Company without Cause or by Employee for Good Reason or in a Window Period and either (w) termination occurs in the first year of the Employment Period in which event the unvested portion shall be 100% vested, (x) termination occurs in the second year of the Employment Period in which event 80% of the unvested portion shall be vested, (y) termination occurs in the third year of the Employment Period in which event 60% of the unvested portion shall be vested or (z) termination occurs after the third year of the Employment Period and the performance goals have been met in each of the first three years of the Employment Period in which event all unvested shares shall be vested, (2) the extension of the term during which each and every Compensatory Award may be exercised by the Executive until the earlier of (x) the first anniversary of the Date of Termination or (y) the date upon which the right to exercise any Compensatory Award would have expired if the Executive had continued to be employed by the Company under the terms of this Agreement until the Final Expiration Date and (3) at the sole election of Executive, in exchange for any or all Compensatory Awards that are either denominated in or payable in Common Stock, an amount in cash equal to the excess of (x) the Highest Price Per Share (as defined below) over (y) the exercise or purchase price, if any, of such Compensatory Awards. As used herein, the term "Highest Price Per Share" shall mean the highest price per share that can be determined to have been paid or agreed to be paid for any share of Common Stock by a Covered Person (as defined below) at any time during the Employment Period or the six-month period immediately preceding the Agreement Effective Date. As used herein, the term "Covered Person" shall mean any Person other than an Exempt Person (in each case as defined in Section 9 hereof) who (I) is the Beneficial Owner (as defined in Section 9 hereof) of 10% or more of the outstanding shares of Common Stock or 10% or more of the combined voting power of the outstanding Voting Stock (as defined in Section 9 hereof) of the Company at any time during the Employment Period, (II) is a Person who has any material involvement in proposing or effectuating the Change of Control (as defined in Section 9 hereof) or (III) is an assignee of or has otherwise succeeded to any shares of Common Stock or Voting Stock of the Company which were at any time during 8 the Employment Period "beneficially owned" (as defined in Section 9 hereof) by any Person identified in clause (I) or (II) of this definition, if such assignment or succession shall have occurred in the course of a privately negotiated transaction rather than an open market transaction. For purposes of determining whether a Person is a Covered Person, the number of shares of Common Stock or Voting Stock of the Company deemed to be outstanding shall include shares of which the Person is deemed the Beneficial Owner, but shall not include any other shares which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options. In determining the Highest Price Per Share, the price paid or agreed to be paid by a Covered Person will be appropriately adjusted to take into account (W) distributions paid or payable in stock, (X) subdivisions of outstanding stock, (Y) combinations of shares of stock into a smaller number of shares and (Z) similar events; and E. as soon as practicable following the calendar year of the date of termination, an amount equal to the product of (x) the Annual Bonus that would have been paid to Executive with respect to the year of termination had the Date of Termination not occurred and (y) a fraction, the numerator of which is the number of days in the fiscal year through the Date of Termination and the denominator of which is 365; (ii) for the Remaining Employment Period, or such longer period as any plan, program, practice or policy may provide, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Sections 2(b)(iv) of this Agreement if the Executive's employment had not been terminated in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies (such continuation of such benefits for the applicable period herein set forth shall be hereinafter referred to as "Welfare Benefit Continuation"). For purposes of determining eligibility of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until the Final Expiration Date and to have retired on such date. (b) Death (except during a Window Period). If the Executive's employment is terminated by reason of the Executive's death during the Employment Period and other than during a Window Period in which event the provisions of Section 4(a) shall govern, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than (i) the payment of Accrued Obligations (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination), (ii) the payment of an amount equal to the Annual Salary that would have been paid to the Executive pursuant to this Agreement for the period beginning on the Date of Termination and ending on the first anniversary thereof if the Executive's employment had not terminated by reason of death (which shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 9 days of the Date of Termination), (iii) during the period beginning on the Date of Termination and ending on the first anniversary thereof medical benefits coverage determined as if Executive's employment had not terminated by reason of death, (iv) as soon as practicable following the fiscal year in which death occurs, payment of an amount equal to the product of (x) the Annual Bonus that would have been paid to Executive with respect to the year of termination had the Date of Termination not occurred and (y) a fraction, the numerator of which is the number of days in the fiscal year through the Date of Termination and the denominator of which is 365 and (v) effective as of the Date of Termination, (A) immediate vesting and exercisability of, and termination of any restrictions on sale or transfer (other than any such restriction arising by operation of law) with respect to, each and every Compensatory Award outstanding as of a time immediately prior to the Date of Termination except the portion of any restricted stock award described in Section 2(b)(x) that would vest only by reason of achievement of performance goals and not by solely by reason of continued employment shall vest only if either (w) death occurs in the first year of the Employment Period in which event the unvested portion shall be 100% vested, (x) death occurs in the second year of the Employment Period in which event 80% of the unvested portion shall be vested, (y) death occurs in the third year of the Employment Period in which event 60% of the unvested portion shall be vested or (z) death occurs after the third year of the Employment Period and the performance goals have been met in each of the first three years of the Employment Period in which event all unvested shares shall be vested, (B) the extension of the term during which each and every Compensatory Award may be exercised or purchased by the Executive until the earlier of (1) the first anniversary of the Date of Termination or (2) the date upon which the right to exercise or purchase any Compensatory Award would have expired if the Executive had continued to be employed by the Company under the terms of this Agreement until the Final Expiration Date and (C) at the sole election of the Executive's legal representative, in exchange for any Compensatory Award that is either denominated in or payable in Common Stock, an amount in cash equal to the excess of (1) the Highest Price Per Share over (2) the exercise or purchase price, if any, of such Compensatory Award. (c) Cause; Other than for Disability, Good Reason or During a Window Period. If the Executive's employment shall be terminated for Cause during the Employment Period and other than during a Window Period, in which event the provisions of Section 4(a) shall govern, this Agreement shall terminate without further obligations to the Executive other than for Accrued Obligations. If the Executive terminates employment during the Employment Period, excluding a termination for any of Disability, Good Reason or without any reason during a Window Period, in which event the provisions of Section 4(a) shall govern, this Agreement shall terminate without further obligations to the Executive, other than for the payment of Accrued Obligations. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 5. Non-exclusivity of Rights. Except as provided in Section 4 of this Agreement, nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor shall anything herein limit or 10 otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as such plan, policy, practice or program is superseded by this Agreement. 6. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any setoff, counterclaim, recoupment, defense, mitigation or other claim, right or action which the Company may have against the Executive or others. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any such payment pursuant to this Agreement), plus in each case interest on any delayed payment at the annual percentage rate which is three percentage points above the interest rate shown as the Prime Rate in the Money Rates column in the then most recently published edition of The Wall Street Journal (Southwest Edition), or, if such rate is not then so published on at least a weekly basis, the interest rate announced by Chase Manhattan Bank (or its successor), from time to time, as its Base Rate (or prime lending rate), from the date those amounts were required to have been paid or reimbursed to the Employee until those amounts are finally and fully paid or reimbursed; provided, however, that in no event shall the amount of interest contracted for, charged or received hereunder exceed the maximum non-usurious amount of interest allowed by applicable law; provided, further, that if the Executive is not the prevailing party in any such contest, then he shall, upon the conclusion thereof, repay to the Company any amounts that were previously advanced pursuant to this sentence by the Company as payment of legal fees and expenses. (b) If there shall be any dispute between the Company and the Executive concerning (i) in the event of any termination of the Executive's employment by the Company, whether such termination was for Cause or Disability, or (ii) in the event of any termination of employment by the Executive, whether Good Reason existed or whether such termination occurred during a Window Period, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or Disability or that the determination by the Executive of the existence of Good Reason was not made in good faith or that the termination by the Executive did not occur during a Window Period, the Company shall pay all amounts, and provide all benefits, to the Executive and/or the Executive's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 4(a) hereof as though such termination were by the Company without Cause or by the Executive with Good Reason or during a Window Period; provided, however, that the Company 11 shall not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking by or on behalf of the Executive to repay all such amounts to which the Executive is ultimately adjudged by such court not to be entitled. 7. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 7 (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Deloitte & Touche LLP (the "Accounting Firm"); provided, however, that the Accounting Firm shall not determine that no Excise Tax is payable by the Executive unless it delivers to the Executive a written opinion (the "Accounting Opinion") that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. In the event that by Deloitte & Touche LLP has served, at any time during the two years immediately preceding a Change in Control Date, as accountant or auditor for the individual, entity or group that is involved in effecting or has any material interest in the Change in Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations and perform the other functions specified in this Section 7 (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company, the Accounting Firm shall make all determinations required under this Section 7, shall provide to the Company and the Executive a written report setting forth such determinations, together with detailed supporting calculations, and, if the Accounting Firm determines that no Excise Tax is payable, shall deliver the Accounting Opinion to the Executive. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Subject to the remainder of this Section 7, any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the 12 Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that it is ultimately determined in accordance with the procedures set forth in Section 7(c) that the Executive is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claims by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than 30 days after the Executive actually receives notice in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid; provided, however, that the failure of the Executive to notify the Company of such claim (or to provide any required information with respect thereto) shall not affect any rights granted to the Executive under this Section 7 except to the extent that the Company is materially prejudiced in the defense of such claim as a direct result of such failure. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which he gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company and reasonably acceptable to the Executive; (iii) cooperate with the Company in good faith in order effectively to contest such claim; and (iv) if the Company elects not to assume and control the defense of such claim, permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7(c), the Company shall have the right, at its sole option, to assume the defense of and control all proceedings in connection with such contest, in which case it may pursue or forego any and all administrative 13 appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim, and may either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's right to assume the defense of and control the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(c) the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(c) a determination is made that the Executive shall not be entitled to any refund with respect to such claim, and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. Confidential Information. The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement) (referred to herein as "Confidential Information"). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. Also, within 10 days of the termination of Executive's employment for any reason, Executive shall return to Company all documents and 14 other tangible items of or containing Company information which are in Executive's possession, custody or control. 9. Change of Control. As used in this Agreement, the terms set forth below shall have the following respective meanings: "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement. "Associate" shall mean, with reference to any Person, (a) any corporation, firm, partnership, association, unincorporated organization or other entity (other than the Company or a subsidiary of the Company) of which such Person is an officer or general partner (or officer or general partner of a general partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of any class of equity securities, (b) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar fiduciary capacity and (c) any relative or spouse of such Person, or any relative of such spouse, who has the same home as such Person. "Beneficial Owner" shall mean, with reference to any securities, any Person if: (a) such Person or any of such Person's Affiliates and Associates, directly or indirectly, is the "beneficial owner" of (as determined pursuant to Rule 13d-3 of the General Rules and Regulations under the Exchange Act, as in effect on the date of this Agreement) such securities or otherwise has the right to vote or dispose of such securities, including pursuant to any agreement, arrangement or understanding (whether or not in writing); provided, however, that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially own," any security under this subsection (a) as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (i) arises solely from a revocable proxy or consent given in response to a public (i.e., not including a solicitation exempted by Rule 14a-2(b)(2) of the General Rules and Regulations under the Exchange Act) proxy or consent solicitation made pursuant to, and in accordance with, the applicable provisions of the General Rules and Regulations under the Exchange Act and (ii) is not then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); (b) such Person or any of such Person's Affiliates and Associates, directly or indirectly, has the right or obligation to acquire such securities (whether such right or obligation is exercisable or effective immediately or only after the passage of time or the occurrence of an event) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, other rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the 15 Beneficial Owner of, or to "beneficially own," (i) securities tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase or exchange or (ii) securities issuable upon exercise of Exempt Rights; or (c) such Person or any of such Person's Affiliates or Associates (i) has any agreement, arrangement or understanding (whether or not in writing) with any other Person (or any Affiliate or Associate thereof) that beneficially owns such securities for the purpose of acquiring, holding, voting (except as set forth in the proviso to subsection (a) of this definition) or disposing of such securities or (ii) is a member of a group (as that term is used in Rule 13d-5(b) of the General Rules and Regulations under the Exchange Act) that includes any other Person that beneficially owns such securities; provided, however, that nothing in this definition shall cause a Person engaged in business as an underwriter of securities to be the Beneficial Owner of, or to "beneficially own," any securities acquired through such Person's participation in good faith in a firm commitment underwriting until the expiration of 40 days after the date of such acquisition. For purposes hereof, "voting" a security shall include voting, granting a proxy, consenting or making a request or demand relating to corporate action (including, without limitation, a demand for a stockholder list, to call a stockholder meeting or to inspect corporate books and records) or otherwise giving an authorization (within the meaning of Section 14(a) of the Exchange Act) in respect of such security. The terms "beneficially own" and "beneficially owning" shall have meanings that are correlative to this definition of the term "Beneficial Owner." "Change of Control" shall mean any of the following occurring on or after the Agreement Effective Date except that the transactions contemplated by the Combination Agreement dated as of December 3, 1996, by and among the Company, Edge Petroleum Corporation, a Texas corporation, Edge Mergeco, Inc., Gulfedge Limited Partnership, Edge Group II Limited Partnership and Edge Group Partnership shall not constitute a Change of Control: (a) any Person (other than an Exempt Person) shall become the Beneficial Owner of 40% or more of the shares of Common Stock then outstanding or 40% or more of the combined voting power of the Voting Stock of the Company then outstanding; provided, however, that no Change of Control shall be deemed to occur for purposes of this subsection (a) if such Person shall become a Beneficial Owner of 40% or more of the shares of Common Stock or 40% or more of the combined voting power of the Voting Stock of the Company solely as a result of (i) an Exempt Transaction or (ii) an acquisition by a Person pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (i), (ii) and (iii) of subsection (c) of this definition are satisfied; 16 (b) individuals who, as of the Agreement Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Agreement Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board; provided, further, that there shall be excluded, for this purpose, any such individual whose initial assumption of office occurs as a result of any actual or threatened election contest that is subject to the provisions of Rule 14a-11 under the Exchange Act; (c) approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (i) more than 85% of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding Voting Stock of such corporation beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the Beneficial Owners of the outstanding Common Stock immediately prior to such reorganization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the outstanding Common Stock, (ii) no Person (excluding any Exempt Person or any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 40% or more of the Common Stock then outstanding or 40% or more of the combined voting power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding Voting Stock of such corporation and (iii) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement or initial action by the Board providing for such reorganization, merger or consolidation; or (d) approval by the shareholders of the Company of (i) a complete liquidation or dissolution of the Company unless such liquidation or dissolution is approved as part of a plan of liquidation and dissolution involving a sale or disposition of all or substantially all of the assets of the Company to a corporation with respect to which, following such sale or other disposition, all of the requirements of clauses (ii)(A), (B) and (C) of this subsection (d) are satisfied, or (ii) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which, following such sale or other disposition, (A) more than 85% of the then outstanding shares of common stock of such corporation and the combined voting power of the Voting Stock of such corporation is then beneficially owned, directly or indirectly, by all or substantially all of the Persons who were the Beneficial Owners of the outstanding Common Stock immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior 17 to such sale or other disposition, of the outstanding Common Stock, (B) no Person (excluding any Exempt Person and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 40% or more of the Common Stock then outstanding or 40% or more of the combined voting power of the Voting Stock of the Company then outstanding) beneficially owns, directly or indirectly, 40% or more of the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding Voting Stock of such corporation and (C) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or initial action of the Board providing for such sale or other disposition of assets of the Company. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. "Exempt Person" shall mean the Company, any subsidiary of the Company, any employee benefit plan of the Company or any subsidiary of the Company, and any Person organized, appointed or established by the Company for or pursuant to the terms of any such plan. "Exempt Rights" shall mean any rights to purchase shares of Common Stock or other Voting Stock of the Company if at the time of the issuance thereof such rights are not separable from such Common Stock or other Voting Stock (i.e., are not transferable otherwise than in connection with a transfer of the underlying Common Stock or other Voting Stock) except upon the occurrence of a contingency, whether such rights exist as of the Agreement Effective Date or are thereafter issued by the Company as a dividend on shares of Common Stock or other Voting Securities or otherwise. "Exempt Transaction" shall mean an increase in the percentage of the outstanding shares of Common Stock or the percentage of the combined voting power of the outstanding Voting Stock of the Company beneficially owned by any Person solely as a result of a reduction in the number of shares of Common Stock then outstanding due to the repurchase of Common Stock or Voting Stock by the Company, unless and until such time as (a) such Person or any Affiliate or Associate of such Person shall purchase or otherwise become the Beneficial Owner of additional shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or additional Voting Stock representing 1% or more of the combined voting power of the then outstanding Voting Stock, or (b) any other Person (or Persons) who is (or collectively are) the Beneficial Owner of shares of Common Stock constituting 1% or more of the then outstanding shares of Common Stock or Voting Stock representing 1% or more of the combined voting power of the then outstanding Voting Stock shall become an Affiliate or Associate of such Person. "Person" shall mean any individual, firm, corporation, partnership, association, trust, unincorporated organization or other entity. "Voting Stock" shall mean, with respect to a corporation, all securities of such corporation of any class or series that are entitled to vote generally in the election of directors of such 18 corporation (excluding any class or series that would be entitled so to vote by reason of the occurrence of any contingency, so long as such continency has not occurred). 10. Covenant Not to Compete. (a) Executive recognizes that in each of the highly competitive businesses in which the Company is engaged, personal contact is of primary importance in securing new customers and in retaining the accounts and goodwill of present customers and protecting the business of the Company. The Executive, therefore, agrees that during the Employment Period and, if the Date of Termination occurs by reason of the Executive terminating his employment for reasons other than Disability or Good Reason and other than during a Window Period, for a period of two years after the Date of Termination, he will not, either within 100 miles of any geographic location with respect to which he has devoted substantial attention to the material business interests of the Company (other than the Company's home office) or any of its affiliated companies or with respect to any immediate geologic trends in which the Company or any of its affiliated companies is active as of the Date of Termination without regard, in either case, to whether the Executive has worked at such location (the "Relevant Geographic Area"), with respect to only the Relevant Geographic Area, (i) accept employment or render service to any person that is engaged in a business directly competitive with the business then engaged in by the Company or any of its affiliated companies or (ii) enter into or take part in or lend his name, counsel or assistance to any business, either as proprietor, principal, investor, partner, director, officer, executive, consultant, advisor, agent, independent contractor, or in any other capacity whatsoever, for any purpose that would be competitive with the business of the Company or any of its affiliated companies (all of the foregoing activities are collectively referred to as the "Prohibited Activity"). (b) In addition to all other remedies at law or in equity which the Company may have for breach of a provision of this Section 10 by the Executive, it is agreed that in the event of any breach or attempted or threatened breach of any such provision, the Company shall be entitled, upon application to any court of proper jurisdiction, to a temporary restraining order or preliminary injunction (without the necessity of (i) proving irreparable harm, (ii) establishing that monetary damages are inadequate or (iii) posting any bond with respect thereto) against the Executive prohibiting such breach or attempted or threatened breach by proving only the existence of such breach or attempted or threatened breach. If the provisions of this Section 10 should ever be deemed to exceed the time, geographic or occupational limitations permitted by the applicable law, the Executive and the Company agree that such provisions shall be and are hereby reformed to the maximum time, geographic or occupational limitations permitted by the applicable law. (c) The covenants of the Executive set forth in this Section 10 are independent of and severable from every other provision of this Agreement; and the breach of any other provision of this Agreement by the Company or the breach by the Company of any other agreement between the Company and the Executive shall not affect the validity of the provisions of this Section 10 or constitute a defense of the Executive in any suit or action brought by the Company to enforce any of the provisions of this Section 10 or seek any relief for the breach thereof by Executive. 19 (d) The Executive acknowledges, agrees and stipulates that: (i) the terms and provisions of this Agreement are reasonable and constitute an otherwise enforceable agreement to which the terms and provisions of this Section 10 are ancillary or a part of as contemplated by Tex. Bus. & Com. Code Ann. (S)(S) 15.50-15.52; (ii) the consideration provided by the Company under this Agreement is not illusory; and (iii) the consideration given by the Company under this Agreement, including, without limitation, the provision by the Company of Confidential Information to the Executive as contemplated by Section 8, gives rise to the Company's interest in restraining and prohibiting the Executive from engaging in the Prohibited Activity within the Relevant Geographic Area as provided under this Section 10, and the Executive's covenant not to engage in the Prohibited Activity within the Relevant Geographic Area pursuant to this Section 10 is designed to enforce the Executive's consideration (or return promises), including, without limitation, the Executive's promise to not disclose Confidential Information under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's heirs, executors and other legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and may only be assigned to a successor described in Section 11(c). (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws that would require the application of the laws of any other state or jurisdiction. (b) The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (c) This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and heirs, executors and other legal representatives. 20 (d) All notices and other communications hereunder shall be in writing and shall be given, if by the Executive to the Company, by telecopy or facsimile transmission at the telecommunications number set forth below and, if by either the Company or the Executive, either by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------------- John E. Calaway Texaco Heritage Plaza 1111 Bagby, Suite 2100 Houston, Texas 77002 If to the Company: ----------------- Edge Petroleum Corporation Texaco Heritage Plaza 1111 Bagby, Suite 2100 Houston, Texas 77002 Telecommunications Number: (713) 654-8960 Attention: Corporate Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (e) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (f) The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (g) The Executive's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason or during a Window Period pursuant to Section 3(c) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (h) This agreement contains the complete and total understanding of the parties concerning the subject matter hereof and expressly supersedes any previous agreement between the parties relating to the subject matter hereof as well as any agreement between Executive and Edge Petroleum Corporation, a Texas corporation. 21 (i) This Agreement shall become effective as of the date on which the Company first receives payment for shares of its Common Stock that it sells pursuant to a registration statement filed under the Securities Act of 1933 (the "Agreement Effective Date"). IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. EDGE PETROLEUM CORPORATION By:/s/ James D. Calaway --------------------------------- James D. Calaway President /s/ John E. Calaway ------------------------------------ John E. Calaway 22 EX-99.E 4 EXHIBIT E EXHIBIT E LOCK-UP LETTER Raymond James & Associates, Inc. Jefferies & Company, Inc. Principal Financial Securities, Inc. As representatives of the several Underwriters c/o Raymond James & Associates, Inc. 880 Carillon Parkway St. Petersburg, Florida Ladies and Gentlemen: This letter is being delivered to you in connection with the Underwriting Agreement (the "Underwriting Agreement") that may be executed in connection with the proposed public offering (the "Offering") between Edge Petroleum Corporation (the "Company") and you, as representatives of a group of underwriters, relating to the sale to the underwriters of shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"). To induce you and the other underwriters to enter into the Underwriting agreement, the undersigned agrees that during the period beginning on February 21, 1997 and continuing to and including the date 180 days after the date of the final Prospectus used in connection with the Offering, the undersigned will not offer, sell, contract to sell or otherwise dispose of, any securities of the Company that are substantially similar to the Common Stock, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock or any such similar securities, without your prior written consent; provided, however, that the undersigned (i) may transfer any or all shares of Common Stock held either during the undersigned's lifetime or on death by will or intestacy to the undersigned's immediate family ("Immediate family" shall mean spouse, lineal descendent, father, mother, brother or sister of the undersigned) or to any custodian or trustee for the account of the undersigned or the undersigned's immediate family, and (ii) may make a bona fide pledge or mortgage of any shares of Common Stock with a commercial lending institution; and provided, further, that in any such case, the undersigned's immediate family or commercial lending institution shall receive and hold such shares of Common Stock subject to the restrictions of this lock-up letter, and there shall be no further transfer of such stock except in accordance with this lock-up letter. By: /s/ John Calaway ----------------------------- Printed name: John Calaway Date: February 25, 1997 EX-99.G 5 EXHIBIT G EXHIBIT G PROMISSORY NOTE $300,000.00 January 24, 1995 FOR VALUE RECEIVED, the undersigned, John E. Calaway and Calaway Oil & Gas Corporation (collectively, "Maker") promises to pay to the order of James C. Calaway ("Payee"), at his address 811 Dallas, Suite 1214, Houston, Texas 77002, the principal sum of Three Hundred Thousand and No/100 Dollars ($300,000.00), together with interest on said principal equal to eight percent (8%) per annum. This Note shall be due and payable as follows: Principal and accrued interest due and payable in full on or before January 24, 1998, together with interest on the unpaid principal balance at 8% per annum. Interest on the outstanding unpaid principal balance shall be computed in arrears and compounded monthly. Interest shall be computed from the date principal is advanced. Interest charges will be calculated on amounts advanced hereunder on the actual number of days said amounts are outstanding on the basis of a 365/366 day year, as the case may be. It is the intention of Maker and Payee to conform strictly to all applicable usury laws. It is therefore agreed that (i) in the event that the maturity hereof is accelerated by reason of an election by Payee, all unearned interest shall be cancelled automatically or, if theretofore paid, shall either be refunded to Maker or credited on the unpaid principal amount of this Note, whichever remedy is chosen by Payee, (ii) the aggregate of all interest and other charges constituting interest under applicable law and contracted for, chargeable or receivable under this Note or otherwise in connection with the transaction for which this Note is given shall never exceed the maximum amount of interest, nor produce a rate in excess of the maximum rate of interest that Payee may charge Maker under applicable law and in regard to which Maker may not successfully assert the claim or defense of usury, and (iii) if any excess interest is provided for, it shall be deemed a mistake and the same shall either be refunded to Maker or credited on the unpaid principal amount hereof and this Note shall be automatically deemed reformed so as to permit only the collection of the maximum legal non-usurious rate and amount of interest. All sums paid or agreed to be paid to the holder of this Note for the use, forbearance or detention of the indebtedness evidenced hereby to the full extent allowed by applicable law, shall be amortized, prorated, allocated and spread through the full term of this Note. In the event of default in the payment of any installment of principal or interest when due hereunder, or upon the occurrence of any event of default under any document or instrument executed in connection with or as security for this Note, or upon failure in performance of any covenant, agreement, or obligation to be performed under any documents executed in connection with or as security for this Note, Payee may declare the entirety of this Note, principal and interest, immediately due and payable without any notice, and failure to exercise said option shall not constitute a waiver on the part of Payee of the right to exercise the same at any other time. All past due principal and interest on this Note shall bear interest from maturity of such principal or interest (in whatever manner same may be brought about) until paid at the highest non-usurious rate allowed by applicable law. To the extent such highest non-usurious interest rate chargeable hereunder is determined by reference to the laws of the State of Texas, same shall be determined by reference to the indicated (weekly) rate ceiling (as defined and described in Texas Revised Civil Statutes, Article 5069-1.04, as amended) at the applicable time in effect. In the event default is made in the payment of this Note in whatever manner its maturity may be brought about, and it is placed in the hands of an attorney for collection, or is collected through probate, bankruptcy or other proceedings, Maker promises to pay all costs and reasonable attorneys' fees incurred by Payee as a result thereof. Maker and every surety, endorser and guarantor of this Note waive grace, notice, demand, presentment for payment, notice of non-payment, protest, notice of protest, notice of intention to accelerate, notice of acceleration of the indebtedness Page 1 of 2 due hereunder and all other notice, filing of suit and diligence in collecting this Note, and the enforcing of any of the security rights of Payee, and consent and agree that the time of payment hereof may be extended without notice at any time and from time to time, and for periods of time whether or not for a term or terms in excess of the original term hereof, without notice or consideration to, or consent from, any of them. This Note may be prepaid, in whole or in part, at any time without penalty. All regular installments and any prepayment sums as received by Payee or other holder hereof shall be applied to any indebtedness of Maker to Payee in such order as Payee shall elect in its sole discretion. The indebtedness evidenced by this Note is secured by a pledge and security interest in 2105.3 shares of stock of Edge Petroleum Corporation which has this day been delivered to Payee. Payee agrees when said Note is paid in full to endorse such stock certificate back over to Maker. The terms and provisions hereof shall be binding upon and inure to the benefit of Maker and Payee and their respective successors and assigns. EXECUTED EFFECTIVE the day and year first written above. "Maker": /s/ John E. Calaway ------------------------------- John E. Calaway CALAWAY OIL & GAS CORPORATION By: /s/ John E. Calaway --------------------------------- John E. Calaway, President Page 2 of 2 ADDENDUM TO JAMES C. CALAWAY - JOHN E. CALAWAY $300,000 LOAN The following additional terms are made a part of the loan agreement between James C. Calaway and John E. Calaway: 1. John E. Calaway agrees to spend $30,000.00 of the loan proceeds received from James C. Calaway in connection with the captioned loan on improvements and furnishings for the condominium James C. Calaway is buying in Aspen, Colorado at Southpoint Condominiums. The $30,000.00 expenditure will be spent first on improvements and furnishings, and any excess funds will be applied towards the purchase price of the unit. Should the improvements and furnishings cost more than $30,000.00, James C. Calaway will pay the excess. 2. As a result of such expenditures, John E. Calaway will own an undivided interest in such condominium, such including the improvements, furnishings and car, (a Range Rover) equal to the fraction the numerator of which is $30,000.00 and the denominator of which is the sum of all expenditures made by James C. Calaway to acquire the condominium, furniture, improvements and car. John E. Calaway will be entitled to receive a Warranty Deed for his undivided interest in the condominium and related improvements. James C. Calaway will retain all decision making authority concerning the building, furnishing and decorating of the condominium, the purchase of furniture and improvements and the purchase of the car and the ongoing maintenance of such items. The car will be registered in the name of James C. Calaway but John E. Calaway will own his undivided share thereof, beneficially. Except as set forth in paragraph 4. below, each party will be liable for their respective undivided ownership interest share of all liabilities and obligations which arise in connection with the condominium, improvements, furnishings and car, and each party shall indemnify and hold harmless the other party, their successors and assigns, against any claims, losses, liabilities or lawsuit in excess of such party's proportionate share. 3. Ongoing costs of maintenance, utilities, taxes, insurance and general upkeep of the condominium and improvements will be borne by the parties in accordance with their undivided ownership interest. It is anticipated that James C. Calaway will be responsible for paying all such expenses, and John E. Calaway will reimburse James C. Calaway on or before the 5th day of each month for John E. Calaway's proportionate share of such costs. Each party will be responsible for gasoline, oil, and light maintenance for the use of the car while such party is using the same. 4. Normal wear and tear on the condominium and improvements and on the car will be borne by the parties in proportion to their ownership interest, but any damages or losses above normal wear and tear which are caused by a party or their guests or invitees will be borne and paid for entirely by such party. 5. The parties agree to purchase a comprehensive liability (all perils) homeowner's policy of insurance to cover the condominium, its use, and occupants, with the cost of same to be paid for by the parties in proportion to their ownership interest. Addendum to JCC-JEC $300,000 Loan January 3, 1995 Page 2 6. Except as may otherwise be agreed between the parties, each of the parties shall have the right to use and occupy the condominium a number of days each year that is equal to each respective party's percentage ownership times 365 days. For example, assuming John E. Calaway is entitled to 1/14 undivided ownership interest, he would be entitled to occupy the condominium for 26 days out of the year (365 x 1/14). James C. Calaway agrees that John E. Calaway will have a superior right of possession to the condominium during the week between Christmas and New Years and during any time periods when John E. Calaway has possession of his children. 7. John E. Calaway, at his discretion, shall furnish all of the art work for the condominium at no cost to James C. Calaway. John E. Calaway will retain full ownership of the art work. 8. James C. Calaway IRA Account, Calaway Petroleum Interests, Inc., Southwest Minerals or others may all participate as lenders in the loan in such amounts as James C. Calaway shall determine. 9. This Agreement is not intended to constitute a partnership, and the parties shall not be liable as partners, joint venturers, or associates. This contract is intended to set forth the rights and obligations of the parties with respect to their undivided ownership interest in the property herein described, and their cost sharing arrangement with respect thereto. 10. The rights and obligations of the parties under this Agreement may not be sold, transferred, mortgaged, hypothecated or otherwise encumbered without the prior written consent of the other party. However, either party may dispose of their interest by gift, devise or intestate succession. AGREED TO AND ACCEPTED THIS 3RD DAY OF JANUARY, 1995 JOHN E. CALAWAY BY: /S/ JOHN E. CALAWAY ---------------------------- NAME: AGREED TO AND ACCEPTED THIS 3RD DAY OF JANUARY, 1995 JAMES C. CALAWAY BY: /S/ JAMES C. CALAWAY ---------------------------- NAME: PLEDGE AND SECURITY AGREEMENT (THIS AGREEMENT CONTAINS AN AFTER-ACQUIRED PROPERTY CLAUSE) THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") dated December 13, 1994, is made by JOHN E. CALAWAY and CALAWAY OIL & GAS CORPORATION, a Texas corporation (collectively, the "Pledgor" or "Borrower"), to JAMES C. CALAWAY (the "Lender"). PRELIMINARY STATEMENTS: (1) The Pledgor, is the owner of the Stock described in Schedule 1 hereto (the "Stock"). (2) The Lender has contemporaneously herewith entered into a Promissory Note and Loan Agreement dated January 24, 1995 (said agreement, as it may hereafter be amended or otherwise modified from time to time, being the "Loan Agreement") with the Pledgor, pursuant to which Lender lent to Borrower the principal sum of $300,000.00. (3) Lender has requested and has the right to receive the additional collateral described herein, and the Pledgor has determined that it is in the best interests of the Pledgor to execute, deliver and perform this Agreement. NOW, THEREFORE, in consideration of the premises and in order to induce the Lender to enter into the Loan Agreement and the agreements and concessions made to Pledgor therein, the Pledgor hereby agrees as follows: SECTION 1. Defined Terms and Related Matters. (a) The capitalized terms used herein which are defined in the Loan Agreement and not otherwise defined herein shall have the meanings specified in the Loan Agreement. (b) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. (c) Unless otherwise defined herein or in the Loan Agreement, the terms defined in Chapters 8 and 9 of the Connecticut Uniform Commercial Code is currently in effect as used herein as therein defined. SECTION 2. Pledge. The Pledgor hereby pledges to the Lender, and grants to the Lender a continuing first lien and security interest in, the following (the "Pledged Collateral"): (i) the Stock and all rights to receive dividends, income, distributions and other property from time to time received, receivable or otherwise distributed or distributable in respect of, attributable to or in exchange for, the Stock; (ii) all proceeds received on the sale of any of the foregoing. The inclusion of proceeds in this Agreement does not authorize the Pledgor to sell, dispose of or otherwise use the Pledged Collateral in any manner not specifically authorized hereby. SECTION 3. Security for Obligations. This Agreement secures the prompt and complete (a) payment of all obligations of the Pledgor to the Lender now or hereafter existing under the Note, as amended, as described in the Loan Agreement (the "Obligation"). This Security Agreement shall not secure any other amounts due Lender under the Loan Agreement or otherwise. SECTION 4. Delivery of Pledged Collateral. In order to effectuate the security interest of Lender, Borrower will deliver the Stock to Lender to hold pursuant to the terms and provisions hereof. Upon full payment of the Obligation, Lender will deliver the Stock back to Borrower endorsed in accordance with Borrower's instructions. SECTION 5. Representations and Warranties. (a) The representations and warranties in the Loan Agreement are true and correct. (b) Except as set forth in Schedule 1 hereto, the Pledgor is the legal and beneficial owner of the Pledged Collateral free and clear of any lien, security interest, option or other charge or encumbrance except for the security interest created by this Agreement. Pledgor has not sold, transferred, assigned or disposed of any part of the Pledged Collateral. Pledgor owns the interests in the Pledged Collateral set forth in Schedule 1 attached hereto. (c) Except as set forth in Schedule 1 hereto, the Lender has a valid and perfected priority security interest in the Pledged Collateral, securing payment of the Obligations. SECTION 6. Further Assurances. The Pledgor agrees that from time to time, at the expense of the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents, and take all further action that may be necessary or desirable, or that the Lender may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Lender to exercise and enforce its rights and remedies hereunder with respect to any Pledged Collateral. SECTION 7. Rights to Receive Income. (a) So long as no Default or an Event of Default shall have occurred and be continuing: (i) Pledgor shall be entitled to receive and retain dividends, income and distributions paid in respect of the Pledged Collateral, provided, however, that any such payments paid to Pledgor in contravention of the Note, Loan Agreement -2- or the Pledge and Security Agreement, shall be, and shall be forthwith delivered to the Lender to hold as, Pledged Collateral and shall, if received by the Pledgor, be received in trust for the benefit of the Lender, be segregated from the other property in trust for benefit of the Lender, and be forthwith delivered to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement). (b) Upon the occurrence and during the continuance of default which is not cured within the applicable cure period provided for in Paragraph 6.1 of the Loan Agreement, (i) All rights of the Pledgor to receive the dividends, income and distributions which it would otherwise be entitled to receive and retain pursuant to Section 7(a)(i) shall cease and the Lender shall have the sole right to receive and hold as Pledged Collateral all subsequent dividends, income and payments attributable to the Pledged Collateral up to the amount due Lender under this Note with any balance to Pledgor. (ii) All dividends, income, payments and distributions which are received by the Pledgor contrary to the provisions of Paragraph (i) of Section 7(b) shall be received in trust for the benefit of the Lender, shall be segregated from other funds of the Pledgor and shall be forthwith paid over to the Lender as Pledged Collateral in the same form as so received (with any necessary endorsement). SECTION 8. Transfers and Other Liens. (a) The Pledgor shall not (i) sell, assign (by agreement, operation of law or otherwise), dispose of, or grant any option with respect to, any of the Pledged Collateral, or (ii) create or permit to exist any lien, security interest or encumbrance upon or with respect to any of the Pledged Collateral which would be prior to the security interest created by this Agreement. SECTION 9. Lenders May Perform. If the Pledgor fails to perform any agreement contained herein or in the Loan Agreement, the Lender itself may perform, or cause performance of, such agreement, and the expenses of the Lender incurred in connection therewith shall be payable by Pledgor under Section 12 hereof. SECTION 10. The Lender's Duties. The powers conferred on the Lender hereunder are solely to protect its interest in the Pledged Collateral and shall not impose any duty upon it to exercise any such powers. Except for reasonable care in the custody of any Pledged Collateral in its possession and the accounting for moneys actually received by it hereunder, the Lender shall have no duty as to any Pledged Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Pledged Collateral. The Lender shall be deemed to have exercised reasonable care in the custody and preservation of the Pledged Collateral in its possession if the Pledged Collateral is accorded treatment -3- substantially equal to that which the Lender accords its own property, it being understood that the Lender shall not have any responsibility for (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Collateral, whether or not the Lender has or is deemed to have knowledge of such matters, or (ii) taking any necessary steps to preserve rights against any parties with respect to any Pledged Collateral. SECTION 11. Remedies Upon Uncured Default. If any Event of Default shall become an Uncured Default: (a) The Lender may exercise in respect of the Pledged Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code of the state whose laws are applicable to this transaction at the time (the "Code") (whether or not the Code applied to the affected Pledged Collateral), and the Lenders may also, without notice except as specified below, sell the Pledged Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, broker's board or at any of the Lender's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Lender may deem commercially reasonable, without recourse to judicial proceedings and without demand for payment, appraisement or advertisement of any kind, all of which the Pledgor waives. The Pledgor agrees to give at least ten (10) days' notice to the Pledgor of the time and place of any public sale or the time after which any private sale is to be made and such notice shall constitute reasonable notification. The Lender shall be obligated to make any sale of Pledged Collateral regardless of notice of sale having been given. The Lender may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. (b) Any cash held by the Lender as Pledged Collateral and all cash proceeds received by the Lender in respect of any sale of, collection from, or other realization upon all or any part of the Pledged Collateral may, in the sole discretion of the Lender, be held by the Lender as collateral for, and/or then or at any time thereafter applied (after payment of any amounts payable to the Lender pursuant to Section 12 hereof) in whole or in part by the Lender against, all or any part of the Obligations in such order as the Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender and remaining after payment in full of all the Obligations shall be paid over to the Pledgor or to whomsoever may be lawfully entitled to receive such surplus. -4- (c) In connection with the sale of any Pledged Collateral, the Lender is authorized, but not obligated, to limit prospective purchases to the extent deemed necessary or desirable by the Lender to render such sale exempt from the registration requirements of the Securities Act of 1933, as amended (the "Securities Act"), and any applicable state securities laws and regulations, and no sale so made in good faith by the Lender shall be deemed not to be "commercially reasonable" because so made. (d) All rights and remedies of the Lender expressed herein are in addition to all other rights and remedies possessed by the Lender in the Note, Loan Agreement and any other agreement or instrument relating to the Obligations. SECTION 12. Indemnity and Expenses. (a) The Pledgor hereby indemnifies the Lender from and against any and all claims, losses and liabilities growing out of or resulting from this Agreement (including, without limitation, enforcement of the Agreement), except claims, losses or liabilities resulting from the Lender's gross negligence or willful misconduct. It is the express intention of the Pledgor that the Lender shall be indemnified and held harmless against any and all losses, liabilities, claims, deficiencies, judgments or expenses arising out of or resulting from the ordinary negligence of the Lender. (b) After an Uncured Event of Default, the Pledgor will upon demand pay to the Lender the amount of any and all reasonable expenses, including the reasonable fees and expenses of its counsel and of any experts and agents, that the Lender may incur in connection with foreclosing the Security Agreement. Otherwise, Lender will bear his own legal fees in connection with this Note, Security Agreement and Loan Agreement. SECTION 13. Amendments, etc. No amendment or waiver of any provision of this Agreement, nor consent to any departure by the Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by the Lender, and then such waiver or consent shall be effective only in the specific instance for the specific purpose for which given. SECTION 14. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic communication) and if to the Pledgor, mailed or telecopied or delivered to it, addressed to it at 1111 Bagby, Suite 2100, Houston, Texas 77002, ATTENTION: JOHN E. CALAWAY, if to the Lender, mailed or delivered to it, addressed to it at the address of the Lender specified in the Loan Agreement or as to either party at such other address as shall be designated by such party in a written notice to each other party complying as to delivery with the terms of this Section. All such notices and other communications shall, when mailed or telegraphed, respectively, be effective three days after deposit in the mails or delivered to the telegraph company, respectively, addressed as aforesaid, return receipt requested, or accompanied by some other proof of transmission. All such notices and other communications shall when hand delivered or faxed be effective upon receipt. -5- SECTION 15. Waiver of Marshalling. All rights of marshalling of assets of the Pledgor, including any such right with respect to the Pledged Collateral, are, to the extent permitted by applicable law, hereby waived by the Pledgor. SECTION 16. Limitation By Law. All rights, remedies and powers provided in this Agreement, the Loan Agreement and any note or other document executed pursuant thereto may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of the Agreement are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable laws. SECTION 17. Severability. Should any clause, sentence, paragraph, subsection or Section of this Agreement be judicially declared to be invalid, unenforceable or void, such decision will not have the effect of invalidating or voiding the remainder of this Agreement, and the parties hereto agree that the part or parts of this Agreement so held to be invalid, unenforceable or void will be deemed to have been stricken herefrom by the parties hereto, and the remainder of this Agreement will have the same force and effectiveness as if such stricken part or parts had never been included herein. SECTION 18. Captions. The captions in this Agreement have been inserted for convenience only and shall be given no substantive meaning or significance whatever in construing the terms and provisions of this Agreement. SECTION 19. No Waiver: Remedies. No failure on the part of the Lender to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 20. Continuing Security Interest; Transfer of Note. This Agreement shall create a continuing security interest in the Pledged Collateral and any after-acquired property of Pledgor included in the description of Pledged Collateral and shall (i) remain in full force and effect until payment in full of the Obligation, (ii) be binding upon the Pledgor, its successors and assigns, and (iii) inure to the benefit of the Lender and their successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii) the Lender may assign or otherwise transfer all or a portion of any of the Note to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to the Lender herein or otherwise. Upon the payment in full of the Obligation, the Pledgor shall be entitled to return, upon its request and at its expense, of such of the Pledged Collateral as shall not have been sold or otherwise applied against the Obligation pursuant to the terms hereof. -6- SECTION 21. Survival of Representations and Warranties. All representations and warranties contained in this Agreement are made in writing by or on behalf of the Pledgor in connection herewith shall terminate as shall this Agreement when all amounts due under the Note have been paid in full. SECTION 22. Security Interest Absolute. All rights of the Lender and security interest hereunder and all obligations of the Pledgor hereunder, shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the Loan Agreement, the Note, any other loan document or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other times of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Loan Agreement or the Note; (iii) any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Pledgor or a third party pledgor. SECTION 23. Governing Law; Terms. This Agreement shall be governed by and construed in accordance with the Laws of the State of Texas, except as required by mandatory provisions of law and except to the extent that the validity or perfection of the security interest hereunder or remedies hereunder, in respect of any particular Pledged Collateral are governed by the Laws of a jurisdiction other than the State of Texas. IN WITNESS WHEREOF, the Pledgor has caused this agreement to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written. PLEDGOR By: /s/ JOHN E. CALAWAY -------------------------------- JOHN E. CALAWAY CALAWAY OIL & GAS CORPORATION By: /s/ JOHN E. CALAWAY -------------------------------- NAME: John E. Calaway TITLE: President -7- THE STATE OF TEXAS COUNTY OF HARRIS Before me, a Notary Public, on this day personally appeared JOHN E. CALAWAY known to me to be the person whose name is subscribed to the foregoing instrument and acknowledged to me that he executed the same for the purposes and consideration therein expressed. Given under my hand and seal of this office this 19th day of December, 1994. My Commission Expires: /s/ JOAN B. ROBISON 1-22-96 ----------------------- NAME: JOAN B. ROBISON NOTARY PUBLIC Comm. Exp. 01-22-96 THE STATE OF TEXAS COUNTY OF HARRIS Before me, a Notary Public, on this day personally appeared JOHN E. CALAWAY known to me to be the person and officer whose name is subscribed to the foregoing instrument and acknowledged to me that the same was the act of the said CALAWAY OIL & GAS CORPORATION, a Texas corporation, and that he has executed the same as the act of such corporation for the purposes and consideration therein expressed, and in the capacity therein stated. Given under my hand and seal of this office this 19th day of December, 1994. My Commission Expires: /s/ JOAN B. ROBISON 1-22-96 ----------------------- NAME: JOAN B. ROBISON NOTARY PUBLIC Comm. Exp. 01-22-96 -8- SCHEDULE 1. All of the interest of Pledgor in and to the following: 2105.3 shares of stock of Edge Petroleum Corporation. -9- EX-99.H 6 EXHIBIT H EXHIBIT H JOINT FILING AGREEMENT In accordance with Rule 13d-1(f) of the Securities Exchange Act of 1934, as amended, the undersigned agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including any and all amendments thereto) with respect to the Common Stock, par value $0.01 per share, of Edge Petroleum Corporation, a Delaware corporation, and further agree that this Agreement shall be included as an Exhibit to such joint filings. The undersigned further agree that each party hereto is responsible for timely filing of such Statement on Schedule 13D and any amendments thereto, and for the completeness and accuracy of the information concerning such party contained therein; provided that no party is responsible for the completeness or accuracy of the information concerning the other party, unless such party knows or has reason to believe that such information is inaccurate. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original instrument, but all of such counterparts together shall constitute but one agreement. In evidence thereof the undersigned, being duly authorized, hereby execute this Agreement this 13th day of March, 1997. /s/ John E. Calaway --------------------------------- John E. Calaway CALAWAY OIL AND GAS CORPORATION By:/s/ John E. Calaway ------------------------------ John E. Calaway President and Secretary CALAWAY PARTNERS, by CALAWAY OIL AND GAS CORPORATION, its general partner By:/s/ John E. Calaway ------------------------------- John E. Calaway President and Secretary /s/ Nell G. Calaway ---------------------------------- Nell G. Calaway -----END PRIVACY-ENHANCED MESSAGE-----