<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_]Preliminary Proxy Statement
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[_]Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
MILLER EXPLORATION COMPANY
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]No fee required.
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2)Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- -------------------------------------------------------------------------------
(4)Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5)Total fee paid:
- -------------------------------------------------------------------------------
[_]Fee paid previously with preliminary materials.
- -------------------------------------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
- -------------------------------------------------------------------------------
(1)Amount previously paid:
- -------------------------------------------------------------------------------
(2)Form, Schedule or Registration Statement no.:
- -------------------------------------------------------------------------------
(3)Filing party:
- -------------------------------------------------------------------------------
(4)Date filed:
<PAGE>
MILLER EXPLORATION COMPANY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The annual meeting (the "Annual Meeting") of stockholders of Miller
Exploration Company (the "Company") will be held at the Doubletree Hotel at
Allen Center, 400 Dallas Street, Houston, Texas, on Friday, May 26, 2000, at
10:00 a.m., local time, for the following purposes:
(1) to elect three directors of the Company, each to serve until the 2003
annual meeting of stockholders of the Company;
(2) to consider and vote upon a proposal to amend the Company's 1997 Stock
Option and Restricted Stock Plan to increase the number of authorized
shares of common stock issuable under the plan from 1,200,000 to
1,900,000.
(3) to consider and vote upon a proposal to amend the Company's Equity
Compensation Plan for Non-Employee Directors to increase the number of
authorized shares of common stock issuable under the plan from 120,000
to 320,000 and to provide that director fees be paid in stock only.
(4) to ratify the selection of Arthur Andersen LLP as the Company's
independent accountants for the year ending December 31, 2000; and
(5) to transact any other business that properly comes before the meeting.
The transfer books of the Company will not be closed, but only stockholders
of record at the close of business on April 10, 2000, are entitled to notice
of and to vote at the Annual Meeting or any adjournment thereof. A complete
list of these stockholders will be available for examination at the office of
Deanna L. Cannon, Vice President-Finance and Secretary of the Company, at 3104
Logan Valley Road, Traverse City, Michigan, during normal business hours for
ten days before the meeting.
By Order of the Board of Directors
Deanna L. Cannon
Vice President-Finance and Secretary
April 25, 2000
Your Vote is Important. Even if you plan to attend the meeting, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY PROMPTLY.
<PAGE>
MILLER EXPLORATION COMPANY
Three Allen Center, Suite 4605
Houston, TX 77002
ANNUAL MEETING OF STOCKHOLDERS
May 26, 2000
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Directors of
Miller Exploration Company (the "Company") for use at the annual meeting of
stockholders of the Company to be held on May 26, 2000, or any adjournment
thereof (the "Annual Meeting"). The Annual Meeting will be held at the the
Doubletree Hotel at Allen Center, 400 Dallas Street, Houston, Texas, at 10:00
a.m., local time. The record date for the stockholders entitled to notice of
and to vote at the Annual Meeting is the close of business on April 10, 2000
(the "Record Date"). The approximate date on which this Proxy Statement and
accompanying Proxy are first being sent to stockholders is April 25, 2000.
The common stock of the Company, par value $.01 per share ("Common Stock"),
can be voted at the Annual Meeting only if the holder is present or
represented by proxy at the Annual Meeting. You may revoke your proxy at any
time before it is exercised by delivering a written notice of revocation to
the Secretary of the Company, by executing and delivering a later-dated proxy
or by attending the Annual Meeting and voting in person.
QUORUM AND VOTING
Holders of Common Stock of record at the close of business on the Record
Date are entitled to one vote for each share held on all matters submitted to
a vote of stockholders at the Annual Meeting or any adjournment thereof. The
holders of shares of Common Stock do not have cumulative voting rights. As of
the close of business on the Record Date, there were 12,704,208 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote is necessary to constitute
a quorum at the Annual Meeting. If a quorum is not present (either in person
or by proxy), the stockholders entitled to vote who are present in person or
by proxy have the power to adjourn the Annual Meeting from time to time
without notice, other than an announcement at the Annual Meeting, until a
quorum is present. At any adjourned Annual Meeting at which a quorum is
present in person or by proxy, any business may be transacted that might have
been transacted at the Annual Meeting as originally noticed.
Abstentions and broker non-votes will be treated as shares that are present
and entitled to vote for purposes of determining the presence of a quorum for
the transaction of business. Abstentions and broker non-votes are tabulated
separately, with abstentions counted in tabulations of the votes cast on a
proposal for purposes of determining whether a proposal has been approved
while broker non-votes relating to a proposal are not counted as a vote cast
with respect to that proposal.
The election of directors will be determined by plurality vote and the
ratification of the appointment of Arthur Andersen LLP the proposal to amend
the Company's 1997 Stock Option and Restricted Stock Plan (the "1997 Stock
Plan"), and the proposal to amend the Equity Compensation Plan for Non-
Employee Directors (the "Director's Plan") each requires the approval of a
majority of the outstanding shares of Common Stock that are present at the
Annual Meeting in person or by proxy and entitled to vote thereon. Therefore,
abstentions will have a neutral effect on the election of directors, and will
have the effect of votes against the proposal to ratify the selection of
independent accountants and the proposal seeking amendment of the Plan and the
Stock Plan, whereas broker non-votes will have a neutral effect on all such
proposals.
<PAGE>
Shares represented by each Proxy that is properly executed and returned and
upon which no contrary instructions are indicated about a specified matter
will be voted as follows with respect to the specified matter: (i) FOR the
election of the three persons named in this Proxy Statement as the nominees of
the Board of Directors of the Company (the "Board of Directors") for election
to the Board of Directors; (ii) FOR the proposal to amend the Company's 1997
Stock Option and Restricted Stock Plan to increase the number of stock
options; (iii) FOR the ratification of the appointment of Arthur Andersen LLP
as the independent accountants for the Company for 2000; (iv) FOR the proposal
to amend of the Equity Compensation Plan; and (v) in accordance with the
discretion of the holders of the Proxy with respect to any other business that
properly comes before the stockholders at the Annual Meeting.
ANNUAL REPORT
The annual report for the Company's fiscal year ended December 31, 1999,
including audited financial statements, is being furnished with this Proxy
Statement to stockholders of record as of the Record Date. The annual report
does not constitute a part of the proxy solicitation materials.
PROPOSAL ONE: ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of seven directors,
three of whom are standing for re-election. The Company's Certificate of
Incorporation provides that the Board of Directors shall be divided into three
classes, with each class to be as nearly equal in number as possible. Each
class of directors serves a term of office of three years, with the term of
one class expiring at the annual meeting of stockholders in each successive
year and after their successors are duly elected and qualified. Three
directors will be elected at the Annual Meeting, each to serve for a three-
year term expiring at the annual meeting in 2003. The Board of Directors has
nominated the following three nominees for election as directors:
Richard J. Burgess
Dan A. Hughes, Jr.
Kelly E. Miller
Each of the nominees is presently a member of the Board of Directors whose
term will expire at the Annual Meeting. Should any nominee named in this Proxy
Statement for the office of director become unable or unwilling to accept
nomination or election, the person acting under the Proxy will vote for the
election, in his stead, of any other person whom the Board of Directors
recommends. The Board of Directors has no reason to believe that any nominee
named above will be unable or unwilling to serve if elected.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
ELECTION OF ALL NOMINEES AS DIRECTORS
2
<PAGE>
PROPOSAL TWO: AMENDMENT TO THE COMPANY'S STOCK OPTION
AND RESTRICTED STOCK PLAN OF 1997
Overview
The purpose of the Company's Stock Option and Restricted Stock Plan of 1997
is to provide incentives that will attract, retain and motivate highly
competent persons as directors, officers and key employees of Miller by
providing them opportunities to acquire shares of our Common Stock.
Additionally, the 1997 Stock Plan is intended to assist in further aligning
the interests of Miller's directors, officers and key employees to those of
its other stockholders. To accomplish this purpose, the 1997 Stock Plan offers
a proprietary interest in the Company through the distribution of benefits in
the form of stock-based compensation, including stock options and restricted
stock grants. These grants are referred to in this Proxy Statement as
"Incentive Awards."
Subject to the terms of the 1997 Stock Plan, the Stock Plan Committee
determines the terms of each Incentive Award, which are set forth in a written
agreement delivered to the recipient of the Incentive Award. The terms of
award agreements may vary from person to person.
The Board of Directors and stockholders of the Company adopted the 1997
Stock Plan on November 17, 1997. The maximum number of shares of Common Stock
that may be issued under the 1997 Stock Plan currently is 1,200,000, subject
to certain antidilution adjustments. As of April 17, 2000, 193,500 shares of
Common Stock were available for additional benefits to be granted under the
1997 Stock Plan. On April 17, 2000, the last reported sale price of the
Company's common stock on the Nasdaq National Market was $.875 per share.
Amendment
In February 2000, the Stock Plan Committee adopted, and the Board of
Directors ratified, an amendment to the 1997 Stock Plan, subject to
stockholder approval. If approved by the stockholders, the amendment to the
1997 Stock Plan will increase the maximum aggregate number of shares of Common
Stock that may be issued pursuant to Incentive Awards granted under the 1997
Stock Plan by 700,000 from 1,200,000 to 1,900,000, subject to certain
antidilution adjustments.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to approve the 1997 Stock Plan amendment to allow
the Company to continue to use equity compensation to attract and retain
qualified personnel and to have shares available for future grants of benefits
as the Stock Plan Committee deems appropriate.
Description of the 1997 Stock Plan
The following is a summary of the principal features of the 1997 Stock Plan,
together with applicable tax implications. This summary, however, does not
purport to be a complete description of all provisions of the 1997 Stock Plan.
Any stockholder who wishes to obtain a copy of the actual plan document may do
so by written request to the Corporate Secretary at the Company's executive
offices at 3104 Logan Valley Road, Traverse City, Michigan 49685-0348.
General. On November 17, 1997, the Company adopted the 1997 Stock Plan. The
Board of Directors contemplates that the 1997 Stock Plan primarily will be
used to grant stock options. However, the 1997 Stock Plan permits grants of
restricted stock and tax benefit rights if determined to be desirable to
advance the purposes of the 1997 Stock Plan.
Persons eligible to receive Incentive Awards under the 1997 Stock Plan (with
certain limitations discussed below) are directors, corporate officers and
other full-time employees of the Company and its subsidiaries.
3
<PAGE>
A maximum of 1,900,000 shares of Common Stock (subject to certain
antidilution adjustments) will be available for Incentive Awards under the
1997 Stock Plan. The 1997 Stock Plan will not be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and will
not be subject to the Employee Retirement Income Security Act of 1974.
The 1997 Stock Plan will be administered by the Stock Plan Committee of the
Board of Directors. The 1997 Stock Plan requires the Stock Plan Committee to
consist of at least two members, all of whom qualified as "non-employee
directors" as defined in Rule 16b-3 under the Securities Exchange Act of 1934.
The Board of Directors, in its discretion, also may require that the members
of the Stock Plan Committee be Aoutside directors" as defined in the rules
issued pursuant to Section 162(m) of the Code. The Stock Plan Committee will
make determinations, subject to the terms of the 1997 Stock Plan, as to the
persons to receive Incentive Awards, the amount of Incentive Awards to be
granted to each person, the terms of each grant and all other determinations
necessary or advisably for administration of the 1997 Stock Plan. The Stock
Plan Committee may amend the terms of Incentive Awards granted under the 1997
Stock Plan from time to time in a manner consistent with the 1997 Stock Plan;
provided, that no amendment may be effective relating to a particular
Incentive Award without the consent of the relevant participant, except to the
extent the amendment operates solely to the benefit of the participant.
The 1997 Stock Plan took effect on November 17, 1997 and, unless earlier
terminated by the Board of Directors, the 1997 Stock Plan will terminate on
November 16, 2007. No award may be made under the 1997 Stock Plan after that
date. The Company has registered shares covered by the 1997 Stock Plan under
the Securities Act.
Stock Options. Under the 1997 Stock Plan, participants may be granted stock
options. Certain stock options that may be granted to employees under the 1997
Stock Plan may qualify as incentive stock options as defined in Section 422(b)
of the Code ("Incentive Stock Options"). Other stock options will not be
Incentive Stock Options within the meaning of the Code ("Non-qualified Stock
Options"). Stock options may be granted at any time prior to the termination
of the 1997 Stock Plan according to its terms or by action of the Stock Plan
Committee.
The Stock Plan Committee will set forth the terms of individual grants of
stock options in stock option agreements that will contain such terms and
conditions, consistent with the provisions of the 1997 Stock Plan, as the
Stock Plan Committee determines to be appropriate. These restrictions may
include vesting requirements to encourage long-term ownership of shares. The
Company will receive no consideration upon the award of options. The option
price per share will be determined by the Stock Plan Committee; provided, that
the option price for an Incentive Stock Option will be a price equal to or
higher than the "market value" of the Company's Common Stock on the date of
grant.
Although the term of each stock option will be determined by the Stock Plan
Committee, no Incentive Stock Option will be exercisable under 1997 Stock Plan
after 10 years from the date it was granted. Options generally will be
exercisable for limited periods of time if an option holder is terminated from
employment with the Company or its subsidiaries without cause, dies or becomes
disabled. If an option holder is terminated for cause, the option holder will
forfeit all rights to exercise any outstanding options. No individual
participant may be granted, during any calendar year, options to purchase more
than 10% of the total number of shares of Common Stock available under the
1997 Stock Plan. The Stock Plan Committee may permit an option holder to
exercise an option for an extended period, which may not extend beyond the
earlier of either three years from the date of termination or the date on
which the options expire by their terms, if (i) the option holder retires
after age 62 or upon any other age determined by the Stock Plan Committee
("Normal Retirement"), (ii) the option holder voluntarily terminates
employment with the written consent of the Stock Plan Committee after the
option holder has attained 55 years of age and completed 15 years of services
("Early Retirement") or (iii) the option holder voluntarily terminates
employment and the Stock Plan Committee determines the termination to be in
the best interests of the Company ("Consensual Severance").
4
<PAGE>
Each person who becomes a non-employee director automatically will be
granted, on the date of his or her initial election, an option to purchase
10,000 shares of Common Stock. In addition, on the first business day
following the date on which each annual meeting of the Company's stockholders
is held, each non-employee director then serving automatically will be granted
an option to purchase 3,000 shares of Common Stock. Each option granted to
non-employee directors will (i) have a 10-year term, (ii) have an exercise
price per share equal to the fair market value of a Common Stock share on the
date of grant and (iii) become 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. If a non-employee
director resigns from the Board without the consent of a majority of the other
directors, such director's options may be exercised only to the extent they
were exercisable on the resignation date.
Restricted Stock. In addition to the authority to grant stock options under
the 1997 Stock Plan, the 1997 Stock Plan will allow the Stock Option Committee
to award restricted stock. Restricted stock will be subject to such terms and
conditions, consistent with the provisions of the 1997 Stock Plan, as the
Stock Option Committee from time to time may determine. As with stock options
grants, the Stock Option Committee will set forth the terms of individual
awards of restricted stock agreements. If a participant's employment or
director or officer status is terminated during the restricted period set by
the Stock Option Committee for any reason other than death or disability, or
any additional reason as may be permitted by the Stock Option Committee, then
any shares of restricted stock still subject to restrictions will be
forfeited. Unless the Stock Option Committee provides otherwise in a
restricted stock agreement, if a participant's employment or director or
officer status is terminated during the restricted period by reason of death
or disability, the restrictions on the participant's shares will terminate
automatically as of the date of death or disability, the restrictions on the
participant's shares will terminate automatically as of the date of death or
disability. The Stock Option Committee, in its discretion, may provide that
all or part of the restrictions on the restricted stock will lapse upon
termination if the termination is by reason of Consensual Severance, Normal
Retirement or Early Retirement.
Without Stock Option Committee authorization, a recipient of restricted
stock may not sell, exchange, transfer, pledge, assign or otherwise dispose of
such stock other than to the Company or by will or the laws of descent or
distribution. In addition, the Stock Option Committee may impose other
restrictions on shares of restricted stock. However, holders of restricted
stock will enjoy all other rights of stockholders with respect to restricted
stock, including the right to vote restricted shares at stockholders' meetings
and the right to receive all dividends paid with respect to restricted stock.
Any securities received by a holder of restricted stock pursuant to a stock
dividend, stock split, recapitalization or reorganization will be subject to
the same terms, conditions and restrictions that are applicable to the
restricted stock for which such shares are received.
The Stock Option Committee may provide that upon the occurrence of a Achange
in control" of the Company (as defined in the 1997 Stock Plan), all restricted
stock or other Incentive Awards immediately would become fully vested,
nonforfeitable or otherwise no longer subject to any restriction. The Stock
Option Committee may provide in the restricted stock agreement that the number
of shares that automatically will vest will be limited in value to the extent
that any payments that are deemed "parachute payments" as defined in Section
280G(b)(2) of the Code would not be subject to the excise tax imposed by
Section 4999 of the Code.
Tax Benefit Rights. The Stock Plan Committee also may grant tax benefit
rights under the 1997 Stock Plan. As with options and restricted stock, the
Stock Plan Committee will set forth the terms and conditions of tax benefit
rights granted and the participants to receive tax benefit rights in written
agreements. A tax benefit right entitles a participant to receive cash payment
from the Company or its subsidiaries to encourage the participant to exercise
his or her options. The amount of the payment may not exceed the amount
calculated by multiplying the ordinary income, if any, realized by the
participant for federal tax purposes as a result of the exercise of a non-
Incentive Stock Option, or as a result of the disqualifying disposition of
shares acquired under an Incentive Stock Option, by the maximum federal income
tax rate (including any surtax or similar charge or assessment) for
corporations, plus the applicable state and local tax imposed on the exercise
of the option or disqualifying disposition. Tax benefit rights may be granted
only with respect to a stock option issued and outstanding or to be
5
<PAGE>
issued under the 1997 Stock Plan or any prior plans. A participant may refuse
the issuance of a tax benefit right if the effect of the tax benefit right
would disqualify an Incentive Stock Option, change the date of the grant or
exercise price or impair the participant's existing stock options.
Federal Income Tax Consequences. A participant receiving Non-qualified Stock
Options will not recognize taxable income at the time the Non-qualified Stock
Option is granted. At the time the Non-qualified Stock Option is exercised,
the participant will recognize ordinary taxable income in an amount equal to
the difference between the exercise price and the fair market value of the
Common Stock on the date of exercise. The Company will be entitled to a
concurrent deduction equal to the ordinary income recognized by the
participant.
An employee granted an Incentive Stock Option will not recognize taxable
income at the time of grant or, subject to certain conditions, at the time of
exercise. If stock acquired upon exercise of an incentive Stock Option is held
for a minimum of two years from the date of grant of the Stock Option and one
year from the date of exercise, the gain or loss (in an amount equal to the
difference between the sale price and the exercise price) upon disposition of
the stock will be treated as long-term capital gain or loss, and the Company
will not be entitled to any deduction.
If the holding period requirement is not met, the employee will recognize
ordinary income in an amount equal to the lesser of (i) the excess of the fair
market value of Common Stock on the date of exercise over the exercise price
or (ii) the excess of the amount realized on the sale of such stock over the
exercise price.
An employee receiving a Restricted Stock award generally will recognize
ordinary taxable income at the time the restrictions lapse in an amount equal
to the difference between the fair market value of the Common Stock at the
time the restrictions lapse and the price, if any, paid by the employee for
such Common Stock (unless the employee makes a Section 83(b) election as
discussed below). Any dividends received by the employee before the
termination of restrictions will be taxed as ordinary income. The Company will
be entitled to a deduction equal to the ordinary income recognized by the
employee. Upon the disposition of the Common Stock, the employee will
recognize taxable gain or loss equal to the difference between the fair market
value of the Common Stock at the time the restrictions lapse and the amount
realized upon the disposition of the Common Stock. The gain or loss will be
taxable as a capital gain or loss.
If an employee makes an election under Section 83(b) of the Code (a "Section
83(b) election"), the employee will recognize ordinary income when the
Restricted Stock is transferred to the employee (without regard to any risk of
forfeiture or restriction on the employee's ability to freely transfer the
Restricted Stock) in an amount equal to the fair market value of the
Restricted Stock at that time over the amount, if any, paid by the employee
for the Restricted Stock. If the employee makes a Section 83(b) election, the
Company will be entitled to a deduction equal to the ordinary income
recognized by the employee in the year of the election. However, dividends
received before the restrictions lapse will not be deductible by the Company.
Upon the disposition of the Common Stock, the employee will recognize gain or
loss equal to the difference between the amount realized and the sum of the
income recognized by the employee as a result of the Section 839b) election
and any amounts paid by the employee for the Restricted Stock.
Section 162(m) of the Internal Revenue Code generally imposes a $1 million
per person annual limit on the amount the Company may deduct as compensation
expense for its chief executive officer and its four other highest paid
executives. The 1997 Stock Plan must comply with certain requirements of
Section 162(m) of the Code to cause stock options granted thereunder to be
classified as "performance-based compensation" under Section 162(m)(4)(c) of
the Code and, thereby, exempt from the $1 million limit imposed by Section
162(m). The 1997 Stock Plan is intended to comply with such requirements with
respect to Stock Options. As a result, income recognized by an executive
officer upon the exercise of a stock option should not be subject to or count
against the Section 162(m) $1 million annual limit on deductible compensation.
Restricted Stock Awards generally are not available for the exemption from the
$1 million annual limit imposed by Section 162(m) and, therefore, income
attributable to grants of Restricted Stock will be included for purposes of
the $1 million limitation.
6
<PAGE>
Outstanding Incentive Awards
The table below sets forth the outstanding stock options granted under the
1997 Stock Plan to the following persons:
<TABLE>
<CAPTION>
Individual Number of Stock Options
---------- -----------------------
<S> <C>
Kenneth J. Foote........................................ 13,000
Frank M. Burke, Jr...................................... 13,000
Richard J. Burgess...................................... 13,000
Dan A. Hughes, Jr....................................... 13,000
William "Casey" McManemin............................... 13,000
Kelly E. Miller......................................... 330,000
Lew P. Murray........................................... 100,000
Deanna L. Cannon........................................ 27,000
All Executive Officers as a group....................... 457,000
All Non-employee directors as a group................... 65,000
</TABLE>
New Plan Benefits.
Incentive Awards are made at the discretion of the Stock Plan Committee and
are not determinable prior to actual grants. No Incentive Awards have been
granted contingent upon the approval of the proposed amendment.
PROPOSAL THREE: APPROVAL OF THE PROPOSED AMENDMENT
TO THE COMPANY'S EQUITY COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Overview
The purpose of the Director's Plan is to provide incentives to the Company's
non-employee directors that further align the interests of those directors
with those of its other stockholders. To accomplish this purpose, the
Director's Plan offers a proprietary interest in the Company through the
distribution of shares of the Company's Common Stock in payment of director's
fees owed to the Company's non-employee directors.
The Board of Directors adopted the Director's Plan on November 17, 1998 and
it was approved and adopted by the stockholders of the Company on June 11,
1999. The maximum number of shares of Common Stock that may be issued under
the Director's Plan currently is 120,000, subject to certain antidilution
adjustments. As of April 17, 2000, no shares of Common Stock were available
for additional benefits to be granted under Director's Plan and an additional
64,590 shares are needed to satisfy the Company's obligations with respect to
the 1999 director's fees. On April 17, 2000, the last reported sale price of
the Company's common stock on the Nasdaq National Market was $.875 per share.
Amendment
In February 2000, the Stock Plan Committee adopted, and the Board of
Directors ratified, an amendment to the Director's Plan, subject to
stockholder approval. If approved by the stockholders, the amendment to the
Director's Plan will:
. increase the maximum aggregate number of shares of Common Stock that may
be issued pursuant to the Director's Plan from 120,000 to 320,000,
subject to certain antidilution adjustments, and
. clarify that under the terms of the Director's Plan all director's fees
owed to non-employee directors are to be paid through the issuance of
shares of Common Stock.
The Board of Directors believes that it is in the best interest of the
Company and its stockholders to approve the Director's Plan amendment.
7
<PAGE>
Description of Director's Plan
The following is a summary of the principal features of the Director's Plan,
together with applicable tax implications. This summary, however, does not
purport to be a complete description of all provisions of the Director's Plan.
A copy of the Director's Plan as proposed to be amended is attached to this
Proxy Statement as Annex A.
General
A maximum of 320,000 shares of Common Stock (subject to certain antidilution
adjustments) would be available for awards of Common Stock ("Stock Awards")
under the Plan. Shares to be issued under the Director's Plan are expected to
be authorized but unissued shares.
The Director's Plan is not qualified under Section 401(a) of the Code, and
is not subject to the Employee Retirement Income Security Act of 1974.
The shares currently covered by the Director's Plan have been registered
under the Securities Act of 1933 and any additional shares to be issued under
the proposed amendment will also be registered.
Participants in the Director's Plan
Under the Director's Plan, non-employee directors (currently five
individuals) are eligible to receive Stock Awards. Non-employee directors of
the Company may be deemed to have an interest in the Director's Plan because
they may be entitled to receive Stock Awards under the Director's Plan.
Administration of the Plan
The Director's Plan is currently administered by the Stock Plan Committee
designated by the Board of Directors (the "Committee"). The Board of Directors
may terminate the Director's Plan at any time and may from time to time amend
the Director's Plan as it deems proper and in the best interests of the
Company, provided that no such amendment may impair any outstanding Stock
Award without the consent of the participant. The Director's Plan took effect
on December 7, 1998, and, unless earlier terminated by the Board of Directors,
the Director's Plan will terminate on December 6, 2008. No award may be made
under the Director's Plan after that date. The Committee has full authority
and discretion to interpret the Director's Plan.
Stock Awards
The Committee currently has the power to determine whether to compensate
participants for Director's Fees earned in a fiscal year in shares of Common
Stock or in cash. "Director's Fees" are those amounts of income due and
payable to a participant for service as a director of the Company for a fiscal
year, including payments for attendance at meetings of the Board of Directors
or meetings of committees of the Board, and any retainer fee paid to members
of the Board, but excluding reimbursement of costs.
Currently, if the Company determines to compensate a participant in the form
of a Stock Award rather than cash, the participant would be entitled to
receive that number of shares of Common Stock calculated by dividing the
dollar amount of a participant's Director's Fees for a fiscal year by the
Market Value of the Common Stock on the day before the Stock Award payment
date. "Market Value" means the last reported sales price on The NASDAQ Stock
Market on the date in question, or if the Common Stock was not traded on The
NASDAQ Stock Market on such date, the last reported sales price on the first
day before the payment date.
If the Committee determines to compensate a participant for the
participant's Director's Fees in shares of Common Stock rather than cash, the
Company will distribute to the participant the number of shares of Common
Stock calculated in accordance with the preceding paragraph on or before the
45th day after the end of the Company's fiscal year in which the Director's
Fees are earned. The Committee may amend the time of payment before or after a
Stock Award (i) in its discretion, if the amendment benefits the participant;
or (ii) in all other cases, with the consent of the participant.
8
<PAGE>
If the proposed amendment is approved, all Director's Fees other than out-
of-pocket expenses will be paid in Common Stock and the Committee will no
longer have the discretion to choose whether to pay fees in cash or Common
Stock.
Federal Income Tax Consequences
For federal income tax purposes, a participant would be required to
recognize compensation income on the value of Common Stock at the time the
Stock Award is granted. At the time the participant recognizes compensation
income, the Company would be entitled to a corresponding deduction for federal
income tax purposes.
New Plan Benefits
Subject to stockholder approval of the proposed amendment to the Director's
Plan, the Committee intends to grant Stock Awards to each non-employee
director. The name of each participant, the dollar value of Director's Fees
earned by and shares to be issued to each participant for fiscal year 1999 are
set forth in the chart below.
<TABLE>
<CAPTION>
Amount Shares
------- ------
<S> <C> <C>
C.E. Miller...................................................... $26,000 20,800
Frank M. Burke, Jr............................................... $30,500 24,400
Kenneth J. Foote................................................. $29,500 23,600
Dan A. Hughes, Jr................................................ $29,000 23,200
William Casey McManemin.......................................... $28,250 22,600
Richard J. Burgess............................................... $27,500 22,000
</TABLE>
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
APPROVAL OF THE AMENDMENT TO THE EQUITY COMPENSATION PLAN FOR NON-EMPLOYEE
DIRECTORS
9
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Company's knowledge, set forth below is certain information, as of
the Record Date, regarding ownership of Common Stock by (i) each person who
beneficially owns more than 5% of the Company's outstanding shares of Common
Stock, (ii) each director and executive officer of the Company and (iii) all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership of Common Stock(1)
--------------------------------------------
Sole Voting Shared
and Voting or Total Percent
Name and Address of Beneficial Dispositive Dispositive Beneficial of
Owner Power(2) Power(3) Ownership(2) Class
- ------------------------------ ----------- ----------- ----------- -------
<S> <C> <C> <C> <C>
Siemens Financial Services,
Inc............................. 1,025,105 0 1,025,105 8.1%
186 Wood Avenue South
Iselin, New Jersey 08830
C.E. Miller(4)................... 1,475,492 0 1,475,492 11.6%
3104 Logan Valley Road
Traverse City, Michigan 49685
Kelly E. Miller(5)............... 1,347,337 10,300 1,357,637 10.6%
3104 Logan Valley Road
Traverse City, Michigan 49685
David A. Miller(6)............... 754,879 0 754,879 5.94%
3104 Logan Valley Road
Traverse City, Michigan 49685
Daniel R. Miller(7).............. 888,360 0 888,360 6.99%
3104 Logan Valley Road
Traverse City, Michigan 49685
Sue Ellen Bell(8)................ 794,056 3,342 797,398 6.28%
3104 Logan Valley Road
Traverse City, Michigan 49685
William Casey McManemin.......... 59,125 0 59,125 1.0%
Lew P. Murray(9)................. 47,704 2,451 50,155 *
Michael L. Calhoun............... 15,250 0 15,250 *
Frank M. Burke, Jr.(10).......... 139,583 0 139,583 1.1%
Kenneth J. Foote(11)............. 123,010 1,500 124,510 1.0%
Dan A. Hughes, Jr................ 53,315 0 53,315 *
Richard J. Burgess............... 24,198 0 24,198 *
Deanna L. Cannon................. 8,000 0 8,000 *
Executive Officers and Directors
as a group (10 persons).......... 3,293,014 14,251 3,307,265 26.0%
</TABLE>
- --------
* Less than 1%.
(1) The number of shares stated are based on information provided by each
person listed and include shares personally owned of record by the person
and shares which, under applicable regulations, are considered to be
otherwise beneficially owned by the person.
10
<PAGE>
(2) Excludes the following shares that may be acquired through the exercise of
stock options granted under the "1997 Stock Plan" which are exercisable
after June 15, 2000:
<TABLE>
<CAPTION>
Number of
Name Options
---- ---------
<S> <C>
Kelly E. Miller.................................................... 198,000
William Casey McManemin............................................ 8,400
Lew P. Murray...................................................... 120,000
Michael L. Calhoun................................................. 15,000
Frank M. Burke, Jr................................................. 8,400
Kenneth J. Foote................................................... 8,400
Dan A. Hughes, Jr.................................................. 8,400
Richard J. Burgess................................................. 10,400
Deanna L. Cannon................................................... 21,000
</TABLE>
(3) These numbers include shares over which the listed person is legally
entitled to share voting or dispositive power by reason of joint
ownership, trust or other contract right, and shares held by spouses,
children or other relatives over whom the listed person may have
substantial influence by reason of relationship.
(4) Includes 213,919 shares held by the Kelly E. Miller Retained Annuity Trust
#1, 213,919 shares held by the Daniel R. Miller Retained Annuity Trust #1,
320,879 shares held by the David A. Miller Retained Annuity Trust #1 and
213,919 shares held by the Sue Ellen Bell Retained Annuity Trust #1, with
respect to each of which C.E. Miller is the sole trustee. Also includes
264,199 shares held by Eagle Investments, Inc. ("Eagle") and 122,565
shares held by Eagle International, Inc. ("Eagle International"), each of
which is owned by a revocable trust of which C.E. Miller is the sole
trustee.
(5) Includes 84,024 shares held by Miller and Miller, Inc., which is owned by
a revocable trust of which Kelly E. Miller is the sole trustee and 85,388
shares held by the Company's 401(k) plan wherein Kelly E. Miller has sole
voting power as the sole trustee. Excludes 213,919 shares held by the
Kelly E. Miller Retained Annuity Trust #1, of which Kelly E. Miller's
father, C.E. Miller, is the sole trustee and of which Kelly E. Miller is
the Grantor with the Trust established for the benefit of his minor
children as beneficiaries.
(6) Includes 84,024 shares held by Oak Shores Investments, Inc., which is
owned by a revocable trust of which David A. Miller is the sole trustee.
Excludes 320,879 shares held by the David A. Miller Retained Annuity Trust
#1, of which David A. Miller's father, C.E. Miller, is the sole trustee
and of which David A. Miller is the Grantor with the Trust established for
the benefit of his minor children as beneficiaries.
(7) Includes 74,634 shares held by Double Diamond Enterprises, Inc., which is
owned by a revocable trust of which Daniel R. Miller is the sole trustee.
Excludes 213,919 shares held by the Daniel R. Miller Retained Annuity
Trust #1, of which Daniel R. Miller's father, C.E. Miller, is the sole
trustee and of which Daniel R. Miller is the Grantor with the Trust
established for the benefit of his minor children as beneficiaries.
(8) Includes 84,024 shares held by Frontier Investments, Inc., which is owned
by a revocable trust of which Sue E. Bell is the sole trustee. Excludes
213,919 shares held by the Sue Ellen Bell Retained Annuity Trust #1, of
which Sue E. Bell's father, C.E. Miller, is the sole trustee and of which
Sue E. Bell is the Grantor with the Trust established for the benefit of
her minor children as beneficiaries.
(9) Includes 2,451 shares held as part of the Miller Oil Corporation 401(k)
Savings Plan for which Mr. Murray has sole dispositive power.
(10) Includes 66,120 shares held by Burke, Mayhorn Company, Ltd., 31,000
shares held by TTC Burke, Ltd., which are private consulting and
investment companies controlled by Mr. Burke and 53,000 shares held by a
KEOGH Plan wherein Mr. Burke is owner of the plan.
(11) Includes 1,500 shares held by Mr. Foote's spouse.
11
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
Biographical information as of April 17, 2000, is presented below for each
person who is either nominated for election as a director at the Annual
Meeting or is continuing as an incumbent director, and for each of the
executive officers of the Company as of April 17, 2000.
Nominees for Election to Terms Expiring in 2003
Kelly E. Miller (age 45) has served as the President, Chief Executive
Officer and a director of the Company since its founding in 1997 and as
President and a director of Miller Oil Company, the Company's predecessor
("MOC") since MOC's founding in 1986. Since 1982, Mr. Miller has served as a
Vice President of Eagle. Mr. Miller serves on the Board of Governors of the
Independent Petroleum Association of America and the Boards of Directors of
the Michigan Oil and Gas Association and Republic Bancorp, Inc. (NASDAQ). Mr.
Miller has been involved in the oil and gas industry since 1978, focusing his
efforts in the areas of strategic planning, prospect development, acquisition
and administration. Mr. Miller received a B.S. degree with a major in
Petroleum Geology and a B.B.A. degree with a major in Petroleum Land
Management from the University of Oklahoma. Mr. Miller also completed the
Owner/President Management Program (OPM) through the Harvard University
Graduate School of Business. Mr. Miller is a Certified Petroleum Geologist
with the American Association of Petroleum Geologists, an international
geological organization. Mr. Miller is the son of C.E. Miller, the Company's
Chairman of the Board.
Dan A. Hughes Jr. (age 42) has served as a director of the Company since
February 2, 1998. Mr. Hughes is a partner in Dan A. Hughes Company, an oil and
gas exploration company located in Beeville, Texas, and has served as
Exploration Manager of Dan A. Hughes Company since 1985. Mr. Hughes currently
serves on the Regional Board of Trustees for the Independent Petroleum
Association of America and as Vice President for the Lower Gulf Coast District
for Texas Mid-Continent Oil & Gas Association. Mr. Hughes has been active in
the oil and gas industry for more than 20 years, overseeing exploration and
development activities in Texas and Louisiana, as well as internationally. Mr.
Hughes received a B.B.A. degree from Texas A&M University and attended Texas
A&M University for post graduate studies in geology. Mr. Hughes is involved in
a number of civic activities and is a member of several boards of directors
and executive committees.
Richard J. Burgess (age 69) has served as a director of the Company since
January 12, 1999. Mr. Burgess served as President and CEO of NOMECO before
retiring in 1994. NOMECO later became CMS Oil and Gas Company which is a
wholly owned subsidiary of CMS Energy Corporation (NYSE). Mr. Burgess received
a B.S. degree (honors) in Geology from the University of Manitoba and has held
various positions in the oil and gas industry since 1954. Mr. Burgess
currently serves on the Board of Directors of Michigan Oil and Gas Association
and ROC Oil Company and is a former director of Seagull Energy, Command
Petroleum and Sydney Oil Company. Mr. Burgess has been involved, in various
capacities, with American Association of Petroleum Geologists, Independent
Petroleum Association of America, Ontario Petroleum Institute and Potential
Gas Committee.
Incumbent Directors--Terms Expiring in 2001
William Casey McManemin (age 39) has served as a director of the Company
since February 2, 1998. Mr. McManemin is a Registered Professional Engineer in
the state of Texas, and he received a B.S. degree in Petroleum Engineering
from Texas A&M University. Since 1988, Mr. McManemin has served as an officer,
shareholder and director of the Manager of SASI Minerals Company and the
General Partner of Spinnaker Royalty Company, L.P. In addition, since
September 1993, Mr. McManemin has served as an officer, shareholder and
director of the General Partner of Republic Royalty Company. All of such
companies are engaged in oil and gas property acquisition, exploration and
development, including activities in several of the same regions and areas in
which the Company's present and past activities are located. In addition to
membership in numerous oil and gas industry associations, Mr. McManemin is a
member of the Executive Committee of the Board of Trustees of The St. Mark's
School of Texas.
12
<PAGE>
Kenneth J. Foote (age 43) has served as a director of the Company since
February 2, 1998. Mr. Foote has served as a managing director of First
National Acceptance Company, a private financial services company, since 1987.
Mr. Foote's primary responsibilities are in the areas of financial analysis,
taxation and strategic planning. Additionally, Mr. Foote is a director of
First National Bank of Michigan. From 1979 to 1982, Mr. Foote worked for the
public accounting firm of Arthur Andersen LLP and became a Certified Public
Accountant during that time. From 1982 to 1987, Mr. Foote was a principal in
two real estate ventures before joining First National Acceptance Company. Mr.
Foote has an A.B. degree in economics from Princeton University and received a
masters in accounting from New York University.
Incumbent Directors--Terms Expiring in 2002
C.E. "Gene" Miller (age 70) has served as the Chairman of the Board and a
director of the Company since its founding in 1997 and of MOC, since MOC's
founding in 1986. Since 1982, Mr. Miller has served as President, Secretary
and Treasurer of Eagle, an oil and gas investment company affiliated with the
Company, and since 1990 has served as President, Secretary and Treasurer of
Eagle International, an international oil and gas development company also
affiliated with the Company. Mr. Miller has been involved in the domestic oil
and gas industry for over 35 years, primarily in Michigan and Texas. Mr.
Miller is a past president of the Michigan Oil and Gas Association and also
served as a director of that organization. Mr. Miller previously served as a
vice president and director and on the Executive Committee of the Independent
Petroleum Association of America, and as a director of the National Stripper
Well Association. In addition, Mr. Miller has been involved in a number of
civic activities and is a member of several boards of directors. Mr. Miller is
the father of Kelly E. Miller, the Company's President and Chief Executive
Officer.
Frank M. Burke, Jr. (age 60) has served as a director of the Company since
February 2, 1998. Mr. Burke has served as Chairman, Chief Executive Officer
and Managing General Partner of Burke, Mayborn Company, Ltd., a private
investment and consulting company located in Dallas, Texas, since 1984. Burke,
Mayborn Company Ltd. provides strategic and financial consulting to selected
individuals and entities. From 1960 to 1984, Mr. Burke was associated with
Peat, Marwick, Mitchell & Co., an international firm of certified public
accountants. Mr. Burke was elected partner in 1968, and served as a member of
the Peat Marwick Board of Directors from 1978 to 1984. During the same period
Mr. Burke served as Chairman, Energy Group for Peat Marwick International and
National Director of Energy and Natural Resources for Peat Marwick in the
United States. Mr. Burke presently serves as a director of Kaneb Services,
Inc. (NYSE), Kaneb Pipe Line Partners, L.P. (NYSE) and Medical Control, Inc.
(NASDAQ). In addition, Mr. Burke serves on the boards of directors of numerous
private corporations.
Executive Officers
Lew P. Murray (age 44) has served as Vice President-Exploration of the
Company since its founding in 1997, and he served in the same capacity for MOC
from January 1996 until the Company was founded. Mr. Murray holds a B.S.
degree with a major in Geology from the University of Oklahoma. Mr. Murray is
a Certified Petroleum Geologist with the American Association of Petroleum
Geologists. Mr. Murray served as Exploration Manager of MOC from 1992 until
1996 and has been involved in the exploration program of MOC and its
affiliates since 1981. Mr. Murray's primary responsibilities involve the
review and recommendations of all domestic and international prospects.
Deanna L. Cannon (age 39) has served as Vice President-Finance and Corporate
Secretary of the Company since June 1999 and as Assistant Vice President-
Finance from May 1998 to June 1999. Previously Ms. Cannon was employed in
public accounting for 16 years, initially for Arthur Andersen & Co. in
Jacksonville, Florida and later for Plante & Moran, LLP in Traverse City,
Michigan. Ms. Cannon holds a B.S. degree in accounting from Ferris State
University and also is a Certified Public Accountant. She is a member of the
Michigan Oil and Gas Association, American Institute of Certified Public
Accountants and Michigan Association of Certified Public Accountants.
13
<PAGE>
Michael L. Calhoun (age 40) has served as Vice President-Operations of the
Company since January 12, 1998. Mr. Calhoun is a Registered Professional
Engineer in the state of Texas and received a B.S. degree in Petroleum
Engineering and a B.A. degree in Business Administration from the University
of Texas. In addition, Mr. Calhoun received a Masters in Business
Administration from Southern Methodist University. Since 1989, Mr. Calhoun has
served in several capacities for Amerada Hess Corporation, including as a
Financial Analyst, Manager of Production, Planning and Control, District
Superintendent and, most recently, as Operations Manager for the Gulf Coast
District. From 1987 to 1989, Mr. Calhoun served as an engineer for Greenwich
Oil Corporation in Dallas, Texas, and from 1985 to 1987 as a field engineer
for the Texas Railroad Commission.
BOARD COMMITTEES AND MEETINGS
The Company's Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the Stock Plan Committee.
Audit Committee. The Audit Committee is responsible for (i) recommending to
the Board of Directors the selection of independent accountants; (ii)
approving the nature and scope of services to be performed by the independent
accountants and reviewing the range of fees for such services; (iii)
conferring with the independent accountants and reviewing the results of the
annual audit; (iv) reviewing with the independent accountants the Company's
internal auditing, accounting and financial controls; (v) reviewing policies
and practices regarding compliance with laws and conflicts of interest; and
(vi) reviewing all material contractual matters. Messrs. Burke (Chairman),
Foote, Hughes and Burgess currently serve on the Audit Committee. During 1999,
the Audit Committee held five meetings.
Compensation Committee. The Compensation Committee is responsible for (i)
reviewing and recommending to the full Board of Directors for approval the
annual base salary levels, annual incentive opportunity levels, long-term
incentive opportunity levels, executive perquisites, employment agreements (if
and when appropriate), change in control provisions/agreements (if and when
appropriate), benefits and supplemental benefits of the Company's Chief
Executive Officer and other key employees; (ii) recommending retainer and
attendance fees for directors who are not employees of the Company or any of
its subsidiaries; (iii) reviewing for their adequacy and competitiveness
compensation plans and awards as they relate to the Chief Executive Officer
and other key employees; and (iv) reviewing the Company's strategic and
financial plans to determine their relationship to the compensation program.
Messrs. McManemin (Chairman), Burke, Foote, Hughes and Burgess are members of
the Compensation Committee. During 1999, the Compensation Committee held two
meetings.
Stock Plan Committee. The Stock Plan Committee is responsible for (i)
advising, recommending and interpreting existing equity compensation plans,
including the 1997 Stock Plan and the Director's Plan; (ii) reviewing and
recommending to the full Board for approval new or amended equity compensation
plans or grants under existing plans; and (iii) ensuring that the total equity
compensation program and practices of the Company are designed with full
consideration of all accounting, tax, securities law and regulatory
requirements. Messrs. McManemin (Chairman) Hughes, Burke, Foote, and Burgess
are members of the Stock Plan Committee. During 1999, the Stock Plan Committee
held one meeting.
During the Company's last fiscal year, the Board of Directors held eleven
regular and special meetings. Each of the directors attended 75% or more of
the aggregate of (i) the total number of meetings of the Board of Directors
and (ii) the total number of meetings held by all committees of the Board of
Directors on which each served (during the periods that each served).
COMPENSATION OF DIRECTORS
The Board of Directors has adopted the Equity Compensation Plan for Non-
Employee Directors. This plan, as amended, will require the Company to
compensate its non-employee directors in shares of the Company's Common Stock
for fees earned by such directors for their service to the Company.
14
<PAGE>
Directors who are not employees of the Company receive a $15,000 annual
retainer fee plus $1,000 for attendance at each regular meeting of the Board
of Directors and $500 for attendance at each committee meeting, (committee
chairmen receive $750). Directors who also are employees of the Company
receive no annual retainer and are not compensated for attendance at Board or
committee meetings. The Company also reimburses directors for expenses
associated with attending Board and committee meetings.
Any person who first becomes a non-employee director automatically is
granted, on the date of his or her election, an option to purchase 10,000
shares of Common Stock. In addition, on the first business day following the
date on which each annual meeting of the Company's stockholders is held, each
non-employee director then serving is automatically granted an option to
purchase 3,000 shares of Common Stock. Each option granted to non-employee
directors will (i) have a 10-year term, (ii) have an exercise price per share
equal to the fair market value of a Common Stock share on the date of grant
and (iii) become 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.
The Board of Directors of the Company adopted a policy providing that
directors are expected to maintain, directly or indirectly, a minimum
investment in the Company of approximately $100,000.
EXECUTIVE COMPENSATION
Compensation Summary
The following Summary Compensation Table shows certain information
concerning the compensation earned during the fiscal years ended December 31,
1999, 1998 and 1997, by the Chief Executive Officer of the Company and each
executive officer who earned in excess of $100,000 and who served in positions
other than Chief Executive Officer at the end of the last completed fiscal
year. The table does not include perquisites and other personal benefits for
individuals for whom the aggregate amount of such compensation does not exceed
the lesser of (i) $50,000 or (ii) 10% of combined salary and bonus for the
named executive officers in 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------- ------------------
Restricted
Name and Principal Stock Stock All Other
Position Year Salary Bonus Awards(2) Options Compensation(1)
- ------------------ ---- -------- ------- ---------- ------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kelly E. Miller,
President and Chief
Executive Officer...... 1999 $194,237 $ 0 $ 0 0 $10,176
1998 276,057 100,000 480,000 330,000 46,237
1997 275,000 200,000 0 0 91,374
William J. Baumgartner,
Executive Vice
President-Finance(3)... 1999 $133,874 $ 0 $ 0 0 $ 5,275
1998 146,635 60,000 180,000 100,000 8,015
1997 125,000 30,000 0 0 15,233
Lew P. Murray, Vice
President-Exploration.. 1999 $117,032 $ 0 $ 0 0 $ 630
1998 $134,231 40,000 120,000 100,000 16,001
1997 100,000 25,000 29,580
Michael L. Calhoun, Vice
President-Operations... 1999 $130,126 $ 0 $ 0 0 $ 7,284
1998 131,885 0 16,000 25,000 4,919
</TABLE>
- --------
(1) Compensation listed in this column for 1999 consisted of the following
payments made by the Company (i) for contributions of Company Common Stock
to the Company's 401(k) Savings Plan on behalf of the
15
<PAGE>
individuals listed as follows: $10,000 for Mr. Miller, $4,615 for Mr.
Baumgartner; and $6,923 for Mr. Calhoun; (ii) for travel accident insurance
policies as follows: $176 each for Messrs. Miller, Baumgartner, Calhoun and
Murray, respectively; and (iii) for premiums on life insurance policies as
follows: $484 for Mr. Baumgartner; $185 for Mr. Calhoun; and $454 for Mr.
Murray. No contribution to the Company's 401(k) Savings Plan was made on
behalf of Mr. Murray or payment of insurance premiums on behalf of Mr.
Miller.
(2) The values of restricted stock awards reported in this column are
calculated using the closing market price of the Common Stock on the date
of grant. Dividends will be paid on shares of restricted stock at the same
rate dividends are paid on Common Stock, if any. Restricted stock vests at
cumulative annual increments of one-half of the total number of shares of
restricted stock granted, beginning on the first anniversary of the date
of grant. Compensation income realized by each of the named executive
officers and corresponding compensation expense recorded by the Company is
based on the closing market price of Common Stock on the first and second
anniversary of the date of grant. Actual compensation amounts are as
follows: $138,750 for Mr. Miller; $36,562 for Mr. Baumgartner (one-half of
the shares of restricted stock granted to Mr. Baumgartner were forfeited
upon his resignation in November 1999); $4,625 for Mr. Calhoun; and
$34,687 for Mr. Murray.
(3) Mr. Baumgartner resigned in November 1999.
Stock Options
The Company's 1997 Stock Plan is administered by the Stock Plan Committee of
the Board of Directors which has authority to determine the individuals to
whom and the terms upon which options will be granted, the number of shares to
be subject to each option and the form of consideration that may be paid upon
the exercise of an option.
There were no stock options granted to or exercised by the named executive
officers during the fiscal year ended December 31, 1999. On January 1, 2000,
the Company granted a total of 191,500 stock options to certain employees with
an exercise price of $0.01 per share. Of those stock options, 132,000 were
issued to executive officers. The right to exercise the options shall vest and
be exercisable when the normal trading average of the stock on the market
remains above the designated values for a period of five consecutive trading
days as follows:
<TABLE>
<CAPTION>
Five-Day Daily Average Target Percentage Vested
----------------------------- -----------------
<S> <C>
$2.00 40%
$2.75 30%
$3.50 30%
</TABLE>
AGGREGATE OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES(1)
<TABLE>
<CAPTION>
Value of
Number of Securities Underlying Unexercised In-the-Money Options
Unexercised Options at Fiscal Year-End Fiscal Year-End
------------------------------------------ --------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------------ -------------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Kelly E. Miller......... 66,000 264,000 $ 0 $ 0
Lew P. Murray........... 20,000 80,000 $ 0 $ 0
Michael L. Calhoun...... 5,000 20,000 $ 0 $ 0
Deanna L. Cannon........ 3,000 12,000 $ 0 $ 0
</TABLE>
- --------
(1) No named executive officer exercised any stock options in 1999.
16
<PAGE>
401(k) Savings Plan
In connection with its formation and initial public offering, the Company
adopted MOC's 401(k) Savings Plan (the "Savings Plan"). The Savings Plan is
available to all full-time employees upon commencement of their employment and
provides for discretionary matching contributions by the Company. The funds in
the Savings Plan are invested in equity and bond funds at the election of the
participant. The Company-paid matching contributions under the Savings Plan
are made in the form of Common Stock and vest at a rate of 20% per year,
beginning after three years of service. The number of shares contributed is
based on the market price of Common Stock at the date of contribution. The
Savings Plan balances that have vested generally are paid at an employee's
termination of employment or retirement.
Life Insurance Program
The Company provides, at its sole cost, life insurance in the face amount of
$150,000 on each of the lives of Messrs. Murray and Calhoun each of whom is
entitled to designate the beneficiary of the insurance proceeds. During 1999,
the Company paid $454 and $185 in premiums for Messrs. Murray's and Calhoun's
respective policies.
Travel Insurance Program
The Company provides to each of Messrs. Kelly Miller, C.E. Miller, Calhoun
and Murray travel accident insurance in the face amount of $100,000, at no
cost. The insurance covers accidental death and disability in the course of
business or personal travel anywhere in the world. Each covered person is
entitled to designate the beneficiary of the insurance proceeds. During 1999,
the Company paid $176 in premiums for each of the policies.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company served as a member of the compensation
committee (or other board committee performing equivalent functions or, in the
absence of any such committee, the entire board of directors) of another
entity, where one of their executive officers served on the compensation
committee of the Company. No executive officer of the Company served as a
director of another entity, where one of their executive officers served on
the compensation committee of the Company. No executive officer of the Company
served as a member of the compensation committee (or other board committee
performing equivalent functions or, in the absence of any such committee, the
entire board of directors) of another entity, where one of their executive
officers served as a director of the Company.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT
AND CHANGE IN CONTROL ARRANGEMENTS
Employment Agreements
The Company has entered into employment agreements with each of Messrs.
Calhoun and Murray that provide for an annual base salary in an amount not
less than $108,000 for Mr. Calhoun and $112,000 for Mr. Murray. See discussion
of Mr. Kelly Miller's employment agreement under the caption "Compensation of
the Chief Executive Officer". Messrs. Miller, Calhoun and Murray also received
option grants in 1998, pursuant to the 1997 Stock Plan, to purchase 60,000,
25,000 and 100,000 shares, respectively, of Common Stock. The exercise price
of the options is $8.00 per share, except that for 11,350 of Mr. Miller's
60,000 shares, the exercise price is $8.80. The options vest at the rate of
one-fifth per year beginning on the first anniversary of the grant date.
Pursuant to the 1997 Stock Plan, the Company also granted to Messrs. Kelly
Miller, Calhoun and Murray 60,000, 2,000 and 15,000 shares of restricted
Common Stock, respectively, which vest at cumulative annual increments of one-
half of the total number of restricted shares beginning on the first
anniversary of the grant date.
The Company made a one-time grant of 270,000 stock options to Mr.Kelly
Miller pursuant to the terms of a stock option agreement. The exercise price
of the options is $8.00 per share and the options vest at the rate of one-
fifth per year beginning on the first anniversary of the grant date.
17
<PAGE>
No stock options or grants of restricted stock were issued to executive
officers during 1999.
Each of the employment agreements of Messrs. Calhoun and Murray have a
three-year term. Under each agreement, the officer's employment may be
terminated upon his death or "disability," for "cause" or "good reason," (as
those terms are defined in the employment agreement) or for any reason upon 45
days' notice by the employee or at will by the Company. Upon discretionary
termination of employment by the Company or termination by the employee for
good reason, the employee's salary and benefits will be continued for a period
of 52 weeks for Mr. Calhoun and 26 weeks for Mr. Murray. Upon death,
disability, discretionary termination by the employee or termination for
cause, no severance pay will be paid. Upon a "change in control" (as defined
in each employment agreement) of the Company, the employees will receive as
severance pay a lump sum equal to the weekly salary times 52 weeks for Mr.
Calhoun and 26 weeks for Mr. Murray provided the employment agreement is not
assigned and assumed by a successor Company. In addition, upon a "change in
control" the executive employee's unvested stock options and restricted stock
shall vest immediately. Mr. Murray was granted options to purchase 60,000
shares of common stock effective January 1, 2000 as a concession for reducing
the number of weeks of severance pay from 52 to 26 under the severance pay
provisions of his employment agreement described above.
Each of the employment agreements provides that the employee is eligible to
participate in the Company's employee benefit plans, including the Company's
matching 401(k) Savings Plan and the 1997 Stock Plan.
Each of the employment agreements contains certain confidentiality
obligations. In addition, in each agreement the employee agrees not to compete
against the Company for a period of one year following termination in any
county or parish in which the Company has a leasehold interest or active or
pending seismic programs.
Indemnity Agreements
The Company has entered into indemnity agreements with Messrs. Miller,
Calhoun, Murray and Ms. Cannon and with each director of the Company
(collectively, the "Executives"). The indemnity agreements indemnify each
Executive against all expenses incurred in connection with any action or
investigation involving each Executive by reason of his or her position with
the Company (or with another entity at the Company's request). The Executives
also will be indemnified for costs, including judgments, fines and penalties,
indemnifiable under Delaware law or under the terms of any current or future
liability insurance policy maintained by the Company that covers the
Executives. An Executive involved in a derivative suit will be indemnified for
expenses and amounts paid in settlement. Indemnification is dependent in every
instance on the Executive meeting the standards of conduct set forth in the
indemnity agreements. If a potential change in control occurs, the Company
will fund a trust to satisfy its anticipated indemnification obligations.
COMPENSATION COMMITTEE AND STOCK PLAN COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Board of Directors has two standing committees responsible for executive
compensation matters. The Compensation Committee of the Board of Directors
(the "Compensation Committee") develops and recommends to the Board of
Directors the compensation policies of the Company. The Compensation Committee
also administers the Company's compensation plans and recommends for approval
by the Board of Directors the compensation to be paid to the Chief Executive
Officer and, with the advice of the Board of Directors, the other executive
officers of the Company. The Compensation Committee consists of five
directors, none of whom are current or former employees of the Company. The
Stock Plan Committee of the Board of Directors has overall responsibility for
stock option and restricted stock grants, including grant approval and plan
administration. The Stock Plan Committee consists of five directors, none of
whom are current or former employees of the Company.
18
<PAGE>
The basic compensation philosophy of the Company is to provide competitive
salaries as well as competitive incentives to achieve superior financial
performance. The Company's executive compensation policies are designed to
achieve three primary objectives:
. Attract and retain well-qualified executives who will lead the Company
and achieve and inspire superior performance;
. Provide incentives for achievement of specific short-term individual and
corporate goals; and
. Align the interests of management with those of the stockholders to
encourage achievement of increases in stockholder value.
Executive compensation at the Company consists primarily of the following
components: base salary and benefits; amounts paid (if any) under the annual
bonus programs available to certain executive officers (see below); and
participation in the Company's stock option and equity-based incentive plans.
Each component of compensation is designed to accomplish one or more of the
three compensation objectives described above.
Base Salary
To attract and retain well-qualified executives, it is the Compensation
Committee's policy to establish base salaries and provide benefit packages at
levels that the Company believes to be competitive. Base salaries of
executives may be determined in part by comparing each executive's position
with similar positions in companies of similar type, size and financial
performance. In general, the Compensation Committee has targeted salaries to
be commensurate with base salaries paid for comparable positions in comparable
size companies. Other factors that have been considered by the Compensation
Committee are the executive's performance, the executive's current
compensation and the Company's performance (determined by reference to
revenues cash flow, production growth earnings and other factors).
The 1999 average base salaries of executives decreased over the previous
year's level as a result of a combination of factors, including implementation
of a general administrative cost reduction plan during the year.
Stock Option and Restricted Stock Plans
Awards under the Company's 1997 Stock Plan are designed to encourage long-
term investment in the Company by participating executives, to align more
closely executive and stockholder interests and to reward executives and other
employees or building stockholder value. The 1997 Stock Plan Committee
believes stock ownership by management is beneficial and stock awards have
been granted by the Company to executives and other employees since the
Company's formation. Since its formation, the 1997 Stock Plan Committee has
reviewed, modified (to the extent appropriate) and taken final action as to
the employees to be granted options and/or restricted stock and the amount,
timing, price and other terms of the options and/or restricted stock.
Under the Company's 1997 Stock Plan, which has been approved by the
stockholders, executives and other employees may be granted shares of
restricted stock. These shares are subject to restrictions that generally
lapse over a period of three years from the date of grant.
Under the 1997 Stock Plan, executives and other employees may be granted
options to purchase shares of stock, as well as tax benefit rights. The
Company has never granted tax benefit rights and does not have a present
intent of so doing. The Company has granted both incentive stock options and
nonqualified stock options within the meaning of the Code. Most of the options
granted have been incentive stock options with an exercise price equal to the
market price of the Common Stock on the date of the grant. The Company may,
however, grant options with an exercise price above or below the market price
on the date of grant.
Compensation of the Chief Executive Officer
Although the Company intended to have employment agreements in place for the
named executive officers including the CEO, the Compensation Committee has not
yet entered into discussions and negotiations with Mr. Miller regarding his
employment agreement.
19
<PAGE>
Section 162(m) of the Internal Revenue Code of 1986, as amended, provides
that publicly held corporations may not deduct compensation paid to certain
executive officers in excess of $1 million annually, with certain exemptions.
The Company has examined its executive compensation policies in light of
Section 162(m) and the regulations adopted by the Internal Revenue Service to
implement this section. It is not expected that any portion of the Company's
deduction for employee remuneration will be disallowed in 2000 or in future
years by reason of awards granted in 1999.
During 1999, all recommendations of the Compensation Committee were
unanimously approved by the Board of Directors without modification.
Respectfully submitted,
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK PLAN COMMITTEE
<S> <C>
William Casey McManemin, Chairman William Casey McManemin, Chairman
Frank M. Burke, Jr. Frank M. Burke, Jr.
Kenneth J. Foote Kenneth J. Foote
Dan A. Hughes, Jr Dan A. Hughes, Jr.
Richard J. Burgess Richard J. Burgess
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with C.E. Miller and Affiliates
The following information describes agreements or transactions between MOC
and C.E. Miller, Chairman of the Board and a director of the Company and MOC,
or his affiliates:
During April 1999, Eagle Investments Inc., an affiliate of the Company,
purchased certain Company leasehold, producing properties and prospects
(collectively, the "Assets"), and assumed any obligations under existing joint
operating agreements, participation agreements and any other agreements
relating to the Assets. The proceeds from sale of these Assets totaled $3.9
million dollars and were used to meet the Company's May 1 and May 31 scheduled
payment obligations to its senior lender, the Bank of Montreal.
All sales of Assets were subject to the approval of the outside directors of
the Company and the Company had the absolute right to repurchase, on or before
December 31, 1999, all of the Assets purchased by Eagle. The Assets could not
be repurchased individually, and had to be repurchased in their entirety
excepting those Assets where drilling operations had begun. No Assets were
repurchased by the Company during 1999.
Service Agreement. MOC entered into an Amended Service Agreement dated
January 1, 1997, amending a prior service agreement, with Eagle, an oil and
gas exploratory company beneficially owned by C.E. Miller. Under the amended
agreement, MOC provides Eagle with administrative, technical, consulting and
other services required by Eagle to operate its business in the ordinary
course. These services include, among others, developing prospects,
coordinating, permitting, drilling and facility construction and operation,
maintaining joint venture relationships and providing accounting, financial,
tax and budget-preparation services. As compensation for its services, Eagle
agreed to pay MOC a fixed fee of $50,000 per calendar quarter, subject to
annual adjustments to be negotiated by MOC and Eagle, as well as additional
fees for specialized services as agreed by the parties. Eagle also agreed to
reimburse MOC its out-of-pocket expenses incurred in providing the services.
Either party may terminate the agreement at any time upon 60 days' prior
notice. Eagle paid MOC $66,667 under the service arrangement in 1999, which
the Company believes is adequate compensation for the services provided to
Eagle. On March 1, 1999, by mutual agreement, the parties terminated the
Service Agreement effective May 1, 1999.
Sale and Lease of Principal Offices. In July 1996 MOC sold its principal
offices located at 3104 Logan Valley Road, Traverse City, Michigan to C.E.
Miller and Betty Miller for $700,000. The Company is leasing the premises from
Mr. and Mrs. Miller under a five-year lease expiring in August 2001. The lease
has a 4% annual escalation clause. The current monthly rent is $8,072. The
Company believes that the rental rate is representative of the fair market
rental rate for the premises and that the purchase price was representative of
the fair market value of the property at the time of sale.
20
<PAGE>
Certain Exploration Programs
Portions of the Company's exploration activities have been conducted as an
active working interest partner in select projects in Texas and Louisiana by
the Hughes Company under an exploration agreement in effect since 1994. Dan A.
Hughes, Jr., a director of the Company, is a partner in and Exploration
Manager of the Hughes Company. At the time the exploration agreement was
entered into, Mr. Hughes was not a director of the Company. Revenues
attributable to these properties were approximately $0.5 million for fiscal
year 1999. Payments to the Hughes Company for the Company's proportionate
share of leasehold, seismic, drilling and operating expenses amounted to
$794,319 (net of $1,126,321 in control of well insurance reimbursements) in
1999. Substantially all of these properties were sold to an independent third
party during 1999.
Any future material transactions between the Company and its affiliates will
be approved by a majority of the disinterested directors of the Company.
21
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's Common Stock to the Standard & Poor's 500 Stock Index and an
industry index comprised of the common stock of companies in the oil and gas
development and exploration industry (the "Peer Group"), assuming an
investment of $100 on the date of the Offering through December 31, 1998. The
Standard & Poor's 500 Stock Index is a broad equity market index published by
Standard & Poor's. The Peer Group was selected by the Company and includes the
companies listed in the footnote to the graph below. Cumulative total return
is measured by dividing (i) the sum of (a) the cumulative amount of dividends
for the measurement period, assuming dividend reinvestment, and (b) the
difference between the share price at the end and the beginning of the
measurement period; by (ii) the share price at the beginning of the
measurement period.
The dollar values for total stockholder return plotted in the graph below
are shown in the following table:
<TABLE>
<CAPTION>
February 4, December 31, December 31,
1998 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
The Company............................... $100.00 $56.25 $13.68
S & P 500................................. 100.00 122.08 145.92
Peer Group................................ 100.00 59.56 48.5
</TABLE>
COMPARISON OF CUMULATIVE
TOTAL STOCKHOLDER RETURN
[GRAPH APPEARS HERE]
* The Peer Group includes [Edge Petroleum Co., Bellwether Exploration Co.,
Titan Exploration, Inc., Clayton Williams Energy, Key Production Co.,
Remington Oil & Gas Corp., Parallel Petroleum Corp., Vista Energy Resources,
Wiser Oil Corp., Brigham Exploration Co. and Harken Energy Corp.]
22
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
officers, and persons who beneficially own more than 10% of the outstanding
shares of Common Stock, to file reports of ownership and changes in ownership
of shares of Common Stock with the Securities and Exchange Commission.
Directors, officers and greater than 10% beneficial owners are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) reports they file. To the Company's knowledge,
based on its review of the copies of such reports received by it, or written
representations from certain reporting persons that no reports on Form 5 were
required for those persons for the 1999 fiscal year, and the Company believes
that its officers and directors complied with all applicable filing
requirements during the Company's last fiscal year, except that the Form 5 for
Mr. Kelly Miller for 1999 was inadvertently filed 21 days beyond the filing
deadline.
PROPOSAL FOUR:
RATIFICATION OF AUDITORS
The Board of Directors has selected Arthur Andersen LLP as the auditors of
the Company for the current fiscal year. The Company expects that
representatives of Arthur Andersen LLP will be present at the Annual Meeting
to respond to appropriate questions and will have an opportunity to make a
statement if they desire to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE
FOR THE RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
AUDITORS FOR 2000.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the annual meeting of
stockholders in the year 2001 and that a stockholder would like to have
included in the proxy statement and form of proxy relating to that meeting
must be received by the Company for consideration not later than January 15,
2001, to be considered for inclusion in the proxy statement and form of proxy
relating to that meeting. The Company's management will have discretionary
voting authority with respect to stockholder proposals raised at the next
annual meeting of stockholders which are not submitted to the Company at least
45 days prior to such meeting, without including any discussion of the matter
in the proxy statement.
SOLICITATION OF PROXIES
Solicitation of proxies will be made initially by mail. In addition,
directors, officers and employees of the Company and its subsidiaries may
solicit proxies by telephone or facsimile or personally without additional
compensation. Proxies may be solicited by nominees and other fiduciaries who
may mail materials to or otherwise communicate with the beneficial owners of
shares held by them. The Company will bear all costs of solicitation of
proxies, including the charges and expenses of brokerage firms, banks,
trustees or other nominees for forwarding proxy materials to beneficial
owners. The Company has engaged its stock transfer agent, American Stock
Transfer an Trust Company to assist in solicitation of proxies.
By Order of the Board of Directors
Deanna L. Cannon
Vice President-Finance and Secretary
April 25, 2000
23
<PAGE>
ANNEX "A"
MILLER EXPLORATION COMPANY
EXPLORATION COMPANYAMENDED AND RESTATED EQUITY COMPENSATION PLAN FOR
NON-EMPLOYEE DIRECTORS
SECTION 1
Establishment and Purpose of Plan
The Company hereby amends and restates its Equity Compensation Plan for Non-
Employee Directors (the "Plan") in its entirety. The purposes of the Plan are
to provide a means by which non-employee directors increase their financial
interest in the Company, and thereby increase their personal interest in the
Company's continued success, through the payment of directors' fees in Company
Common Stock.
SECTION 2
Definitions
The following words have the following meanings unless a different meaning
is plainly required by the context:
2.1 "Award" means the award of Common Stock to a Participant under the
Plan.
2.2 "Committee" means a committee designated by the Board of Directors of
the Company to administer the Plan or, if no committee is designated, the
Board of Directors.
2.3 "Common Stock" means the Common Stock of the Company, $.01 par value.
2.4 "Company" means Miller Exploration Company, a Delaware corporation.
2.5 "Director's Fee" means the amount of income payable to a Participant
for service as a director of the Company for a fiscal year, including without
limitation payments for attendance at meetings of the Board of Directors or
meetings of committee of the Board of Directors, and any retainer fee paid to
members of the Board of Directors, but excluding reimbursement costs.
2.6 "Market Value" of any security on any given date means, if the security
is listed for trading on The Nasdaq Market or one or more national securities
exchanges, the last reported sales price on the date in question, or if such
security shall not have been traded on such principal exchange on such date,
the last reported sales price on the first day prior thereto on which such
security was so traded.
2.7 "Non-Employee Director" shall mean a director of the Company who is not
employed by the Company or its subsidiaries.
2.8 "participant" means the Non-Employee Directors of the Company who are
granted Awards under the Plan.
A-1
<PAGE>
SECTION 3
Administration
3.1 Power and Authority. The Committee shall administer the Plan. Except as
limited in this Plan, the Committee shall have full power and authority to
interpret the provisions of the Plan and Awards granted under the Plan, to
supervise the administration of the Plan and to make all other determinations
considered necessary or advisable under the Plan. All determinations,
interpretations, and selections made by the Committee regarding the Plan shall
be final and conclusive. The Committee may delegate recordkeeping,
calculation, payment, and other ministerial administrative functions to
individuals designated by the Committee, who may be employees of the Company.
3.2 Awards to Participants. In accordance with and subject to the
provisions of the Plan, the Committee shall have the authority to grant Awards
under the Plan.
3.3 Indemnification of Committee Members. Neither any member or former
member of the Committee nor any individual to whom authority is or has been
delegated shall be personally responsible or liable for any act or omission in
connection with the performance of powers or duties or the exercise of
discretion or judgment in the administration and implementation of the Plan.
Each person who is or shall have been a member of the Committee shall be
indemnified and held harmless by the Company from and against any cost,
liability, or expense imposed or incurred in connection with such person's or
the Committee's taking or failing to take any action under the Plan. Each such
person shall be justified in relying on information furnished in connection
with the Plan's administration by any appropriate person or persons.
SECTION 4
Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.2, a
maximum of 320,000 shares of Common Stock shall be available for Awards under
the Plan. Such shares may be authorized but unissued shares.
4.2 Adjustments. If the number of shares of Common Stock outstanding
changes by reason of a stock dividend, stock split, recapitalization, merger,
consolidation, combination, exchange of shares, or any other change in the
corporate structure or shares of the Company, the aggregate number and class
of shares available for Awards under the Plan shall be appropriately adjusted.
No fractional shares shall be issued pursuant to the Plan, and any fractional
shares resulting from adjustments shall be eliminated from the respective
Award, with an appropriate cash adjustment for the value of any Awards
eliminated.
SECTION 5
Awards
5.1 Grant. In accordance with the provisions of Section 5.3, each Non-
Employee Director shall receive an Award in respect of any Director=s Fee that
would otherwise be payable to such Non-Employee Director.
A-2
<PAGE>
5.2 Determination of Number of Shares. The number of shares of Common Stock
(rounded to the nearest whole share) to be awarded to a Participant shall be
calculated by dividing the dollar amount of a Participant=s Director=s Fee for
a fiscal year by the Market Value of the Common Stock on the day before the
payment date.
5.3 Time of Payment by the Company. The Company shall distribute or cause
to be distributed to a Participant the number of shares of Common Stock as
calculated in Section 5.2 on or before the 45th day after the end of the
Company=s fiscal year in which the Director=s Fees are earned. The time of
payment may be amended before or after an Award (a) by the Committee in its
sole discretion, if the terms of such amendment benefits the Participant, or
(b) in all other cases, by the Committee with the consent of the Participant.
SECTION 6
General Provisions
6.1 No Rights to Awards. No Participant or other person shall have any
claim to be granted any Award, and there is no obligation of uniformity of
treatment of Participants. The terms and conditions of the Awards of the same
type and the determination of the Committee to grant a waiver or modification
of any Award and the terms and conditions thereof need not be the same with
respect to each Participant.
6.2 Compliance With Laws; Listing and Registration of Shares. All issuances
of Common Stock under the Plan shall be subject to applicable laws, rules, and
regulations, and to the requirement that if at any time the Committee
determines, in its sole discretion, that the listing, registration, or
qualification of the shares covered thereby upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in connection
with, the issue of shares thereunder, such Award may not be granted in whole
or in part, unless and until such listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Committee.
6.3 No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements, including the grant of options and other
stock-based awards, and such arrangements may be either generally applicable
or applicable only in specific cases.
6.4 No Right to Directorship. The grant of an Award shall not be construed
as giving a Participant the right to be retained in the directorship of the
Company.
6.5 Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in
accordance with the laws of the State of Delaware and applicable federal law.
6.6 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
6.7 Unfunded Plan. This Plan shall be an unfunded plan within the meaning
of the Internal Revenue Code of 1986, as amended. Benefits provided in the
Plan constitute only an unsecured contractual promise to pay in accordance
with the terms of the Plan by the Company.
A-3
<PAGE>
SECTION 7
Effective Date and Duration of the Plan
This Plan initially took effect December 7, 1998, which was the effective
date of approval by the Board of Directors. This Plan as initially adopted was
approved by the stockholders of the Company on June 11, 1999. The amended and
restated Plan was approved by the Board of Directors on February 25, 2000 and
approved by the stockholders of the Company on May 26, 2000. Unless earlier
terminated by the Board of Directors, no Award shall be granted under this
Plan after December 6, 2008.
SECTION 8
Termination and Amendment
The Board may terminate the Plan at any time, or may from time to time amend
the Plan, provided that no such amendment may impair any outstanding Award
without the consent of the Participant. No termination, amendment, or
modification of the Plan shall become effective with respect to any Award
previously granted under the Plan without the prior written consent of the
Participant holding such Award unless such amendment or modification benefits
the Participant.
A-4
<PAGE>
MILLER EXPLORATION COMPANY
Three Allen Center, Suite 4605, Houston TX 77702
This Proxy is Solicited on behalf of the Board of Directors
The undersigned hereby appoints Kelly E. Miller and Deanna L. Cannon as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them, to represent and vote, as designated on the reverse side, all shares of
Common Stock of Miller Exploration Company (the "Company") held of record by the
undersigned on April 10, 2000, at the Annual Meeting of Stockholders to be held
on May 26, 2000 or any adjournment thereof.
(To be Signed on Reverse Side.)
<PAGE>
<TABLE>
<S> <C>
[X] Please mark your
votes as in this
example.
WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
1. To elect three Nominees: Richard J. Burgess 2. To amend the company's 1997 Stock Option and
directors of [_] [_] Dan A. Hughes, Jr. Restricted Stock Plan to increase the number [_] [_] [_]
the Company Kelly E. Miller of authorized shares of common stock
issuable under the plan from 1,200,000 to
1,900,000.
FOR, except vote withheld from
the following nominee(s):
3. To amend the Company's Equity Compensation
__________________________________ Plan for Non-Employee Directors to increase [_] [_] [_]
the number of authorized shares of common
stock issuable under the plan from 120,000
to 320,000 and to provide that director
less be paid in stock only.
4. To ratify the selection of Arthur Andersen
LLP as the Company's independent [_] [_] [_]
accountants for the year ending December
31, 2000.
SIGNATURE(S)_________________________________________________________________ DATE____________________, 2000
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such.
</TABLE>
