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ENEX
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ENEX RESOURCES CORPORATION
Three Kingwood Place Suite 200
800 Rockmead Drive
Kingwood, Texas 77339
INFORMATION STATEMENT
Background
As of the close of business on March 16, 1998, the holders of more than 78% of
the outstanding shares of the common stock of ENEX Resources Corporation
("Enex") had tendered their shares to Middle Bay Oil Company, Inc. ("Middle
Bay") pursuant to Middle Bay's offer to purchase all of Enex's outstanding
common stock for $15.00 per share, in cash. On March 17, 1998, Enex received
Middle Bay's written assurances that Middle Bay would accept all tendered shares
at the expiration of the tender offer on March 20, 1998. If no additional shares
are tendered, the aggregate amount to be paid by Middle Bay will be $15,724,230
in cash, plus payments to holders of options to purchase 143,000 shares of Enex
common stock outstanding on March 17, 1998. As a result, Middle Bay will own not
fewer than 1,048,282 of the total of 1,342,672 shares of Enex common stock now
outstanding, and Enex will become a subsidiary of Middle Bay.
In order to facilitate Middle Bay's tender offer, on March 17, 1998, the Enex
Board of Directors took the following steps:
(1) Added three (3) Middle Bay nominees to the Enex Board of Directors to
facilitate the transfer of control of Enex to Middle Bay. The three new
directors, whose appointment increased total board membership from six to nine
members, are Middle Bay's President, John J. Bassett, its Vice President for
Corporate Development, Stephen W. Herod, and one of its non-employee directors,
Gary R. Christopher. Messrs. Bassett, Herod, and Christopher will hold office
until the next annual meeting of Enex stockholders and until their successors
are elected and qualified.
(2) Approved the acquisition of the tendered shares of Enex common stock by
Middle Bay pursuant to Section 203 of the Delaware General Corporation Law; and
(3) Amended the Rights Agreement between Enex and its transfer agent, American
Stock Transfer, Incorporated, dated September 4, 1990, as amended through April
12,1994, to make the stock purchase rights created by the agreement inapplicable
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to transactions which are approved by Enex's Board of Directors and to increase
the rights exercise price to $33.00 to reinstate the approximate ratio between
the exercise price and the market price of Enex common stock, prior to Middle
Bay's tender offer, to that which was in effect (approximately 3 to 1) when the
rights were created.
In addition, Gerald B. Eckley and the five other Enex directors elected by
Enex's stockholders, Robert D. Carl, III, William C. Hooper, Jr., Martin J.
Freedman, James T. Shorney, and Stuart Strasner (collectively, the "Incumbent
Enex Directors") have tendered their resignations, effective upon the successful
completion of the tender offer. As soon as possible, but not sooner than the
tenth day after this Information Statement is mailed to all of the stockholders
of Enex, Messrs. Bassett, Herod, and Christopher are expected to appoint four
(4) additional individuals to fill the vacancies caused by those resignations.
According to information provided to Enex by Middle Bay, the source of the
consideration to be paid for the shares of the tendering Enex stockholders is
available cash and working capital and a drawdown of approximately $15,000,000
under Middle Bay's revolving credit facility with the Bank of Oklahoma, N.A. The
loan requires Middle Bay to cause Enex, a subsidiary of Middle Bay, to become a
party to and pledge certain of its assets as collateral under the credit
facility. The loan agreement provides for a $50,000,000 convertible revolving
line of credit pursuant to which the Bank, with other participating banks, shall
extend from time to time loans to Middle Bay and its subsidiaries for
Bank-approved purposes to the extent of Middle Bay's available "collateral
borrowing base" as provided in the loan agreement. The collateral borrowing base
is determined from time to time by the Bank based on evaluations of the oil and
gas reserves attributable to Middle Bays and its subsidiaries' interests in
proven producing oil and gas properties. The extension of credit by the Bank to
Middle Bay for the purpose of acquiring Enex shares was approved in light of the
Bank's evaluation of Enexs proven producing reserves and their contribution to
Middle Bay's bank borrowing base.
The loans extended under the credit facility may convert to a 72 month term loan
on or after March 31, 1998, payable in equal monthly payments of principal plus
interest at variable rates at either bank prime or 1.75 - 2.00 points above the
London Interbank Offered Rates quoted from time to time at the election of
Middle Bay.
Reference is made to Middle Bay's Offer to Purchase dated February 19, 1998 (the
"Offer to Purchase") and the related Letter of Transmittal, which was provided
to all Enex stockholders in February for additional information concerning
Middle Bay, an oil and gas company engaged in the exploration for oil and gas in
the United States, its tender offer, the letter of intent entered into between
Enex and Middle Bay on January 29, 1998, and the "Board Action Condition" the
steps taken by the Enex Board of Directors on March 17, 1998 was intended to
satisfy. Additional information about Enex stockholdings, about Messrs. Bassett,
Herod, and Christopher and the additional directors they will appoint, and about
certain other matters appears below.
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New Directors
With the addition of the three new board members, Enex has nine directors,
divided into three classes. One class of directors is elected by the
stockholders annually. Currently, the directors are classified as follows:
Directors whose terms expire in:
1998 1999 2000
Robert D. Carl, III Martin J. Freedman Gerald B. Eckley
Stuart Strasner James T. Shorney William C. Hooper, Jr.
John J. Bassett
Stephen W. Herod
Gary R. Christopher
Set forth below is certain information furnished by and concerning the three
current directors who will not be resigning from the Board and the four nominees
who are expected to be appointed to the Board following the resignation of the
Incumbent Enex Directors. The additional directors to be appointed will hold
office for the unexpired terms of the directors they will be replacing and until
their successors are elected and qualified.
Position; Principal Occupation or
Name Employment; Five-Year Employment History
John J. Bassett: Mr. Bassett, age 39, is Middle Bay's President and Chief
Executive Officer, a position he has held since 1992. Mr. Bassett has also
served as the Chairman of the Board of Directors of Middle Bay since 1992. He
has also served as President, chief executive officer and a director of Bay City
Energy Group, Inc., a company that explores for oil and gas in the United States
and is a principal shareholder of Middle Bay, since 1987. Stephen W. Herod Mr.
Herod, age 39, currently serves as Vice President for Corporate Development and
as a director of Middle Bay, positions he has held since July, 1997. From April,
1992 to June, 1997 Mr. Herod served as President of Shore Oil Company, a
privately held independent exploration company, which was acquired by Middle Bay
in July, 1997.
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Gary R. Christopher: Mr. Christopher, age 48, is the Acquisition Coordinator for
Kaiser- Francis Oil Company, a position he has held since February, 1995. From
January, 1993, to February, 1995, Mr. Christopher served as Senior Vice
President and Manager of Energy Lending for the Bank of Oklahoma, which he
continues to serve as a consultant. Mr. Christopher has been a director of
Middle Bay since May, 1997. He also serves on the Board of PetroCorp
Incorporated and is a member of the society of Petroleum engineers and the
Society of Petroleum Evaluation Engineers.
Frank E. Bolling, Jr.: Mr. Bolling, age 39, is Vice President of Midstream Fuel
Service, Inc. and its Pepco-Retail Division, a distributor for Chevron U.S.A.,
Inc. From 1993 to 1995, Mr. Bolling served as General Manager of the Dantzler
Bulk Division of Fuel Services, Inc., a distributor for Chevron U.S.A., Inc. Mr.
Bolling has been a director of Middle Bay since 1995.
Alvin V. Shoemaker: Mr. Shoemaker, age 59, has been principally occupied for the
past five years as a private investor. From 1986 to 1994, Mr. Shoemaker served
as Chairman of the Board of Trustees of the University of Pennsylvania. He has
also served as Vice Chairman of the Securities Industry Association, and as a
director of Harcourt Brace Jovanovich, Royal Insurance of America, the Council
on Foreign Relations and the Wharton School of Finance. Mr. Shoemaker has been a
director of Middle Bay since July, 1997. He also serves on the Board of Hanover
Compressor Co.
Edward P. Turner, Jr.: Mr. Turner is a managing partner of the law firm of
Turner, Onderdonk, Kimbrough & Howell, P.A., of Chatom, Alabama, with which he
has been associated for over 25 years. Mr. Turner has served as a director of
Middle Bay since its inception in 1992. He is also a director of BCEG, Inc. and
President and a director of ERW, Inc.
Board of Directors and Committees
Enex's Board of Directors held seven meetings in 1997. Of the Incumbent Enex
Directors, none attended fewer than 75% of the aggregate number of meetings of
the Board of Directors and the Committees on which they serve that were held
during the period that they served. None of Messrs. Bassett, Herod and
Christopher was a director at the time of the most recent meeting of the Board
of Directors. Enex has no executive committee or nominating committee.
The functions of Enex's Audit Committee, currently consisting of Messrs. Hooper,
Strasner and Carl, include recommending the engagement and discharge of the
independent
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auditors, directing and supervising special investigations, reviewing with the
independent auditors the plan and results of Enex's procedures for internal
auditing, approving each professional service provided by the independent
auditors, considering the range of audit and nonaudit fees and reviewing the
adequacy of Enex's system of internal accounting controls. The Audit Committee
held three meetings in 1997.
The functions of Enex's Compensation and Options Committee, currently consisting
of Messrs. Hooper, Freedman and Shorney, are to review and determine salaries
for officers and certain key employees, to administer Enex's 1991 Non-Qualified
Stock Option Plan and to review and determine the officers and employees to whom
stock options should be granted, the number of shares to be optioned and the
option price to be paid, and to review and determine bonuses and other special
awards of employee compensation and benefits. The Compensation and Options
Committee held three meetings in 1997.
Section 162(m) of the Internal Revenue Code generally limits the annual
corporate tax deduction for compensation paid to executive officers named in the
Summary Compensation Table below to $1 million, unless certain requirements are
met. The Compensation and Options Committee has determined that it is not
necessary to modify any currently existing compensation arrangements or
incentive plans because all compensation paid to executive officers under
existing arrangements and plans would either be less than the deductibility
limit or exempted under the transition provisions provided in the Regulations.
The Committee intends to monitor Enex's compensation and benefit plans to insure
that Enex's corporate tax deduction is maximized without limiting Enex's
flexibility to attract and retain qualified executives to manage Enex.
Enex's directors are not personally liable for monetary damages to Enex or to
its stockholders in instances in which directors have unintentionally breached
their fiduciary duty to Enex. Thus, neither Enex nor its stockholders have the
right to bring an action for damages against a director in cases involving an
error in judgement or otherwise arising from the director's failure to exercise
due care in carrying out his responsibilities as a director, unless the
director's conduct involved a breach of the director's duty of loyalty to Enex,
was not taken in good faith, provided an improper personal benefit to the
director or involved the payment of an unlawful dividend, stock repurchase or
stock redemption.
Security Ownership of Certain Beneficial Owners and Management
As of March 16, 1998, there were 1,342,672 shares of Enex common stock issued
and outstanding. The following table sets forth the ownership of Enex common
stock held (i) by each person who owns of record or who is known by Enex to own
beneficially more than 5% of such stock as of such date, (ii) by each of the
current directors and each of the Middle Bay nominees who will be appointed as
directors of Enex as of such date, (iii) by each of the executive officers of
Enex named in the Summary Compensation Table below, as of such date, and (iv)
all of Enex's directors, nominees and executive officers as a group, as of such
date. The number of shares and the percentage of the class beneficially owned by
the persons named in the table and by all directors, nominees and executive
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officers as a group is presented in accordance with SEC Rule 13d-3 and includes,
in addition to shares actually issued and outstanding, unissued shares which are
subject to issuance upon exercise of options within 60 days. Except as other-
wise indicated, the persons named in the table have sole voting and dispositive
power with respect to all securities listed.
Number of Shares Percent
Beneficially Owned of Class
Names and Addresses of Beneficial Owners
FMR Corp.
82 Devonshire Street
Boston, MA 02109.............. 144,300 (1) 10.75%
Franklin/Templeton Group of Funds
777 Mariners Island Blvd.
San Mateo, CA 94404............ 128,100 (2) 9.54%
Directors, Nominees and Executive Officers (3)
Gerald B. Eckley.................. 315,000 22.86%
Robert D. Carl, III............... 15,000 1.10%
William C. Hooper, Jr. ........... 18,000 1.32%
Martin J. Freedman................ 32,700 2.41%
James T. Shorney.................. 15,000 1.10%
Stuart Strasner................... 15,000 1.10%
James A. Klein.................... 45,950 3.35%
John J. Bassett................... - (4) - %
Stephen W. Herod.................. - (4) - %
Gary R. Christopher............... - (4) - %
C. J. Lett, III................... - (4) - %
Frank E. Bolling, Jr.............. - (4) - %
Alvin V. Shoemaker................ - (4) - %
Edward P. Turner, Jr.............. - (4) - %
Directors, Nominees and Executive Officers
as a group (14 persons........... 456,650 (4) 30.74%
(1) FMR Corp. ("FMR") is a holding company one of whose principal assets is the
capital stock of Fidelity Management and Research Company ("Fidelity"), the
investment advisor to a large number of investment companies (the "Fidelity
Funds"), including the Fidelity Low-Priced Stock Fund (the "Fund"), which owns
the shares shown in the table. The Fund, FMR, through its control of Fidelity,
and the Chairman of FMR each has sole power to dispose of such shares. Neither
FMR nor its principal shareholders has the sole power to vote or direct the
voting of such shares, which power resides with the Fidelity Funds' Board of
Trustees. Fidelity carries out the voting of the shares under written guidelines
established by the Fidelity Funds' Board of Trustees. All information regarding
FMR was obtained from Amendment No. 6 to Schedule 13G filed by FMR with the SEC
on February 14, 1998.
(2) Franklin Resources, Inc. ("FRI"), a holding company whose subsidiaries
include a bank, broker- dealers, and the investment advisors to a large number
of investment companies (the "Franklin/Templeton Funds"), has reported that the
above shares are held for the benefit of the Franklin Balance Sheet Investment
Fund ("FBSIF"), which has the right to receive dividends on
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and the proceeds from the sale of such shares. FRI has reported that it has the
sole power to vote, and shares with Franklin Advisors, Inc. (the investment
advisor to FBSIF), the power to dispose of such shares. All information
regarding FRI was obtained from Amendment No. 3 to Schedule 13G filed by FRI
with the SEC on February 12, 1997.
(3) 800 Rockmead, Three Kingwood Place, Suite 200, Kingwood, TX 77339 is the
address for all directors, nominees and executive officers. Actual ownership of
outstanding shares, excluding unissued shares subject to options is as follows:
Mr. Eckley - 280,000 shares, 20.85%; Mr. Freedman - 17,700 shares, 1.32%; Mr.
Klein - 15,950 shares, 1.19%; and all directors, nominees and executive officers
as a group - 313,650 shares, 23.36%.
(4) Does not include any shares tendered to Middle Bay, on whose board of
directors these named individuals serve.
Executive Compensation
There is shown below information concerning the annual and long-term
compensation for services in all capacities to Enex for the fiscal years ended
December 31, 1995, 1996 and 1997, of those persons who were (i) the chief
executive officer and (ii) the other executive officers of Enex (the "Named
Officers") who earned at least $100,000 during the fiscal year ended December
31, 1997:
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Name Shares All
and Underlying Other
Principal Position Year Salary Bonus Options Compensation
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Gerald B. Eckley 1997 $240,000 $54,984 25,000 $370,000 (1)
President, 1996 $240,000 $53,000 - 0 - $ 23,368 (2)
Chief Executive Officer 1995 $240,000 $32,400 - 0 - $ 21,175 (2)
James A. Klein 1997 $ 71,167 $33,874 25,000 $ 76,875 (1)
Controller
(1) The amounts shown represent the value realized upon the exercise of options
to purchase Enex common stock.
(2) The amounts shown represent the aggregate value of monthly contributions of
shares of Enex's common stock equal to 50% of a participant's open market
purchases of Enex's common stock for the preceding month (limited to a maximum
of 2,500 shares per participant per year) pursuant to Enex's Employee Stock
Purchase Program (the "Program"). All officers, directors and full-time
employees were eligible to participate in the Program until it was terminated in
1996.
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Option Grants
On January 15, 1997 non-qualified options to purchase a total of 75,000 shares
were awarded to three executive officers (including Mr. Eckley - 25,000 and Mr.
Klein - 25,000) and options for an additional 10,000 shares were awarded to each
of the Company's five non- employee directors. These options, which expire
January 15, 2007, are exercisable at $9.875 per share, which was equal to the
fair market value of the Company's Common Stock on the date of grant. All of the
options were immediately exercisable.
Option Exercises and Year-End Values
Shown below is information concerning the exercise and year-end values of the
options to purchase Enex's common stock granted in prior years for the Named
Officers and held by them at December 31, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
Number of Shares
Underlying Unexercised
Number of Options at December 31, 1997
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable
<S> <C> <C> <C>
Gerald B. Eckley 60,000 $ 370,000 35,000 -
James A. Klein 12,500 $ 76,875 30,000 -
Value of
Unexercised In-the-Money
Options at December 31, 1997 (1)
Name Exercisable Unexercisable
Gerald B. Eckley $ 66,875 $0
James A. Klein $ 50,625 $0
</TABLE>
(1) The dollar values are calculated by determining the difference between the
fair market value of the securities underlying the options and the exercise
price of the options at fiscal year-end.
Compensation of Directors
During 1997, each non-employee director received $1,200 as compensation for each
meeting which he attended in person and $1,800 per calendar quarter.
Employment Agreement
The employment agreement between Enex and its founder and president, Gerald B.
Eckley, provides for a minimum salary of $200,000 per year for a five-year term
beginning each May 19. Salary increases are at the discretion of the Board of
Directors. Mr. Eckley's base salary was $240,000 in 1997. So long as Mr. Eckley
is employed by Enex, the agreement will be automatically extended for an
additional year every May 19 unless Mr. Eckley or the Board elects to terminate
the automatic extension feature. The agreement provides for compensation
continuation benefits in the event of Mr. Eckley's death or disability. If Mr.
Eckley terminates
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the agreement following a change of control of Enex, for a breach of the
material provisions of the agreement or because performance of his duties
becomes hazardous to his health, he will remain entitled to the full base
compensation then in effect, as severance pay, until the expiration of the
agreement.
Mr. Eckley and Middle Bay are expected to enter into a Consulting Agreement
which will replace Mr. Eckley's employment agreement upon his resignation as
Enex's president and chief executive officer, which is scheduled to occur on
April 1, 1998. The terms of the Consulting Agreement have not yet been finalized
but are expected to provide that Mr. Eckley will be paid $20,000 per month by
Middle Bay for approximately four years. If the Consulting Agreement is not
entered into, Mr. Eckley's employment agreement will continue in effect.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and regulations of the SEC
thereunder require Enex's executive officers and directors and persons who own
more than ten percent of Enex's common stock ("Reporting Persons") to file
initial reports of ownership and changes in ownership with the SEC. Reporting
Persons are required by SEC regulation to furnish Enex with copies of all
Section 16(a) forms they file. Based solely on its review of the copies of such
forms received by Enex and written representations that no other reports were
required for those persons, Enex believes that all filing requirements
applicable to its Reporting Persons were complied with for the fiscal year ended
December 31, 1997.
By Order of the Board of Directors
/s/ Gerald B. Eckley
GERALD B. ECKLEY
President
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