ALAMCO, INC.
200 West Main Street, Clarksburg, West Virginia 26301
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1995
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The Annual Meeting of Stockholders of Alamco, Inc. (the "Company") will be
held at the Bridgeport Country Club in Bridgeport, West Virginia, on Friday,
May 12, 1995 at 10:00 a.m., E.D.T., for the following purposes:
1. To elect one director to serve for a one year term expiring at the
1996 Annual Meeting of Stockholders and to elect two directors each to
serve for a three year term expiring at the 1998 Annual Meeting of
Stockholders;
2. To amend the Alamco, Inc. 1992 Employees Stock Option Plan to increase
the maximum number of shares of Common Stock to be issued under the
Plan from 100,000 to 250,000 (the "Stock Option Plan Amendment");
3. To approve and adopt an amendment to Article IV of the Certificate of
Incorporation of the Company to increase the authorized capital of the
Company from 8,500,000 shares to 16,000,000 shares, of which autho-
rized Common Stock shall be increased from 7,500,000 shares, par value
of $.10 per share, to 15,000,000 shares, par value of $.10 per share
(the "Capital Stock Proposal"); and
4. To transact such other business as may properly be brought before
the meeting or any adjournment or adjournments thereof.
A Proxy Statement containing information for stockholders is attached
hereto.
Only holders of the Company's Common Stock of record at the close of
business on March 24, 1995, will be entitled to notice of and to vote at the
meeting and any and all adjournments thereof. A list of stockholders entitled
to vote at the meeting will be available at the offices of the Company, 200 West
Main Street, Clarksburg, West Virginia. Stockholders may examine this list
during ordinary business hours in the 10-day period before the meeting. The
list will also be available for inspection at the meeting.
By order of the Board of Directors,
Jane Merandi, Secretary
April 13, 1995
IMPORTANT
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE,
SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. PROMPT
RETURN OF THE PROXY WILL ASSURE A QUORUM AND SAVE THE COMPANY UNNECES-
SARY EXPENSE.
TABLE OF CONTENTS
PAGE
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
DIRECTORS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 3
Committees of the Board . . . . . . . . . . . . . . . . . . . . . . . 4
Directors' Compensation . . . . . . . . . . . . . . . . . . . . . . . 5
Compensation Committee Interlocks . . . . . . . . . . . . . . . . . . 6
THE STOCK OPTION PLAN AMENDMENT . . . . . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Reasons for the Plan Amendment . . . . . . . . . . . . . . . . . . . . 6
Description of the Plan as Amended . . . . . . . . . . . . . . . . . . 7
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . 8
Incentive Stock Options . . . . . . . . . . . . . . . . . . . . . . 8
Nonqualified Stock Options . . . . . . . . . . . . . . . . . . . . 8
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE CAPITAL STOCK PROPOSAL . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Increase in Authorized Capital . . . . . . . . . . . . . . . . . . . 10
Possible Anti-takeover Effects . . . . . . . . . . . . . . . . . . . 10
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Board Recommendation . . . . . . . . . . . . . . . . . . . . . . . . 12
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . 12
Summary Compensation Table . . . . . . . . . . . . . . . . . . . . 13
Option Grants Table . . . . . . . . . . . . . . . . . . . . . . . . 14
Option Exercises and Year-End Value Table . . . . . . . . . . . . . 15
Report of the Compensation Committee . . . . . . . . . . . . . . . . 15
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . 17
Stockholder Return Performance Presentation . . . . . . . . . . . . 18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Security Ownership of Management . . . . . . . . . . . . . . . . . . 19
Principal Stockholders . . . . . . . . . . . . . . . . . . . . . . . 19
Compliance with Section 16 of the Exchange Act . . . . . . . . . . . 19
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS . . . . . . . . . . . 20
SUBMISSION DATE FOR STOCKHOLDER PROPOSALS AND
DIRECTOR NOMINATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 20
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ALAMCO, INC.
200 WEST MAIN STREET, CLARKSBURG, WEST VIRGINIA 26301
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PROXY STATEMENT
----------------------
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 12, 1995
-----------------------
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
Proxies on behalf of the Board of Directors of Alamco, Inc. (the "Company") of
holders of the Company's Common Stock, par value $0.10 per share (the "Common
Stock") for use at the Annual Meeting of Stockholders (the "Meeting") to be held
on Friday, May 12, 1995, and at any and all adjournments thereof. The approxi-
mate date on which this Proxy Statement and the enclosed form of Proxy will
first be sent to stockholders is on or about April 13, 1995.
At the Meeting, the Company's stockholders will be asked: (1) to elect one
director to serve for a one year term expiring at the 1996 Annual Meeting of
Stockholders and to elect two directors each to serve for a three year term
expiring at the 1998 Annual Meeting of Stockholders; (2) to amend the Alamco,
Inc. 1992 Employees Stock Option Plan to increase the maximum number of shares
of Common Stock to be issued under the Plan from 100,000 to 250,000 (the "Stock
Option Plan Amendment"); (3) to approve and adopt an amendment to Article IV of
the Certificate of Incorporation of the Company to increase the authorized
capital of the Company from 8,500,000 shares to 16,000,000 shares, of which
authorized Common Stock shall be increased from 7,500,000 shares, par value of
$.10 per share, to 15,000,000 shares, par value of $.10 per share (the "Capital
Stock Proposal"); and (4) to transact such other business as may properly be
brought before the meeting or any adjournment or adjournments thereof.
Only holders of record of the Company's Common Stock as of the close of
business on March 24, 1995 (the "Record Date") are entitled to notice of and to
vote at the Meeting and at any and all adjournments thereof. On that date there
were 4,660,064 shares of Common Stock of the Company outstanding and entitled to
vote. Holders of Common Stock are entitled to one vote per share. The pres-
ence, in person or by Proxy, of the holders of a majority of the outstanding
shares of Common Stock entitled to vote at the Meeting shall constitute a
quorum.
When the enclosed Proxy is executed, dated, and returned prior to the date
of the Meeting, the shares represented thereby will be voted by the persons
named as Proxies in accordance with the stockholder's directions. If no choice
is specified, the Proxy will be voted FOR the election of the nominees listed,
FOR the Stock Option Plan Amendment and FOR the Capital Stock Proposal. Shares
represented by Proxies marked as abstentions on any matter will not be voted on
that matter, although they will be counted for quorum purposes. Broker's shares
held in "street name" and not voted by them will not be counted in tabulating
votes, although if such shares are represented at the Meeting, they will be
counted for quorum purposes.
Any stockholder may revoke his or her Proxy at any time prior to its use at
the Meeting by giving written notice to the Secretary of the Company at the
above address, or by signing and delivering to the above address a Proxy bearing
a later date. Attendance at the Meeting will not have the effect of revoking a
Proxy unless the stockholder so attending shall, in writing, so notify the
Secretary of the Company at any time prior to the voting of the Proxy.
The cost of solicitation of the enclosed Proxy will be borne by the
Company. Solicitation of the Proxies may be made personally, or by mail,
telephone, or telegraph, by regularly employed officers and employees of the
Company (who will not be specifically compensated for such services). The
Company has also retained Chemical Bank to assist in the solicitation of
Proxies. The Company anticipates that the assistance provided by Chemical Bank
will cost approximately $5,000. The Company will reimburse banks, brokerage
firms and others for reasonable expenses incurred in forwarding solicitation
materials to beneficial owners of shares.
The Company's 1994 Annual Report on Form 10-K is being mailed to stock-
holders concurrently with these proxy materials. Stockholders who wish to
receive additional copies of the Company's 1994 Annual Report may do so by
making a written request to the Company directed to the attention of the
Secretary of Alamco, Inc., P. O. Box 1740, Clarksburg, West Virginia 26302-1740.
ELECTION OF DIRECTORS
Pursuant to the Certificate of Incorporation, the Board of Directors is
divided into three classes, each consisting of one-third of such directors, as
nearly as possible. The number of directors has been set at seven, and at each
annual meeting of stockholders, one class of directors is elected for a term of
three years. The Executive Committee of the Board of Directors has recommended
to the Board and the Board has nominated James B. Gehr for election for a term
of one year, to be added to the class which will hold office until the 1996
Annual Meeting of Stockholders, and Robert S. Maust and Thomas M. Levine for
election for a term of three years, to hold office until the 1998 Annual Meeting
of Stockholders, and until each of their respective successors are duly elected
and qualified. All three men are current members of the Board of Directors
whose terms expire at the Meeting.
Unless the Company receives instructions to the contrary, the enclosed
Proxy, properly executed and returned, will be voted FOR the three above-named
nominees. The management of the Company is not aware of any circumstances that
would preclude the nominees from serving if elected. However, should any
nominee become unable or unwilling to serve as a director prior to the Meeting,
all Proxies authorizing votes for such nominee will be voted for the election of
such other person as the Board of Directors may recommend in his place, unless
the Board of Directors shall reduce the number of directors by the number of
such nominees so unable or unwilling to serve.
If a quorum is present, the directors will be elected by a plurality of the
votes of the shares of Common Stock present in person or represented by proxy at
the Meeting and entitled to vote. Stockholders of the Company do not vote
cumulatively in the election of directors.
Information regarding the nominees and the other continuing directors is
set forth below:
<TABLE>
<S><C>
DIRECTORS OF THE COMPANY
Shares of
Common Stock
For a Term Beneficially Owned Percent of
Name and Director to Expire (As of March 1, Common Stock (as of
Principal Occupation<1> Age Since In 1995) March 1, 1995)
Robert S. Maust 57 1987 1998 23,092<2><3> *
Chairperson,
Dept. of Accounting,
College of Business and
Economics,
West Virginia University
Thomas M. Levine 45 1995 1998 -0- *
Executive Vice President
Fostin Capital Corp.
Pittsburgh, Pennsylvania
(a venture capital
investment management
company)<4>
James H. Weber 61 1993 1997 3,923 *
Business and Financial
Consultant and Former
Executive Partner for
Coopers & Lybrand<5>
Richard R. Hoffman 44 1988 1997 74,010<7> 1.5%
Executive Vice President
and Chief Operating
Officer of the
Company<6>
James B. Gehr 64 1972 1996 63,253<2><8> 1.3%
President of Natural Gas
Resources (a private
corporation engaged in
acquisition of oil and
gas properties); and
oil and gas consultant
Stephen L. Barr 43 1989 1996 9,960<2> *
Managing Director
Chemical Securities, Inc.
Houston, Texas
John L. Schwager 46 1986 1996 146,219<9> 3.1%
Chief Executive Officer
and President of the
Company
</End Table>
* Denotes less than 1% ownership interest.
- ------------------
<F1> Except as otherwise indicated, each nominee and director has held
the principal occupation listed by his name during the last five
years.
<F2> Shares beneficially owned by Messrs. Gehr, Maust and Barr include
1,200 shares, 2,000 shares and 1,200 shares, respectively, which
each such director has the right to acquire upon the exercise of
stock options under the Alamco, Inc. 1982 Outside Directors' Stock
Option Plan. The per share average exercise price of such options
held by Messrs. Gehr, Maust and Barr are $3.67, $3.325 and $3.67,
respectively. Such options have expiration dates ranging from
November 7, 1997 to November 7, 2001. See "DIRECTOR'S OF THE
COMPANY - DIRECTOR'S COMPENSATION STOCK OPTIONS".
<F3> The shares beneficially owned by Mr. Maust include 1,200 shares
held as joint tenant with his wife, Brenda, 100 shares held in
trust with Mr. Maust as the trustee and as to which Mr. Maust has
sole voting control, and 1,000 shares held in trust for Mr. Maust's
son, Jason, as to which Mr. Maust has sole voting control.
<F4> Mr. Levine, an attorney, has held this position since 1982. He also
serves as general partner of several venture capital partnerships of
which Fostin is the managing general partner. Mr. Levine was elected
to the Board on March 23, 1995 and is also a member of the Board of
Directors of DMI Furniture, Inc., a public company.
<F5> Mr. Weber, elected as a Director in December 1993, retired from
Coopers & Lybrand accounting firm in 1993 as Executive Partner, and
has been serving as a business and financial consultant since then.
From 1976 to 1989 he served as Managing Partner of the Pittsburgh,
Pennsylvania office for Coopers & Lybrand.
<F6> Prior to being elected on December 13, 1990 as the Company's Execu-
tive Vice President and Chief Operating Officer, Mr. Hoffman
served as Senior Vice President, Exploration and Production from
November 1988 through December 1990.
<F7> The number of shares of Common Stock beneficially owned by Mr.
Hoffman includes 71,833 shares which he has the right to acquire
upon the exercise of currently exercisable stock options and 2,177
shares that have been allocated to his account under the Alamco,
Inc. Employee Savings and Protection Plan.
<F8> The shares beneficially owned by Mr. Gehr include 120 shares held
by his wife.
<F9> The number of shares of Common Stock beneficially owned by Mr.
Schwager includes 91,233 shares which he has the right to acquire
upon the exercise of currently exercisable stock options, 120
shares held jointly with his wife, Carol, and 3,766 shares that
have been allocated to his account under the Alamco, Inc. Employee
Savings and Protection Plan.
Mr. Claron Dawson, a director of the Company since 1981, retired from the
Board in May 1994.
During 1994, there were seven meetings of the Board of Directors. All
incumbent members of the Board of Directors attended at least seventy-five
percent of the meetings held by the Board of Directors and the committees of the
Board of Directors of which they were members, with the exception of Mr. Levine,
who was elected to the Board in March 1995.
There is no family relationship among the directors and executive officers
of the Company.
COMMITTEES OF THE BOARD
At present, the standing committees of the Board of Directors consist
of the Executive Committee, the Audit Committee and the Compensation Committee.
The Executive Committee held one meeting during 1994. Its members are John L.
Schwager (Chairman), Robert S. Maust and Stephen L. Barr. The functions
performed by the Executive Committee include handling important Board matters
that arise between Board meetings, serving as the Board's direct link to senior
management on important issues requiring close Board attention and recommending
to the Board nominations for election to the Board. The Executive Committee,
with the exception of Mr. Schwager, also conducts searches for new directors.
The Audit Committee held four meetings in 1994. Its members are
Robert S. Maust (Chairman), James B. Gehr, Stephen L. Barr and James H. Weber.
The functions performed by the Audit Committee include reviewing internal
financial information, monitoring cash flow, budget variances and credit
arrangements, reviewing the audit program of the Company, reviewing with the
Company's independent public accountants the results of all audits upon their
completion, annually selecting and recommending independent public accountants,
overseeing the quarterly unaudited reporting process and taking such other
action as may be necessary to assure the adequacy and integrity of all financial
information distributed by the Company.
The Compensation Committee held three meetings in 1994. Its members are
James B. Gehr (Chairman) and James H. Weber. The functions performed by the
Compensation Committee include recommending to the Board compensation levels of
senior management, working with senior management on benefit and compensation
programs for Company employees and monitoring local and national compensation
trends to ensure that the Company's compensation program is competitive locally
and within the oil and gas industry.
DIRECTORS' COMPENSATION
STANDARD ARRANGEMENTS. For 1994, Directors who were employees of the
Company received the same fees as those Directors who were neither officers nor
employees of the Company (the "Outside Directors"). During 1994, all Directors
were entitled to receive an annual fee of $12,000, a fee of $500 per Board or
Committee meeting attended ($250 if attended via telephonic conference), as well
as reimbursement for all expenses incurred in connection with Company business.
An increase in meeting fees from $500 to $750 was approved by the Board to be
effective January 1, 1995. Additionally, Outside Directors serving on the
Executive Committee received an annual fee of $1,500 and Mr. Maust received an
additional annual fee of $1,500 as chairman of the Audit Committee. Mr.
Schwager received an annual fee of $15,000 for acting as Chairman of the Board.
See "EXECUTIVE COMPENSATION EMPLOYMENT AGREEMENTS". By electing to do so
prior to the end of the year in which fees are earned, Outside Directors may
defer receipt of their fees until termination of their services as a director.
OTHER ARRANGEMENTS. The Alamco, Inc. 1992 Equity Compensation Plan for
Outside Directors (the "1992 Outside Directors' Plan") became effective on
March 20, 1992, after stockholder approval was given on May 8, 1992. The 1992
Outside Directors' Plan provides that up to 75,000 shares of Common Stock may be
issued thereunder. At December 31, 1994, the number of shares available for
issuance was 58,574 shares. Under the 1992 Outside Directors' Plan, each
Outside Director automatically receives fifty percent of his annual fee (exclu-
sive of fees for attending meetings of the Board or any Committee thereof) (the
"Annual Retainer") in the form of Common Stock. Additionally, each Outside
Director may elect to receive any or all of the remaining cash balance of his
Annual Retainer in the form of Common Stock, provided that he notifies the
Secretary of the Company in writing of such election on or before the last day
of December of the prior year. For 1994, Mr. Maust elected to receive sixty-
five percent (65%) of his total Annual Retainer in Common Stock and Mr. Barr
elected to receive seventy-five percent (75%) of his total Annual Retainer in
Common Stock.
The total number of shares of Common Stock issued to an Outside Director
pursuant to the 1992 Outside Directors' Plan is determined by dividing the
dollar amount of the Outside Director's Annual Retainer that is to be paid in
Common Stock by the "Fair Market Value" of a share of Common Stock. For the
purposes of the 1992 Outside Directors' Plan, Fair Market Value means the
closing price of the Common Stock as reported on the American Stock Exchange on
July 1 (or if not a trading day the next preceding day on which there was a sale
of Common Stock) for the Annual Term for which the Annual Retainer is due and
payable. "Annual Term" means the period of time from the date of an Annual
Meeting of the Company's Stockholders in one year to the day before the date of
the Annual Meeting of the Company's Stockholders in the following year.
Fractional shares of Common Stock will not be issued. Cash equal to the Fair
Market Value of such fractional share will be paid in lieu thereof. The shares
of Common Stock issuable to an Outside Director pursuant to the 1992 Outside
Directors' Plan will be issued and any remaining cash portion of the Annual
Retainer will be paid to such Outside Director on July 1 of each year, or if not
a business day, the next succeeding business day.
An Outside Director who is elected at an Annual Meeting of Stockholders
of the Company to serve on the Board of Directors for the first time will
receive fifty percent of his Annual Retainer in the form of Common Stock and the
remaining fifty percent in cash.
STOCK OPTIONS. With the exceptions of Mr. Weber and Mr. Levine, each of
the existing Outside Directors has the right to acquire shares of Common Stock
upon the exercise of stock options under the Alamco, Inc. 1982 Outside Director-
s' Stock Option Plan. While no further options are available for grant,
existing options have expiration dates ranging from November 7, 1997, to
November 7, 2001.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Gehr, Chairman of the Compensation Committee, is a former officer of
the Company. Mr. Gehr resigned as President of the Company on January 1, 1987.
STOCK OPTION PLAN AMENDMENT
GENERAL
The Alamco, Inc. 1992 Employees Stock Option Plan (the "Plan") was
adopted by the Company's Board of Directors on March 20, 1992, and approved by
the Stockholders on May 8, 1992. As originally adopted, the Plan provided for
100,000 shares as the maximum number of shares available to be issued pursuant
to all grants of options (the "Options") made under the Plan. Such shares may
be from the Company's authorized and unissued shares of Common Stock and/or
treasury shares. As of March 1, 1995, Options to purchase 64,500 shares had
been granted to various officers and key management employees of the Company,
leaving only 35,500 shares available for issuance under the Plan. Therefore,
the Board on March 24, 1995, unanimously agreed to amend the Plan by increasing
the maximum number of shares available for issuance under in the Plan by 150,000
shares to a total of 250,000 shares of Common Stock. In order to ensure that
the Plan continues to comply with Section 162(m) of the Internal Revenue Code,
the Board also approved the establishment of a 150,000 share maximum on the
amount of Options that may be awarded to an employee in any calendar year.
REASONS FOR THE PLAN AMENDMENT
The Board of Directors believes that the Amendment will allow the Board
the flexibility to continue providing incentives to officers and key management
employees of the Company on a tax-efficient basis by enabling such employees to
participate in the long-term growth of the Company.
The Company recognizes the importance of continuing to attract and retain
employees with the requisite degree of training, experience and ability, and of
stimulating the active interest of these persons in the continued development
and success of the Company. The Board of Directors believes that the Plan will
accomplish that objective by encouraging a sense of proprietorship and loyalty
in persons whose services are particularly valuable to the Company. In the
opinion of the Board of Directors, the award of compensation in the form of
stock options is a valuable tool in attracting and motivating qualified employ-
ees, and the interest of the Company and its stockholders is thereby advanced.
The Board also believes it is important to comply in most circumstances with the
deduction limitations of Section 162(m) of the Internal Revenue Code by struc-
turing options as "performance-based compensation".
DESCRIPTION OF THE PLAN AS AMENDED
The Plan, administered by the Compensation Committee of the Company's
Board of Directors (the "Committee"), provides for Options to be available for
grant to certain officers (including members of the Board of Directors who are
employees of the Company) and key management employees of the Company. These
Options are granted at the discretion of the Committee and may be either
Incentive Stock Options within the meaning of Section 422 of the Internal
Revenue Code ("ISOs"), or Nonqualified Stock Options ("NSOs"), or a combination
thereof. In addition to determining the employees who are eligible and whether
an Option will be an NSO or an ISO, under the Plan the Committee designates the
number of shares covered by the Option, the date of the grant, the time and
conditions of the exercise of each Option, and the amounts, if any, of any
additional compensation (described below) which may be paid under the Plan.
In order to ensure compliance with Section 162(m) of the Internal Revenue
Code, the maximum number of shares which will be awarded under the Plan to any
employee in a given calendar year will be 150,000 shares of Common Stock.
The exercise price of Options granted under the Plan shall be equal to
one hundred percent (100%) of the fair market value per share of the Common
Stock on the date of the granting of the Option except with respect to ISOs
granted to a ten percent (10%) stockholder of the Company, in which case the
exercise price must not be less than one hundred ten percent (110%) of the fair
market value. The exercise price of the Option is payable in cash, upon
exercise, or may be paid with shares of Common Stock, under certain conditions.
The Plan provides for Options to be exercisable after the expiration of
six months from the date of grant, or later as determined by the Committee, and
until an optionee ceases to be an employee (Options remain exercisable for 30
days after the date the optionee ceases to be an employee to the extent the
Options are exercisable on the termination date) or until the expiration date.
Options shall expire under the terms of the Plan no later than the tenth
anniversary of the date the Option is granted. Additionally, Options granted
under the Plan are not assignable or transferrable, except by will or under the
laws of descent and distribution.
Under certain conditions, if the Company shall effect a merger, consoli-
dation or other reorganization, the Company shall use its best efforts to
provide for optionees to have the right to purchase the kind and number of
shares which he or she would have the right to purchase immediately prior to the
effective date of such event (including shares which relate to an Option not yet
exercisable). However, in the event that such plan or agreement does not grant
the optionee such right within ten (10) days preceding the effective date of
such merger, consolidation or other reorganization, all exercisable Options will
continue to be exercisable upon their terms, and all Options not yet exercisable
shall become immediately exercisable at the exercise price set forth therein.
Unless the applicable Option Agreement provides otherwise, if an optionee
exercises an Option, in whole or in part, and as a direct result thereof he or
she is deemed under the applicable federal or state income tax law to have
realized taxable ordinary compensation income, the Company shall pay in cash to
such optionee or such other person, as additional compensation for the optionee-
's services, an amount equal to the lesser of (a) the sum of (i) the amount by
which the state and federal income tax liability of the Company shall be reduced
in any taxable year as a direct result of the allowance of a deduction on
account of the exercise of the Option in whole or in part and (ii) the amount by
which the federal and state income tax liability of the Company shall be reduced
in any taxable year on account of the making of such cash payment to such
optionee and (b) an amount which, after the application of federal and state
income taxes to such cash payment, equals the additional federal and state
income tax payable by such optionee on account of his or her exercise of the
Option.
The Plan may be terminated or amended at any time by the Board of
Directors except that stockholder approval is required if the amendment would
(i) increase the maximum number of shares available for issuance, (ii) change
the designation of persons eligible to receive Options or (iii) change the
exercise price at which shares may be sold. The Plan shall terminate March 20,
2002, unless terminated prior thereto by action of the Board. No further grants
shall be made from the Plan after termination; provided, however, that termina-
tion shall not affect the right of any optionee with respect to grants made
prior to termination.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. An optionee will not, under current federal
income tax laws, realize any taxable income upon the grant or the exercise of an
ISO. However, some optionees may be subject to the "alternative minimum tax"
and the amount by which the fair market value of the shares on the date of
exercise exceeds the exercise price will generally be added to the optionee's
income for purposes of calculating his or her alternative minimum taxable
income.
The federal income tax consequences to an optionee who sells Common Stock
acquired by exercise of an ISO will depend on whether the optionee has met two
holding period requirements. These holding periods are: (1) two years from the
date the ISO was granted and (2) one year from the date that the optionee
exercises the ISO. If the optionee sells Common Stock acquired by exercise of
an ISO and satisfies both of these holding periods, the optionee will recognize
long-term capital gain (or loss) equal to the difference between the optionee's
tax basis in the Common Stock and the amount realized on the disposition.
If shares of Common Stock acquired upon exercise of an ISO are disposed
of before the expiration of both of these holding periods, the optionee may
realize ordinary income in the year of such disposition. The amount of the
ordinary income realized will generally be equal to the lesser of (i) the excess
of the fair market value of the shares on the exercise date (or, if such shares
are subject to restrictions on the date of exercise, the date such restrictions
lapse) over the exercise price paid, or (ii) the amount of gain realized on the
disposition. Any additional gain recognized upon such disposition will be taxed
as either long-term or short-term capital gain, depending on whether the
applicable gain holding period has been satisfied.
NON-QUALIFIED STOCK OPTIONS. An optionee will not, under current laws,
realize any taxable income upon the grant of a NSO. Upon exercise of the NSO,
the amount by which the fair market value of the shares at the time of exercise
exceeds the exercise price will constitute compensation income to the optionee
in the year of exercise and will be subjected to tax at ordinary income tax
rates. If the optionee thereafter sells the shares, the difference between any
amount realized on such sale and the fair market value of the shares at the time
of exercise will be taxed as capital gain or loss, which will be short-term or
long-term, depending on the length of time the optionee held the shares before
sale.
The Company will be entitled to a deduction for federal income tax
purposes in the same year in which the optionee recognized ordinary income with
respect to an Option. The Company's deduction will equal the amount the
optionee recognizes as income. The Company may satisfy any federal, state or
local withholding tax requirements by withholding appropriate amounts from the
optionee or by requiring the optionee to remit to the Company an amount suffi-
cient to satisfy such withholding obligations.
VOTE REQUIRED
Approval of the Stock Option Plan Amendment requires the affirmative vote
of the holders of at least a majority of the shares of Common Stock present in
person or by proxy at the Meeting.
BOARD RECOMMENDATION
The Board of Directors has unanimously approved the Stock Option Plan
Amendment, amending the 1992 Alamco, Inc. Employees Stock Option Plan and
recommends that the Company's stockholders vote FOR the approval of the Stock
Option Plan Amendment.
THE CAPITAL STOCK PROPOSAL
GENERAL
The Board of Directors, on March 24, 1995, unanimously approved the
amendment of, and recommends to the stockholders of the Company the approval and
adoption of, a proposal (the "Capital Stock Proposal") to amend the Company's
Certificate of Incorporation (the "Certificate of Incorporation") to increase
the authorized capital of the Company from eight million five hundred (8,500,00-
0) shares to sixteen million (16,000,000) shares, of which authorized Common
Stock shall be increased from seven million five hundred (7,500,000) shares to
fifteen million (15,000,000) shares. The Capital Stock Proposal will not effect
a change in the authorized Preferred Stock of the Company. The Capital Stock
Proposal may be deemed to have an anti-takeover effect as described more fully
under "Possible Anti-Takeover Effects". If the Capital Stock Proposal is
approved, the first paragraph of Article IV of the Certificate will be amended
and restated to read in its entirety as follows:
ARTICLE IV.
Capital Stock
The total number of shares of all classes of capital stock which the
Corporation shall have the authority to issue is sixteen million
(16,000,000) shares, of which fifteen million (15,000,000) shares shall
be Common Stock with a par value of ten cents ($0.10) per share, and of
which one million (1,000,000) shares shall be Preferred Stock with a par
value of One Dollar ($1.00) per share, and the shares of Common Stock and
Preferred Stock are expressly authorized to be issued by the Board of
Directors from time to time in one or more classes of stock, voting or
non-voting, or in one or more series of stock within any class thereof,
and the Board of Directors is expressly authorized to determine, in a
resolution providing for the issuance of any class or series of Common
Stock or Preferred Stock, the designations, preferences, dividend rate,
redemption provisions, sinking fund provisions, rights on liquidation or
dissolution, voting power, conversion rights, and other preferences and
relative, participating, option or other special rights and qualifica-
tions or restrictions, of shares of such class or series not fixed and
determined by the Certificate of Incorporation."
In addition, no change shall be effected by the Capital Stock Proposal to
the Company's Certificate of Designations, Preferences and Rights of Series A
Preferred Stock as filed with the Secretary of State of the State of Delaware on
December 2, 1994.
INCREASE IN AUTHORIZED CAPITAL
The Company's Certificate of Incorporation presently authorizes the
issuance of up to seven million five hundred (7,500,000) shares of Common
Stock. As of March 1, 1995, there were 4,660,064 shares of Common Stock issued
and outstanding (exclusive of 53,049 shares held by the Company as treasury
shares). In addition, there were four hundred eighty-three thousand two hundred
(483,200) shares of Common Stock reserved for issuance under various employee
incentive compensation plans and sixty two thousand nine hundred seventy four
(62,974) shares of Common Stock reserved for issuance under compensation and
option plans for outside directors. Accordingly, there are only 2,256,762
authorized shares of Common Stock unissued and not reserved for future issuance.
The Company's Board of Directors believes that the proposed amendment to
Article IV of the Certificate of Incorporation to increase the authorized Common
Stock will provide the Company with an adequate supply of shares available for
general corporate purposes. If approved by the stockholders of the Company,
such additional authorized shares would be available for issuance without
further stockholder approval. The Board of Directors considers the proposed
increase in authorized Common Stock desirable because it would provide the
Company with the ability to take advantage of future opportunities for the
issuance of equity in connection with financings, possible future acquisitions,
and for other general corporate purposes, including stock dividends, stock
splits and employee benefit plans, without the delay and expense incident to the
holding of a special meeting of stockholders to consider any specific issuance.
Such additional shares could also be issued in a public offering or privately
placed in order to raise capital for various purposes. The rules of the
American Stock Exchange, Inc. (the "AMEX"), the exchange on which the Common
Stock is listed, may, however, require stockholder approval in certain circum-
stances prior to the sale or issuance of additional shares of Common Stock.
While the AMEX does not require stockholder approval as a prerequisite to
approval of applications to list additional shares to be issued in a public
offering, the AMEX does require stockholder approval to list additional shares
to be issued in connection with transactions such as those (1) involving the
acquisition of the stock or assets of another company where the present or
potential issuance of Common Stock, or securities convertible into Common Stock,
could result in an increase in outstanding common shares of twenty percent (20%)
or more, and (2) involving the sale or issuance by the Company of Common Stock
(or securities convertible into Common Stock) equal to twenty percent (20%) or
more of presently outstanding Common Stock for less than the greater of book
value or market value.
Currently, the Company is not engaged in any negotiations concerning the
issuance of any shares of Common Stock, nor are there any plans, commitments,
agreements or understandings relating to the issuance of any additional shares
of Common Stock except as described herein under the "Stock Option Plan Amend-
ment" and the Rights Agreement described below. The timing of the actual issu-
ance of additional shares will depend upon market conditions, the specific
purpose for which the stock is to be issued and other similar factors.
While the Board of Directors is of the opinion that the proposed amend-
ment is in the best interests of the Company and its stockholders, the Board
recognizes that the amendment may have some disadvantages to the stockholders.
The issuance of additional shares of Common Stock may have a dilutive effect on
earnings per share and in the voting power of existing holders of Common Stock.
POSSIBLE ANTI-TAKEOVER EFFECTS
The primary purpose of the Capital Stock Proposal is to provide the
Company with the flexibility to raise additional capital from the sale of shares
of Common Stock and to take advantage of possible future opportunities for which
the issuance of additional shares of Common Stock may be deemed advisable
without the delay and expense incident to calling a special meeting of the
Company's stockholders in any case in which such a meeting would not otherwise
be required.
The issuance of additional shares of Common Stock may be deemed to have
an anti-takeover effect since such shares may be used, under certain circum-
stances, to create voting impediments to frustrate persons seeking to effect a
takeover or otherwise gain control of the Company. The increase in authorized
Common Stock may also be viewed as having the effect of discouraging an attempt
by another person or entity, through the acquisition of a substantial number of
shares of the Common Stock, to acquire control of the Company, since the
issuance of additional shares may be used to dilute such person's ownership of
shares of the Company's voting stock.
The Capital Stock Proposal has not been proposed as an anti-takeover
measure nor is the Board of Directors aware of any offers to acquire control of
the Company. It should be noted that any action taken by the Company to
discourage an attempt to acquire control of the Company may result in stockhold-
ers not being able to participate in any possible premiums which may be obtained
in the absence of anti-takeover provisions. Any transaction which may be so
discouraged or avoided could be a transaction that the Company's stockholders
might consider to be in their best interests. However, the Board of Directors
has a fiduciary duty to act in the best interests of the Company's stockholders
at all times.
The Company's Certificate of Incorporation and By-laws already contain
certain provisions that may make more difficult a change in control of the
Company not having the approval of the Board of Directors. The Certificate of
Incorporation currently authorizes the Board of Directors to issue up to one
million (1,000,000) shares of Preferred Stock without further action, authori-
zation or approval of the Company's stockholders of such Preferred Stock. Of
such Preferred Stock, 100,000 shares have been designated as Series A Preferred
Stock and may be issued upon certain events described in the Company's Rights
Agreement with Chemical Bank. Such Rights Agreement may be deemed to have an
anti-takeover effect by making it more difficult to effect a change in control
of the Company without obtaining the approval of the Board of Directors. Such
issuance, however, may be subject to certain AMEX rules. Additionally, the
Certificate of Incorporation provides for "blank check" common and preferred
stock which may be divided into series without specified designations and issued
by the Board of Directors.
The Certificate of Incorporation also specifies that the Board of
Directors shall be divided into three (3) classes, each class being elected for
a term of three years expiring at successive yearly intervals. Any vacancies in
the Board of Directors shall only be filled by a vote of two-thirds of the
remaining Board as set forth in the Certificate of Incorporation. Further, the
Certificate of Incorporation provides that a decrease in the number of directors
will not shorten the term of any incumbent. As to voting provisions, the
Certificate of Incorporation specifies that stockholder action may only be taken
at a meeting of the stockholders unless otherwise provided for in the By-laws.
The By-laws specifically deny the power of stockholders to consent in writing,
without a meeting, to the taking of any action. Finally, the Certificate of
Incorporation requires a super majority vote by the holders of two-thirds of the
outstanding shares of Common Stock to amend or repeal the provisions in the
Certificate relating to (1) stockholder action without a meeting, (2) the
classified board of directors, and (3) the super majority voting provision
itself.
The By-laws of the Company provide that a special meeting of stockholders
may only be called by the President at the request in writing of a majority of
the Board of Directors or at the request in writing of a majority of the holders
of two-thirds of the issued and outstanding capital stock entitled to vote at
such a meeting. According to the By-laws, for a stockholders meeting, the
holders of a majority of the issued and outstanding capital stock entitled to
vote at the meeting shall constitute a quorum. In order for a stockholder to
propose nominations for directors, the By-laws require specific steps to be
followed, as discussed in "Submission Date for Stockholder Proposals and
Director Nominations".
The By-laws further provide that the number of directors may be increased
or decreased by one within any twelve (12) month period by the affirmative vote
of the majority of the Board of Directors or by more than one with the affirma-
tive vote of at least two-thirds of the Board. In order for officers to be
removed, the By-laws require a removal with cause to be voted in the affirmative
by a majority of the whole Board of Directors, or without cause, an affirmative
vote of at least one-third of the whole Board is required.
The By-laws also require the affirmative vote of two-thirds of the Board
to amend the By-law provisions relating to (1) special meetings of stockholders,
(2) stockholder action without a meeting, (3) director nominations, (4) number
of directors, (5) removal of officers, and (6) certain By-law amendments.
Additionally, certain transactions with the Company may be subject to
Section 203 of the Delaware General Corporation Law, which regulates certain
"business combinations" with "interested stockholders".
Any new shares of Common Stock, when issued, would have the same rights
and privileges as the shares of Common Stock presently outstanding, and would be
available for issuance at such time and on such terms as the Board of Directors
may consider appropriate.
The Company intends to file a Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware which integrates into a single
instrument all of the provisions of its Certificate of Incorporation which are
in effect and operative and have been previously filed.
VOTE REQUIRED
An affirmative vote of the holders of a majority of the outstanding
Common Stock entitled to vote at the Annual Meeting is required to adopt the
Capital Stock Proposal. Accordingly, abstentions and broker non-votes will be
counted as negative votes and could have a significant effect on the outcome of
this proposal. Proxies solicited by the Board will be voted in favor of the
adoption of the Capital Stock Proposal to amend Article IV of the Certificate of
Incorporation unless otherwise indicated thereon.
BOARD RECOMMENDATION
The Board of Directors unanimously recommends a vote FOR adoption of the
Capital Stock Proposal to amend the Certificate of Incorporation to increase the
capital of the Company.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the Chief
Executive Officer ("CEO") of the Company and by each other executive officer of
the Company whose total salary and bonus exceeded $100,000 in 1994.
</TABLE>
<TABLE>
<S><C>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Long-Term
Other Compensation All
Name and Annual Awards Other
Principal Salary Bonus Compensation Compensation
Options
Position Year ($) ($) ($) ($)
(#)
John L. Schwager 1994 146,000<1> 30,000<2> 31,250<3> 7,900<4> 6,123<5>
President and 1993 169,000 30,000<6> 16,367<7> 100,000 8,523<5>
Chief Executive Officer 1992 163,000 30,000<6> 7,786<5>
Richard R. Hoffman 1994 90,000<8> 20,000 16,000<9> 100,000 4,989<10>
Executive Vice 1993 97,000 20,000 4,919<10>
President and 1992 92,000 22,000 4,487<10>
Chief Operating Officer
</TABLE>
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<F1> The Schwager Employment Agreement (as hereinafter defined) provided for a
base salary of $138,000 for 1994, and a minimum of $168,500 for 1995 and
1996, as well as certain Company-provided benefits. See "EXECUTIVE
COMPENSATION EMPLOYMENT AGREEMENTS".
<F2> Mr. Schwager was granted a $30,000 bonus for the Company's 1994 perfor-
mance, $7,400 of which was paid on December 31, 1994, $7,600 of which was
paid on January 15, 1995, and $15,000 of which will be paid on October
15, 1995.
<F3> Director's fees as follows: $12,000 annual retainer; $15,000 chairman
fees, and; $4,250 meeting fees.
<F4> These options were nonqualifed stock options which replaced incentive
stock options with the same number of shares and the same material terms.
<F5> The 1994 amount includes contributions made by the Company, as well as
reallocated forfeitures, under the Alamco, Inc. Employee Savings and
Protection Plan (the "401(k) Plan") of $2,495 in cash and 539 shares of
Common Stock. The 1993 amount includes contributions made by the Company
under such plan of $2,428 in cash and 979 shares of Common Stock. The
1992 amount includes contributions made by the Company under such plan of
$2,182 in cash and 1,148 shares of Common Stock.
<F6> On June 15, 1993, and November 1, 1992, Mr. Schwager was granted bonuses
of $30,000 each, triggered by the market price of the Company's Common
Stock averaging $6.00 per share and $5.00 per share, respectively, over a
60 consecutive trading day period. See "EXECUTIVE COMPENSATION EMPLOY-
MENT AGREEMENTS".
<F7> The Company paid additional compensation of $16,367 to Mr. Schwager in
July 1993 upon his exercise of certain stock options under the terms of
the Stock Option Agreement dated May 12, 1988 as reimbursement for
increased income taxes based on the amount by which the tax liability of
the Company was reduced.
<F8> In 1994, the Hoffman Employment Agreement (as hereinafter defined)
provided for a base salary of $83,000 and certain other Company-provided
cash benefits. In December 1994, the Board elected to increase his base
salary to $100,500 for 1995. See "EXECUTIVE COMPENSATION EMPLOYMENT
AGREEMENTS".
<F9> $12,000 annual retainer and $4,000 in meeting fees for Director's compen-
sation.
<F10> The 1994 amount includes $2,329 in cash and 395 shares of Common Stock
contributed by the Company as well as reallocated forfeitures under the
401(k) Plan. The 1993 amount includes contributions made by the Company
under such plan of $1,895 in cash and 485 shares of Common Stock. The
1992 amount includes $1,470 in cash and 618 shares of Common Stock.
</END TABLE>
The Company has no long-term incentive compensation plan involving the award of
restricted stock or options that are subject to performance-based conditions.
OPTION GRANTS TABLE
The following table sets forth those stock options granted by the Company in
1994 to the CEO. The Company did not grant any stock options to the other
named executive officer, nor did it grant any stock appreciation rights.
<TABLE>
<S><C>
OPTION GRANTS TABLE
OPTION GRANTS IN 1994
Potential Realizable Value at
Assumed Rates of Stock Price
Appreciation for
Individual Grants Option Term<1>
% of Total
Options
Options Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
John L. Schwager 7,900<2> 17% $2.50 12/30/95 $31,057 $33,476
</TABLE>
- -------------------------
<F1> The product of (a) the difference between: (i) the product of the
per-share market price at the time of grant and the sum of 1 plus
the adjusted stock price appreciation rate compounded annually
over the term of the option; and (ii) the per-share exercise price
of the option; and (b) the number of securities underlying the
grant at fiscal year-end.
<F2> These stock options were granted as replacement options for those
options granted December 31, 1985, which replacements provided for
the same number of shares, the same exercise price and the same
expiration date; however, the new options are nonqualified stock
options and are replacing incentive stock options. See "EXECUTIVE
COMPENSATION REPORT OF THE COMPENSATION COMMITTEE".
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information concerning the exercise of
stock options during 1994 by the Company's CEO and the other named executive
officer of the Company, and the year-end value of unexercised options held by
these persons.
<TABLE>
<S><C>
YEAR-END OPTION VALUE TABLE
AGGREGATED OPTION VALUES FOR 1994 YEAR-END
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Shares Shares
Acquired Exercisable/ Exercisable/
Name On Exercise (#) Value Realized ($) Unexercisable Unexercisable<1>
John L. Schwager -0- -0- 91,233/66,667 $151,554/(41,667)
Richard R. Hoffman -0- -0- 71,833/66,667 $102,354/(41,667)
</END TABLE>
- -----------------------
<F1> For all unexercised options held as of December 31, 1994, the
aggregate dollar value of the excess of the market value of the
stock underlying those options over the exercise price of those
unexercised options. On December 30, 1994, the closing sales
price of the Common Stock was $6.125 per share. These values are
shown separately for those options that were exercisable and those
options that were not yet exercisable on December 31, 1994.
Report of the Compensation Committee
The Compensation Committee has prepared the following report in accordance
with the disclosure rules relating to executive compensation. This report does
not constitute soliciting materials nor is it filed for purposes of Section 18
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Further, this information is excluded from, and is not to be considered as
incorporated by reference into, any of the Company's prior or future filings
under the Exchange Act or Securities Act of 1933, as amended (the "Securities
Act").
TO: The Board of Directors
As members of the Compensation Committee (the "Committee"), it is our
duty to administer the Company's various incentive plans, including the Alamco
401(k) Plan and the Alamco, Inc. 1992 Employees Stock Option Plan. The Commit-
tee ensures that such plans are competitive and that they serve to attract and
retain those employees who contribute significantly to the profitability of the
Company and maximize stockholder value. We also review the performance and
compensation levels of the Chief Executive Officer ("CEO") and the other three
executive officers of the Company, consulting with the other Outside Directors
on these matters.
The Committee is responsible for ensuring that executive compensation is
based on an evaluation of individual and corporate performance. The Committee
believes that compensation should vary with performance and should be driven by
the long-term interests of the stockholders. The Committee's basic strategic
compensation principles are as follows:
* Compensation at all levels should be competitive with comparable organi-
zations and should reward performance and contribution to the Company.
* As employees assume greater responsibilities, a larger proportion of
their total compensation will be incentive compensation (both short and
long-term), influenced by the growth in the value of the Company's Common
Stock, as well as other financial measures.
* Stock options are an effective way to align the interests of employees
and stockholders and to encourage optionees to think and act like owners.
* The benefits package for executives should be competitive and will be
designed to encourage career commitment to the Company.
Compensation paid to Mr. Schwager, the President and CEO of the Company, is
based on a number of different factors, including: the assets, earnings and
stock appreciation of the Company; the degree of attainment of targeted goals of
the Company, and; a comparison of the Company with other similarly situated
entities in the oil and gas industry. The Committee's judgment is based on its
assessment of the Company's overall performance, rather than any formula or
weighting of any particular performance measures. Some of the specific factors
considered by the Committee include the increase in revenues; the successful
completion of strategic acquisitions, and; the significant increase in
reserves. Each year, comparisons are made of the salaries and stock ownership of
the CEO and the Chief Operating Officer ("COO") as well as the Company's
operating performance with the same data from a peer group of similarly situated
gas and oil companies to assist in determining what compensation adjustments, if
any, need to be made. The peer group used for compensation purposes is not the
same peer group which is used in the performance graph; however, certain of the
companies are included in both groups.
Mr. Schwager's base salary for 1994 ($138,000) was based primarily on his
rights under the December 17, 1992 employment agreement with the Company, as
amended, as more fully described below (the "Schwager Employment Agreement").
Mr. Schwager also received $16,250 in director's annual and meeting fees and
$15,000 for acting as chairman of the Board of Directors. In addition to his
base salary, a $30,000 incentive bonus was awarded to Mr. Schwager in December
1994, based on the Company's positive financial performance for 1994, $7,400 of
which was paid to him on December 31, 1994, with the balance to be paid during
1995.
The Committee recommended that employees of the Company who had incentive
stock options be permitted to exchange those options for nonqualified stock
options containing all of the same terms (term, expiration date, exercise
price). In addition to certain other key employees of the Company, Mr. Schwager
elected to convert 7,900 shares of Common Stock under this plan (see Option
Grant Table). The Committee also recommended that certain key managerial
employees be granted options in the aggregate of 18,500 shares of Common Stock
under the 1992 Employees Stock Option Plan. The Committee decided that no new
stock options should be granted to the Company's executives, pending a more
thorough comparative analysis of other peer companies in the industry.
The Committee recommended a revision to the terms of the Schwager Employ-
ment Agreement after careful consideration of Mr. Schwager's 1992 Employment
Agreement and a comparison of compensation and benefit levels provided by other
similar entities, and consultation with outside counsel. The Committee believes
that its actions taken in regard to Mr. Schwager's compensation have been
prudent, considering Mr. Schwager's effective leadership in improving the
financial condition, enhancing oil and gas operations and increasing the reserve
base of the Company which the Committee believes should have the effect of
improving stockholder value over the long term.
The compensation paid to the three other executive officers of the Company
is based on factors similar to those stated above for the CEO. The Committee
evaluates the executive's performance, employment agreements and the overall
performance of the Company in terms of sales, reserves, assets, earnings, and
stock appreciation when approving compensation. In 1994, the Committee recom-
mended and the Board approved cash bonuses totalling $32,000 for these three
executive officers ($20,000 payable to the Executive Vice President and COO in
two installments and $6,000 payable each to the Vice President and Controller
and the Vice President, Administration and Legal Affairs in two installments).
The Committee's actions were taken on the basis of the officers' positive
performance reviews made by the CEO of qualitative factors, as well as meeting
various financial and production targets, positive results from drilling and
production activities and the overall operations of the Company.
The Committee approved Company contributions to the 401(k) Plan of $38,477
in cash and 10,370 shares of Common Stock.
COMPENSATION COMMITTEE
James B. Gehr, Chairman
James H. Weber
EMPLOYMENT AGREEMENTS
The Company and Mr. Schwager entered into an employment agreement dated as
of December 17, 1992, and amended on January 1, 1994, and thereafter revised in
an Employment Agreement effective January 1, 1995 (the "Schwager Employment
Agreement") providing for Mr. Schwager's employment as President and Chief
Executive Officer.
Effective January 1, 1995, the Committee recommended, and the entire Board
approved, a revised Employment Agreement between Mr. Schwager and the Company.
This entitles Mr. Schwager to a minimum annual base salary of $168,500, plus
director and chairman fees, subject to yearly renewals and adjustments. The
Company will also pay an incentive cash bonus under the Schwager Employment
Agreement of $30,000 should the average trading price of the Company's Common
Stock equal or exceed $7.00 per share for a 60-day period, with additional
bonuses of $30,000 to be paid for each $1.00 incremental increase in the trading
price above $7.00 for a similar period.
Additionally, the Schwager Employment Agreement was revised to provide
Mr. Schwager, in the event of a discharge without cause or his resignation for
good reason (which includes, among others, a "change of control" or a signifi-
cant asset sale), payment for accrued obligations, payment equal to three times
the highest annual rate of base salary in effect during the past twenty-four
months, insurance coverage for three years, or two times the cash equivalence of
such coverage for a three year period, and full vesting and exercisability of
all existing stock options. In the event of a discharge for cause or Mr.
Schwager's resignation without good reason, none of the aforementioned benefits
are available, except payment of accrued obligations by the Company. The
Schwager Employment Agreement was also revised to provide for payment of Mr.
Schwager's base salary for eight months, reduced by any disability benefits, in
the case of disability.
Unless otherwise agreed to by the Board, the Schwager Employment Agreement
prohibits Mr. Schwager from engaging in any business competitive with the
Company's oil and gas business from the date of his termination with the Company
for a period of one year.
The Company and Richard R. Hoffman entered into an employment agreement
dated as of July 1, 1991, as amended on January 1, 1994, and thereafter revised
on January 1, 1995 (the "Hoffman Employment Agreement") providing for Mr.
Hoffman's employment as Chief Operating Officer. Under the Hoffman Employment
Agreement, Mr. Hoffman's base salary was set at $83,000 for 1994, plus the same
annual and meeting fees as those paid to outside Directors, or $16,000 for
1994. Effective January 1, 1995, Mr. Hoffman will receive an annual base salary
of $100,500, plus certain perquisites and director fees. Additionally, under
the Hoffman Employment Agreement, Mr. Hoffman is entitled to an amount equal to
$24,750 plus one and one-half times his annual base salary in effect at that
time in the event Mr. Hoffman's employment is terminated without cause, or he is
reassigned to a position which is not of comparable executive status, or in the
event of a "change in control" of the Company and Mr. Hoffman chooses to
terminate his employment with the Company. Unless the Board otherwise provides,
the Hoffman Employment Agreement prohibits Mr. Hoffman from engaging in any
business competitive with the Company's oil and gas business from the date of
his termination with the Company for one year.
STOCKHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a comparison of the annual percentage change in the
cumulative total stockholder return of the Company's Common Stock against the
cumulative total return of the American Stock Exchange Market Value Index and
the American Stock Exchange Natural Resources Group Index for a period of five
fiscal years commencing December 31, 1989 and ending December 31, 1994. The
market indices chosen by the Company for comparison purposes are not the same
group of companies used by the Compensation Committee for comparison purposes of
executive compensation; however, some of the companies are included in both
groups. In accordance with the rules of the Securities and Exchange Commission,
this presentation shall not be incorporated by reference into any of the
Company's prior or future filings under the Exchange Act or the Securities Act.
</TABLE>
<TABLE>
<S><C>
Date Alamco, Inc.<1> AMEX Market Value<1> AMEX Natural Res.<1><2>
12/31/89 100 100 100
12/31/90 60 81.5 83.3
12/31/91 47.5 104.5 64.9
12/31/92 100 105.6 63.7
12/31/93 137.5 126.2 78.8
12/31/94 122.5 114.7 78
</END TABLE>
- -------------------------
<F1> Source - American Stock Exchange.
<F2> Based on $100 being invested on December 31, 1989, in each of the
Company's Common Stock and the presented Indices, including rein-
vestment of dividends.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF MANAGEMENT
As a group, the directors and executive officers of the Company (9 persons)
beneficially owned 360,656 shares of Common Stock or a total of 6.9 percent of
the outstanding voting securities of the Company as of the Record Date. Such
ownership includes 205,133 shares that the directors and officers have the right
to acquire, within sixty days of the Record Date, upon the exercise of stock
options.
In addition to Messrs. Schwager and Hoffman, this group includes Mr. Steven
E. May and Ms. Bridget D. Furbee. Mr. May has held the office of Vice President
and Controller of the Company since December 13, 1990. Previously, Mr. May
served as Manager of Financial Planning and later as Assistant Controller. Ms.
Furbee was elected Vice President, Administration and Legal Affairs in May
1994. Prior to that, Ms. Furbee served as Gas Marketing/Office Administrator
Manager and later as Manager, Gas Marketing and Legal Affairs.
For information regarding security ownership of the CEO and the other named
executive officer, individual directors and nominees, see "DIRECTORS OF THE
COMPANY".
PRINCIPAL STOCKHOLDERS
To the knowledge of the Company, Breau Capital Management, Inc., FMR
Corporation and The Guardian Life Insurance Co. of America are the only entities
which owned of record or beneficially more than five percent of the outstanding
Common Stock as of the Record Date. The following table indicates the benefi-
cial ownership of Breau Capital Management, Inc. as of January 18, 1995, based
on information contained in its 13G filing as of that date, the beneficial
ownership of FMR Corporation as of February 13, 1995, based on information
contained in its 13G filing as of that date, and the beneficial ownership of The
Guardian Life Insurance Co. of America as of February 10, 1995, based on
information contained in its 13G filing as of that date.
</TABLE>
<TABLE>
<S><C>
Amount and
Nature of
Title of Name and Address of Beneficial Percent of
Class Beneficial Owner Ownership Class
Common Stock Breau Capital Management, Inc. 300,000 shares 6.4
Watermill Center
800 South Street
Waltham, MA 02154
Common Stock FMR Corp. 409,200 shares 8.8
82 Devonshire Street
Boston, MA 02109
Common Stock The Guardian Life Insurance<1> 285,000 shares<1> 6.1
Company of America
201 Park Ave. South
New York, NY 10003
</END TABLE>
- -------------------------
<F1> This Company has sole voting power over all shares; however, 40,000
shares have shared voting and dispositive powers with The Guardian Employe-
e's Incentive Savings Plan and shared voting and dispositive powers of
25,000 shares with The Guardian Life Insurance Company of America Master
Pension Trust.
COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the American Stock
Exchange. Officers, directors and holders of more than 10% of the Common Stock
are required by regulations promulgated by the Commission pursuant to the
Exchange Act to furnish the Company with copies of all Section 16(a) forms they
file. The Secretary of the Company assists officers and directors, and will
assist beneficial owners, if any, of more than 10% of the Common Stock, in
complying with the reporting requirements of Section 16(a) of the Exchange Act.
Based solely on its review of the copies of such forms received by it, the
Company believes that since January 1, 1994, all Section 16(a) filing require-
ments applicable to its directors, officers and greater than 10% beneficial
owners were met.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors retained the accounting firm of Coopers & Lybrand as
the Company's independent public accountants for 1994 and 1995. Representatives
of Coopers & Lybrand are expected to attend the Meeting, will have the opportu-
nity to make a statement if they desire to do so, and will be available to
respond to appropriate questions.
SUBMISSION DATE FOR STOCKHOLDER PROPOSALS
AND DIRECTOR NOMINATIONS
Stockholder proposals for the 1996 Annual Meeting of Stockholders must be
received at the Company's main office in Clarksburg, West Virginia, no later
than December 14, 1995.
In addition, the Company's By-laws provide that nominations for election as
a director may be made by any stockholder entitled to vote for the election of
directors. Advance written notice of such proposed nomination must be received
by the Secretary of the Company by certified mail no later than (i) 90 days
prior to the anniversary of the previous year's Annual Meeting of Stockholders,
or (ii) with respect to an election to be held at a Special Meeting of Stock-
holders or at an Annual Meeting that is held more than 70 days prior to the
anniversary of the previous year's annual meeting, the close of business on the
tenth day following the date on which notice of such meeting is first given to
the stockholders. A copy of the applicable By-law provision may be obtained,
without charge, by written request to the Secretary of the Company at its main
office.
OTHER MATTERS
The Board of Directors is not aware of any matter which may be presented
for action at the Meeting other than matters set forth herein. Should any other
matter requiring a vote of stockholders arise, it is intended that the enclosed
Proxy will be voted with respect thereto in accordance with the judgment of the
persons named in said Proxy.
By order of the Board of Directors,
Jane Merandi, Secretary
April 13, 1995
YOUR VOTE IS IMPORTANT!
PLEASE SIGN AND PROMPTLY RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
1. ELECTION OF DIRECTORS:
FOR all nominees listed below / /
WITHHOLD AUTHORITY / /
(except as marked to the contrary below) to vote for all nominees listed
below:
Term expiring 1996: James B. Gehr
Term expiring 1998: Thomas M. Levine
Term expiring 1998: Robert S. Maust
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the box next to the nominee's name below.
/ / James B. Gehr / / Thomas M. Levine / / Robert S. Maust
2. THE CAPITAL STOCK PROPOSAL: Approval of the proposal to amend Article IV of
the Company's Certificate of Incorporation to increase the number of autho-
rized capital of the Company from 8,500,000 shares to 16,000,000 shares, of
which authorized Common Stock shall be increased from 7,500,000 shares, par
value of $.10 per share to 15,000,000 shares, par value of $.10 per share
/ / For / / Against / / Abstain
3. THE STOCK OPTION PLAN AMENDMENT: Approval to amend the Alamco, Inc. 1992
Employees Stock Option Plan to increase the maximum number of shares of
Common Stock to be issued under the Plan from 100,000 to 250,000.
/ / For / / Against / / Abstain
Dated . . . . . . . . . . . . 1995 . . . . . . . . . . . . . . . .
Signature
. . . . . . . . . . . . . . . . .
Signature if held jointly
Please sign exactly as name appears on this proxy. When shares are
held by joint owners, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by
president or other authorized officer. If a partnership, please sign
in partnership name by authorized person.
(over)
PROXY
ALAMCO, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G. Jane Merandi and Steven E. May, and each of
them, with power to act without the other and with full power of substitution,
as Proxies and hereby authorizes them to represent and to vote all the shares of
Common Stock of Alamco, Inc. held of record by the undersigned on the close of
business on March 24, 1995, at the Annual Meeting of Stockholders to be held on
May 12, 1995, and at any adjournment or adjournments thereof (a) in the manner
designated on the reverse side, and (b) in their discretion, upon other business
as may properly come before the meeting or any adjournment or adjournments
thereof.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
</TABLE>
