<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
MIDDLE BAY OIL COMPANY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
PRELIMINARY COPY
MIDDLE BAY OIL COMPANY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
To the Shareholders of Middle Bay Oil Company, Inc.
You are cordially invited to attend the Annual Meeting of Shareholders
of Middle Bay Oil Company, Inc., an Alabama corporation (the "Company"), to be
held at the offices of the Company, 1221 Lamar Street, Suite 1020, Houston,
Texas 77010, on May 28, 1998 at 10:00 a.m. Central Daylight Time, for the
purpose of acting on the following matters:
1. The consideration of and voting upon the election of seven
directors to serve until the next Annual Shareholder Meeting;
2. The consideration of and voting upon a proposed amendment to
the Company's Articles of Incorporation to increase the
authorized capital stock of the Company from 10,000,000 shares
to 20,000,000 shares of common stock and from 5,000,000 shares
to 10,000,000 shares of preferred stock;
3. The consideration of and voting upon a proposed amendment to
the 1995 Stock Option and Stock Appreciation Rights Plan
increasing to 1,500,000 shares the number of shares of common
stock available to option.
4. Consideration of and voting upon the approval and ratification
of the selection of KPMG Peat Marwick, LLP as independent
accountants to audit the accounts of the Company for fiscal
years ending December 31, 1998 and 1999; and
5. To transact such other business as may properly come before
the meeting or any adjournment.
All shareholders of record as of April 1, 1998 are entitled to notice
of and to vote at the Annual Meeting or any adjournments thereof.
Whether or not you plan to attend this meeting, we urge you to please
sign and date the accompanying form of proxy and return it promptly in the
enclosed, postage prepaid envelope. This will ensure that your shares will be
represented. If you attend the meeting, you may vote in person regardless of
whether you have given your proxy. Any proxy may be revoked at any time before
it is exercised, as indicated in the Proxy Statement.
By Order of the Board of Directors
John J. Bassett, President
April 28, 1998
Houston, Texas
<PAGE> 3
Annual Reports to shareholders, including financial statements,
are being mailed to shareholders, together with these proxy
materials, commencing on or about April 28, 1998.
Stockholders may obtain, without charge, a copy of the Company's Annual Report
on Form 10-KSB (without exhibits) for the year ended December 31, 1997 as filed
with the Securities and Exchange Commission, by writing to Middle Bay Oil
Company, 1221 Lamar Street, Suite 1020, Houston, Texas 77010. Copies of the
Company's Annual Report on Form 10-KSB may also be obtained directly from the
Securities and Exchange Commission web site at http://www.sec.gov/.
YOUR VOTE IS IMPORTANT.
PLEASE COMPLETE, SIGN AND RETURN THE ACCOMPANYING
PROXY FORM IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE> 4
PRELIMINARY COPY
MIDDLE BAY OIL COMPANY, INC.
1221 Lamar Street, Suite 1020
Houston, Texas 77010
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 28, 1998
This Proxy Statement is furnished to shareholders of Middle Bay Oil
Company, Inc., an Alabama corporation (the "Company"), in connection with the
solicitation, at the Company's expense, on behalf of the Board of Directors of
the Company of proxies to be used at an Annual Meeting of Shareholders of the
Company to be held at 10:00 a.m. Central Daylight Time on May 28, 1998 and all
adjournments thereof (the "Annual Meeting"). This Proxy Statement and the
enclosed form of proxy are being mailed to shareholders on or about April 28,
1998.
The Annual Meeting will be held at the principal offices of the Company
at 1221 Lamar Street, Suite 1020, Houston, Texas 77010. Proxies in the form
enclosed will be voted at the Annual Meeting if properly executed, returned to
the Company before the meeting and not revoked. Any shareholder giving such
proxy may revoke it at any time before it is voted by written revocation
delivered to the Company's Secretary, by voting in person at the Annual Meeting
or by giving a later proxy.
The cost of solicitation will be paid by the Company. In addition to
solicitation of proxies by use of the mails, directors, officers or employees of
the Company may, without additional compensation, solicit proxies personally, by
telephone or by other appropriate means. The Company will request banks,
brokerage houses and other custodians, nominees or fiduciaries holding shares of
common stock in their names for others to promptly send proxy materials to, and
obtain proxies from, their principals, and the Company will reimburse them for
their reasonable expenses in doing so.
OUTSTANDING CAPITAL STOCK
All voting rights are vested exclusively in the holders of the
Company's common stock. The record date for shareholders entitled to vote at the
Annual Meeting is the close of business on April 1, 1997. At the close of
business on that date, the Company had issued, outstanding and entitled to vote
at the meeting 7,830,766 shares of common stock, $.02 par value, each of which
is entitled to one vote on all matters expected to be voted upon at the Annual
Meeting.
-1-
<PAGE> 5
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of shares of common
stock entitled to vote at the Annual Meeting representing a majority of the
votes entitled to be cast is necessary to constitute a quorum at the Annual
Meeting. Each holder of shares of common stock is entitled to one vote, in
person or by proxy, for each share held in such shareholder's name on the record
date. Assuming the presence of a quorum, the affirmative votes equal to at least
a majority of the votes of holders of common stock entitled to vote at the
Annual Meeting, in person or by proxy, are required for the election of
directors and the approval of the selection of independent public accountants.
As to any other matters which may come before the meeting, a majority of the
votes of holders of common stock cast at the Annual Meeting generally is
required for approval. Abstentions will be included in vote totals and, as such,
will have the same effect on the matter voted upon as a negative vote. Where
nominee recordholders do not vote on directors or the other proposals because
they did not receive specific instructions on such proposal from the beneficial
owners of such shares ("broker nonvotes"), such broker nonvotes will not be
included in vote totals and, as such, will have no effect on the action taken at
the Annual Meeting.
The shares represented by proxies solicited by the Board of Directors
will be voted in accordance with the recommendations of the Board of Directors
unless otherwise specified in the proxy, and where the person solicited
specifies a choice with respect to any matter to be acted upon, the shares will
be voted in accordance with the specification so made.
The enclosed proxy is revocable at any time prior to its being voted by
filing an instrument of revocation or a duly executed proxy bearing a later
date. A proxy may also be revoked by attendance at the meeting and voting in
person. Attendance at the meeting will not by itself constitute a revocation.
Any such revocation or later dated proxy should be mailed or delivered to Middle
Bay Oil Company, Inc., 1221 Lamar Street, Suite 1020, Houston, Texas 77010,
Attention: Kelly G. Griffin, Assistant Secretary.
The Company will bear the cost of soliciting proxies from shareholders.
In addition to the use of the mails, proxies may be solicited by directors and
officers of the Company by personal solicitation, telephone or telegram. Such
directors and officers will not be additionally compensated for such
solicitation but may be reimbursed for reasonable out-of-pocket expenses
incurred in connection therewith.
The Company has not and will not engage any investment banking or
brokerage firm or any professional proxy solicitation firm to solicit proxies.
No fees, commissions or other compensation will be paid to anyone for proxy
votes solicited by the Company.
Arrangements will be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of the common stock. The Company may reimburse such
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in connection therewith.
The enclosed form of proxy allows shareholders to grant or withhold
discretionary authority to the persons named to vote on any other matters that
may properly come before the Annual Meeting. The Company is not aware of any
other proposals planned to be made at the Annual Meeting and has no current
intention of
-2-
<PAGE> 6
making any additional proposals. The chairman of the meeting shall determine the
order of business at the Annual Meeting and the voting and other procedures to
be observed. The chairman is authorized to declare whether any business is
properly brought before the meeting, and business not properly brought before
the meeting may not be transacted.
CORPORATE GOVERNANCE
The Board of Directors has the responsibility for establishing broad
corporate policies and for the overall performance of the Company, taking into
consideration the interests of all shareholders. Members of the Board are kept
informed of the Company's business by various reports sent or communicated to
them regularly, as well as by operating and financial reports made at Board and
Committee meetings by the President and other officers. During 1997, the full
Board met three times. The Board has two Committees, an Audit Committee and a
Compensation Committee. The Audit Committee met one time, and the Compensation
Committee met twice.
The Audit Committee's duties include recommending to the Board the
selection of a firm of independent public accountants for approval by the
shareholders at their Annual Meeting. In addition, the Committee confers with
the Company's independent public accountants to review the plan and scope of
their proposed audit, as well as their findings and recommendations upon the
completion of the audit. The Committee meets with the independent public
accountants and with appropriate Company financial personnel regarding the
Company's internal controls and financial policies. The Audit Committee
currently consists of Gary R. Christopher, Frank E. Bolling, Jr. and Alvin V.
Shoemaker. No member of the Audit Committee is an officer or employee of the
Company.
The Compensation Committee is responsible for establishing and
reviewing policies governing executive salaries, bonus and incentive
compensation and the terms and conditions of employment of executives of the
Company. In addition, the Committee is responsible for the oversight of the
Company's 1995 Stock Option and Stock Appreciation Rights Plan and similar or
other plans which may be maintained from time to time by the Company and has
authority to grant options and awards under the Company's 1995 Stock Option and
Stock Appreciation Rights Plan, and oversees the Company's SEP/IRA retirement
plan, the net profits interest incentive compensation plan established by the
Company in 1995 and the 40l(k) plan established in 1997 (see "Corporate
Governance - Executive Compensation"). The Committee coordinates with the
appropriate financial, legal and administrative personnel of the Company, as
well as outside experts retained in connection with the administration of these
plans. The Compensation Committee currently consists of John J. Bassett,
President and Chief Executive Officer, and Messrs. Edward P. Turner, Jr. and
Frank E. Bolling, Jr., neither of whom is an officer or employee of the Company.
During 1997, all incumbent directors attended all of the meetings of
the Board of Directors. Attendance at those meetings was 100%. Attendance at the
Committee meetings was 100%.
-3-
<PAGE> 7
COMPENSATION OF DIRECTORS
Each director is paid an attendance fee of $500 for each meeting of the
Board and of each Committee of the Board, and the Company reimburses directors'
documented travel and lodging expenses.
Each nonemployee director is eligible for incentive awards under the
1995 Stock Option and Stock Appreciation Rights Plan. In January, 1998, the
Board of Directors approved the Compensation Committee's recommendation to issue
nonqualified stock options pursuant to the Plan to nonemployee directors, as
follows (see "Executive Compensation"):
<TABLE>
<CAPTION>
No. of Exercise
Name Optioned Shares Price
---- --------------- -----
<S> <C> <C>
Edward P. Turner, Jr. 10,000 $5.75
Frank E. Bolling, Jr. 10,000 $5.75
Gary R. Christopher 10,000 $5.75
Alvin V. Shoemaker 10,000 $5.75
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the shares of the Company's common and
preferred stock beneficially owned by those persons known by the Company to be
the beneficial owner of more than five percent of the Company's issued and
outstanding common and preferred stock as of December 31, 1997:
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percent of
Class(5) Beneficial Owner Beneficial Ownership Class
-------- ---------------- -------------------- -----
<S> <C> <C> <C>
Common C. J. Lett, III(1)(3) 1,197,556 13.8%
9320 East Central
Wichita, Kansas 67206
Common Kaiser-Francis Oil Company(3) 3,333,334 38.3%
6733 South Yale
Tulsa, Oklahoma 74136
Common Weskids, L.P.(1)(4) 843,687 10.0%
310 South Street
Morristown, NJ 07960
Common Weskids, Inc. 843,687 10.0%
310 South Street
Morristown, NJ 07960
</TABLE>
-4-
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
Common Alvin V. Shoemaker(2)(3) 661,222 8.9%
8800 First Avenue
Stone Harbor, NJ 08247
Preferred Weskids, L.P.(4) 117,467 44.1%
Series B 310 South Street
Morristown, NJ 07960
Preferred Weskids, Inc. 117,467 44.1%
Series B 310 South Street
Morristown, NJ 07960
Preferred Alvin V. Shoemaker(3) 117,466 44.1%
Series B 8800 First Avenue
Stone Harbor, NJ 08247
Preferred Stephen W. Herod(3) 15,867 5.9%
Series B 1110 Briar Ridge Drive
Houston, TX 77057
Preferred W. Tim Sexton(3) 15,867 5.9%
Series B 12010 Winwood
Houston, TX 77024
</TABLE>
(1) Weskids, L.P. has agreed that, for a period of one year from June 30,
1997, its voting power will be restricted to not more than votes
representing 20% of the total number of shares of the Company's common
stock issued and outstanding and eligible to vote at the time in
connection with any vote taken or consent, waiver or ratification given
in connection with the election or removal of directors of the Company.
(2) Mr. Shoemaker has agreed that, for a period of one year from June 30,
1997, his voting power will be restricted to not more than votes
representing 20% of the total number of shares of the Company's common
stock issued and outstanding and eligible to vote at the time in
connection with any vote taken or consent, waiver or ratification given
in connection with the election or removal of directors of the Company.
(3) The nature of the beneficial ownership is sole voting and investment
power.
(4) Weskids, L.P. is presently the beneficial owner and has sole voting and
disposition power of 843,687 shares of common stock and 117,467 shares
of Series B preferred stock immediately convertible into not less than
117,467 shares of the Company's common stock. The exact conversion
ratio is determined by the terms of the merger. Weskids, Inc. is the
general partner of Weskids, L.P. and effectively controls Weskids, L.P.
The officers and directors of Weskids, Inc. are as follows: J. Peter
Simon, director; William Edward Simon, Jr., director; Michael B.
Lenard, President; Mark J. Butler, Vice President/Treasurer; and
Christine W. Jenkins, Secretary.
-5-
<PAGE> 9
(5) Series B preferred stock is convertible into common stock at a variable
ratio of not less than one-to- one.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the shares of the Company's
common stock beneficially owned by each director and executive officer and all
directors and executive officers as a group, all as of February 28, 1998:
<TABLE>
<CAPTION>
Conv. Preferred Name and Address of Amount and Nature of Percent of
& Options Stock Beneficial Owner Beneficial Ownership(6) Class
--------- ----- ---------------- ----------------------- -----
<S> <C> <C> <C> <C>
152,000 24,711 John J. Bassett 176,711 2.0%
4326 Noble Oak Trail
Houston, TX 77059
94,500 25,796 Frank C. Turner, II 120,296 1.4%
1406 Tallow Court
Seabrook, TX 77586
114,500 6,996 Robert W. Hammons 121,496 1.4%
915 Kentbury Court
Katy, TX 77450
8,000 5,000 Lynn M. Davis 13,000 0.1%
121 Donna Circle
Daphne, AL 36526
34,734 376,241 Edward P. Turner, Jr.(1) 410,975 4.7%
100 Central Avenue
Chatom, AL 36518
15,000 1,182,556 C. J. Lett, III(2) 1,197,556 13.8%
9320 East Central
Wichita, KS 67206
34,734 -- Frank E. Bolling, Jr. 34,734 0.4%
3830 Kendale Drive
Gautier, MS 39553
-- 12,000 Gary R Christopher(3) 12,000 0.1%
6733 South Yale
Tulsa, OK 74136
117,466 661,222 Alvin V. Shoemaker(4) 778,688 8.9%
8800 First Avenue
Stone Harbor, NJ 08247
</TABLE>
-6-
<PAGE> 10
<TABLE>
<S> <C> <C> <C> <C>
15,867 109,816 Stephen W. Herod(5) 125,683 1.4%
1110 Briar Ridge Drive
Houston, TX 77057
All executive officers and
directors as a group
(10 persons) 2,991,139 34.3%
</TABLE>
(1) Includes 362,803 shares owned by Bay City Energy Group, Inc. in which
Mr. Turner has indirect voting control but not a direct beneficial
interest, and 13,438 shares over which Mr. Turner has sole voting and
dispositive power.
(2) Mr. Lett was named Executive Vice President of the Company on February
28, 1997 in connection with the Bison Merger (see "Certain
Relationships and Related Transactions").
(3) Mr. Christopher is an officer of Kaiser-Francis Oil Company which is
the beneficial owner of 3,333,334 of the Company's common shares.
(4) Consists of 117,466 shares of Series B preferred stock convertible into
117,466 common shares of the Company. Mr. Shoemaker's voting rights are
restricted until June 30, 1998 (see "Certain Relationships and Related
Transactions").
(5) Consists of 15,867 shares of Series B preferred stock convertible into
15,867 common shares of the Company. Mr. Herod's voting rights are
restricted in the same manner as Weskids, L.P. and Mr. Shoemaker. Mr.
Herod was named Vice President - Corporate Development and a director
of the Company in connection with the Shore Merger (see "Certain
Relationships and Related Transactions").
(6) The nature of beneficial ownership for all shares is sole voting and
investment power.
CHANGES IN CONTROL
There are no arrangements known to management which may result in a
change in control of the Company.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the
aggregate cash compensation earned by and paid to the Company's executive
officers for the periods ended December 31, 1995 through December 31, 1997:
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<PAGE> 11
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ----------------------
Awards Payouts
------ -------
Securities
Underlying
Restr. Options/ All Other
Name and Other Annual Stock SARs LTIP Compensation
Principal Position Year Salary ($) Bonus ($) Compensation Awards($) (#) Payouts ($) ($)
------------------ ---- ---------- --------- ------------ --------- --- ----------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Bassett 1997 95,521 6,001 -- 129,545 132,000 -- 13,032
President & 1996 58,075 -- -- -- 20,000 -- 2,271
Chief Executive 1995 56,250 -- -- -- -- -- 11,371
Officer
Frank C. Turner, II 1997 85,729 6,000 -- 57,960 94,500 -- 16,250
Vice President & 1996 54,458 -- -- -- 20,000 -- 2,174
CFO 1995 50,083 -- -- -- -- -- 10,775
Robert W. Hammons 1997 85,729 6,000 -- 57,960 94,500 -- 12,500
Vice President - 1996 58,075 -- -- -- 20,000 -- 2,271
Engineering 1995 56,250 -- -- -- -- -- 11,360
</TABLE>
Compensation Under Plans. The Company established a SEP/IRA retirement
plan (the "Plan") in 1993 which allows for a maximum discretionary Company
contribution of 15% of total wages paid to employees for the year. For the years
ended December, 1997 through 1995, the Company contributed a total of $51,500,
$5,000 and $30,000, respectively, to the Plan, including $32,064, 3,068 and
$18,505 for all executive officers as a group since the Plan's inception.
The Company established a 401(k) plan in October, 1997, which allows
for voluntary contributions by the employees and the employer. No Company
contributions were made in 1997.
In March, 1995, the Board of Directors adopted an employee incentive
compensation plan whereby the proceeds equivalent to 1% net profits interest
(the "net profits interest") in all oil and gas properties, drilling prospects
and acquisitions and divestitures acquired or made after January 1, 1994 are
paid into a fund for incentive compensation awards to eligible employees.
The net profits interest on property acquisitions and drilling
prospects are calculated on the monthly gross profit which is defined as
revenues from oil and gas sales, less direct operating expenses, attributable to
the Company's working or royalty interest in an individual property. Direct
operating expenses include landowner's royalty, overriding royalty and all costs
of production, equipment, operating expenses and taxes. On drilling prospects,
the net profits interest will not include costs of drilling, testing and
completing the well, the costs of acreage and costs of geological or geophysical
work. For divestitures, the net profits interest will be calculated on the gross
sales price, less any direct costs of the sale of an individual property.
To qualify for an award as an "eligible employee," as presently
established by the Compensation Committee, an employee must be employed by the
Company on October 1 and December 31 of the calendar year and have been
recommended by the Compensation Committee to receive an award. For the years
ended December 31, 1996 and 1995, the Company paid $6,916 and $30,000,
respectively, to employees through the
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<PAGE> 12
employee incentive plan, including $4,897 and $21,245 for all executive officers
as a group. No amount was paid into the employee incentive plan in 1997.
The Company has no other retirement, pension/profit-sharing or other
deferred compensation.
Option Grants in Last Fiscal Year. The 1995 Stock Option and Stock
Appreciation Rights Plan (the "Plan") is administered by the Compensation
Committee (the "Committee") of the Board of Directors. At least two members of
the Committee must be disinterested nonemployee directors. The Committee is
authorized to determine the employees, including officers, to whom options or
rights are granted. Each option or right granted shall be on such terms and
conditions consistent with the Plan as the Committee may determine, but the
duration of any option or right shall be not greater than ten years or less than
five years from the date of grant.
Options or rights grants shall be made under the Plan only to persons
who are officers or salaried employees of the Company or are nonemployee
directors. The aggregate number of shares of common stock of the Company which
could be subject to options or rights under the Plan during 1997 was 500,000.
During the fiscal year ended December 31, 1997, options covering 295,000 shares
were issued under the Plan.
The option price of shares covered by options granted under the Plan
may not be less than the fair market value at the time the option is granted.
The option price must be paid in full in cash or cash equivalent at the time of
purchase or prior to delivery of the shares in accordance with cash payment
arrangements acceptable to the Committee. If the Committee so determines, the
option price may also be paid in shares of the Company's common stock already
owned by the optionee. The Committee has discretion to determine the time or
times when options become exercisable, within the limits set forth in the Plan.
All options and rights granted under the Plan will, however, become fully
exercisable if there is a change in control (as defined in the Plan) of the
Company.
The following table provides certain information with respect to all
options granted during the fiscal year ended December 31, 1997 to any executive
officer or director of the Company; 295,000 options were granted under the Plan
and 225,000 were granted outside of the Plan:
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options/SARs
Options/ Granted to
SARS Employees in Exercise or Base Expiration
Name Granted (#) Fiscal Year Price ($/Sh) Date
---- ----------- ----------- ------------ ----
<S> <C> <C> <C> <C>
John J. Bassett 100,000 19.0% 5.50 2/13/2007
32,000 6.0% 6.00 2/6/2007
Frank C. Turner, II 62,500 12.0% 5.50 2/13/2007
32,000 6.0% 6.00 2/6/2007
</TABLE>
-9-
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Robert W. Hammons 62,500 12.0% 5.50 2/13/2007
32,000 6.0% 6.00 2/6/2007
Lynn M. Davis 8,000 2.0% 6.00 2/6/2007
Edward P. Turner, Jr.* 21,400 4.0% 6.00 2/6/2007
Frank E. Bolling, Jr.* 21,400 4.0% 6.00 2/6/2007
C. Noell Rather** 21,200 4.0% 6.00 2/6/2007
</TABLE>
*Nonemployee director
**Former nonemployee director
Aggregated Option Exercises in Last Fiscal Year and Option Value Table
as of December 31, 1997. The following table sets forth certain information
concerning each exercise of stock options during the year ended December 31,
1997, by each of the named executive officers and directors and the aggregated
fiscal year-end value of the unexercised options of each such named executive
officer and director:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options/SARs at Options/SARs at
Acquired Value FY End (#) FY End ($)
Name on Exercise (#) Realized ($) Exer. Unexer. Exer. Unexer.
---- --------------- ------------ ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
John J. Bassett -- -- -- 152,000 -- 728,000
Frank C. Turner, II 20,000 115,000 20,000 94,500 150,000 409,250
Robert W. Hammons -- -- -- 114,500 -- 559,250
Lynn M. Davis 5,000 38,750 -- 8,000 37,500 32,000
Edward P. Turner, Jr.* -- -- -- 34,734 -- 185,600
Frank E. Bolling, Jr.* -- -- -- 34,733 -- 185,600
</TABLE>
*Nonemployee director
EMPLOYMENT AGREEMENTS
Mr. Bassett and Mr. Hammons in January, 1997, signed employment
agreements with the Company which extend through January 31, 2002 and January
31, 2000, respectively, with automatic one-year extensions upon each anniversary
date of the employment agreement thereafter unless either party gives at least
30 days' notice of termination. Each employment agreement is terminable by the
Company before expiration of the term
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<PAGE> 14
if such termination is for cause (as specified in the employment agreement). The
executive employment agreements provide for an annual salary of not less than
the base salaries of $95,000 and $85,000, respectively, which amounts may be
adjusted from time to time by the Board of Directors upon the recommendation of
the Compensation Committee. They also provide for fringe benefits in accordance
with the Company's policies adopted from time to time for salaried executive
employees holding comparable positions.
Mr. Herod executed an employment agreement with the Company with an
effective date of July 1, 1997 and extending through June 30, 1999, with
automatic one-year extensions upon each anniversary date of the employment
agreement thereafter unless either party gives at least 30 days' notice of
termination. The employment agreement is terminable by the Company before
expiration of the term if such termination is for cause (as specified in the
employment agreement). The executive employment agreement provides for an annual
salary of not less than the base salary of $100,000, which amount may be
adjusted from time to time by the Board of Directors upon the recommendation of
the Compensation Committee. It also provides for fringe benefits in accordance
with the Company's policies adopted from time to time for salaried executive
employees holding comparable positions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and any persons who own more than 10%
of the Company's common stock to file with the Securities and Exchange
Commission reports of ownership and changes in ownership of such securities.
Based on representations from such persons, the Company believes that there was
no failure to file or delinquent filings under Section 16(a) of the Securities
Exchange Act of 1934 by any officer, director or beneficial owner of 10% or more
of the Company's common stock during 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Edward P. Turner, Jr., a director of the Company, is managing partner
of the law firm of Turner, Onderdonk, Kimbrough & Howell, P.A., the Company's
general counsel for certain corporate and oil and gas matters. For the years
ended December 31, 1995 through 1997, the Company paid legal fees to Mr.
Turner's firm of $787, $1,560 and $2,874, respectively, for legal services. Mr.
Turner's firm charges the Company for its services on the same basis as it
charges other business clients for similar services rendered. The Company
intends to continue to use Mr. Turner's firm as its primary local counsel in
Alabama and will pay reasonable fees for such future services.
Bay City Energy Group, Inc., is presently indebted to the Company in
the amount of $166,165 ($139,005 of principal and $27,160 of accrued interest).
The note payable was renegotiated on December 31, 1995 and is due in full on
January 1, 2001, plus interest at an annual fixed rate of 5%. The note payable
is secured by 75,000 shares of the Company's common stock. Edward P. Turner,
Jr., a director of the Company, has indirect voting control but not a beneficial
interest in Bay City Energy Group, Inc.
On September 4, 1996, the Company signed a stock purchase agreement
with Kaiser Francis Oil Company ("the Preferred Stock Agreement").
Kaiser-Francis agreed to purchase 1,666,667 shares of Series A Preferred Stock
("Preferred") at $6.00 per share, for a total investment of $10,000,000. The
Preferred is
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<PAGE> 15
nonvoting and accrues dividends at 8% per annum, payable quarterly in cash. The
Preferred is convertible at any time after issuance into shares of common stock
at the rate of two shares of common stock for each share of Preferred before
January 1, 1998. The conversion rate decreases thereafter at 8% per annum. On
January 31, 1998, Kaiser-Francis converted all 1,166,667 Preferred shares it
held into 3,333,334 shares of the Company's common stock. Prior to such
conversion, Kaiser-Francis owned none of the issued and outstanding common
shares. Subsequent to the conversion, Kaiser-Francis' shares represent 42.4% of
the issued and outstanding shares of common stock. Gary R. Christopher, a
director of the Company, serves as Acquisitions Coordinator of Kaiser-Francis
Oil Company.
In December, 1996, the Company entered into an Agreement and Plan of
Merger (the "NPC Merger") with NPC Energy Corporation ("NPC"). Pursuant to the
Merger, the Company issued 562,000 shares of its common stock and paid
$1,226,400 to certain of NPC's shareholders. Preferred stock in the amount of
$1.0 million under the Preferred Stock Agreement was sold to finance the cash
portion of the purchase price.
In February, 1997, the Company entered into an Agreement and Plan of
Merger (the "Bison Merger") with Bison Energy Corporation ("Bison"), whereby
Bison was merged with a wholly-owned subsidiary of the Company in exchange for
Company common stock and cash. Pursuant to the Bison Merger, the Company issued
1,167,556 shares of its common stock and net cash consideration of $5,900,000 to
C. J. Lett, III in exchange for all of the stock of Bison. 562,000 shares of
Company common stock owned by Bison (as a result of the NPC Merger) were
canceled at closing. Mr. Lett became Executive Vice President of the Company on
February 28, 1997 and is a director of the Company.
On June 20, 1997, the Company entered into an Agreement and Plan of
Merger (the "Shore Merger") with Shore Oil Company ("Shore"), whereby Shore was
merged with a wholly-owned subsidiary of the Company in exchange for Company
common stock, Series B preferred stock (the "Series B"), cash and the assumption
of Shore debt. Shore was privately held principally by Weskids, L.P. and Alvin
V. Shoemaker. Shore's assets consist of oil and gas properties located primarily
in Alabama, Louisiana, Mississippi and Texas, as well as approximately 42,000
net mineral acres in LaFourche, Terrebonne and St. Mary Parishes, South
Louisiana. Pursuant to the Shore Merger, the Company issued 1,883,333 shares of
its common stock, paid Shore's indebtedness to its shareholders of $2,333,303
and assumed bank debt of $2,105,000. In addition, the Company paid $200,000 in
cash and issued 266,667 shares of Series B which are convertible into as many as
1,333,333 shares of common stock over the next five years, contingent upon the
results of drilling and leasing activity on Shore's Louisiana mineral acreage.
In connection with the merger, Messrs. Shoemaker and Herod were appointed as
directors, replacing Frank C. Turner and C. Noell Rather. Mr. Herod was also
appointed as Vice President - Corporate Development.
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<PAGE> 16
ELECTION OF DIRECTORS
NOMINEES FOR ELECTION AS DIRECTORS
The following table sets forth information concerning the present
directors and executive officers of the Company. All of the directors are
nominees for election at the Annual Meeting. All directors serve for a one-year
term or until the annual meeting of shareholders of the Company held following
their election:
<TABLE>
<CAPTION>
Director
Name Age Position(s) Held Since
---- --- ---------------- -----
<S> <C> <C> <C>
John J. Bassett(1) 39 Chairman, President and 1989
Chief Executive Officer
C. J. Lett, III 40 Executive Vice President 1997
and Director
Stephen W. Herod (2) 38 Vice President and Director 1997
Edward P. Turner, Jr.(1) 68 Director 1989
Frank E. Bolling, Jr. 38 Director 1992
Alvin V. Shoemaker (3) 59 Director 1997
Gary R. Christopher 48 Director 1997
</TABLE>
(1) John J. Bassett and Edward P. Turner, Jr. were elected upon the
organization of Middle Bay Oil Company as a corporation in November,
1992. Previously they served as directors of Bay City Minerals, Inc.,
the general partner of the Predecessor Partnership.
(2) Mr. Herod replaced Frank C. Turner, II effective July 3, 1997.
(3) Mr. Shoemaker replaced C. Noell Rather effective July 28, 1997.
John J. Bassett has served as President and a director of the
Company since 1992 and was elected Chairman of the Board of Directors in 1992.
He served as President of the general partner of the Predecessor Partnership
from 1987 to 1992. He also serves as a director and President of Bay City Energy
Group, Inc., a principal shareholder of the Company.
C. J. Lett, III has served as Executive Vice President for the
Company since February 28, 1997. Mr. Lett is also President and a director of
Bison Energy Corporation, a position he has held since 1981.
Stephen W. Herod has served as Vice President - Corporate
Development and a director of the Company since July 1, 1997. Mr. Herod served
as President and a director of Shore Oil Company from
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<PAGE> 17
April, 1992 until the merger of Shore and the Company on June 30, 1997. He
joined Shore's predecessor as Controller in February, 1991. In addition, Mr.
Herod was employed by Conquest Exploration Company from 1984 until 1991 in
various financial management positions, including Operations Accounting Manager.
From 1981 to 1984, Mr. Herod was employed by Superior Oil Company as a financial
analyst.
Edward P. Turner, Jr. served as President of Bay City
Minerals, Inc. from 1975 to 1987. He is a member of the Alabama State Bar and a
managing partner of the law firm of Turner, Onderdonk, Kimbrough & Howell, P.A.,
in Chatom, Alabama. A substantial amount of his practice is devoted to oil and
gas law. Mr. Turner also serves as a director of Bay City Energy Group, Inc.
Frank E. Bolling, Jr. has been employed by Midstream Fuel
Services, Inc. as Vice President of Retail Operations since February, 1995.
Prior to his employment with Midstream, Mr. Bolling served as Vice President and
General Manager of Dantzler Bulk Plant, Inc., a distributor for Chevron U.S.A.,
Inc. with annual sales in excess of $25 million. Mr. Bolling served as sales
manager for Dantzler from 1987 to 1989. Prior to 1987, Mr. Bolling was employed
by Bay City Minerals, Inc.
Alvin V. Shoemaker is a former Chairman of the Board of First
Boston Corporation and former President of Blyth Eastman Paine Webber. He has
also worked for the U.S. Treasury. He has been Chairman of the Board of Trustees
of the University of Pennsylvania, Vice Chairman of the Securities Industry
Association and a director of Harcourt Brace Jovanovich, Royal Insurance of
America, the Council on Foreign Relations and the Wharton School of Finance
Board. Mr. Shoemaker is also a director of Hanover Compressor Company.
Gary R. Christopher is Acquisitions Coordinator of
Kaiser-Francis Oil Company, a position he has held since February, 1996. From
1991 to 1996, Mr. Christopher served as Senior Vice President and Manager of
Energy Lending for the Bank of Oklahoma. He continues to serve as a consultant
to the Bank of Oklahoma. Kaiser-Francis Oil Company owns 1,166,667 shares of the
Company's Series A Preferred stock; each such preferred share is convertible
into two shares of common stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR ALL
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS OF THE COMPANY FOR THE ENSUING
YEAR.
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<PAGE> 18
PROPOSAL TO INCREASE AUTHORIZED CAPITAL STOCK
The Company's Articles of Incorporation authorize ten million
(10,000,000) common shares with a par value of $.02 per share and 5,000,000
preferred shares, the preferences and rights with respect to which may be
designated from time to time by the Board of Directors.
Currently, there are seven million eight hundred thirty thousand seven
hundred sixty-six (7,830,766) common shares issued and outstanding. Shares of
common stock may be issued from time to time as may be determined by the Board
of Directors. Each share of common stock has one vote for each share of common
stock standing in the name of the holder thereof on the books of the Company and
entitled to vote. Cumulative voting is not allowed in the election of directors
or for any other purpose.
Currently, there are 1,666,667 shares of preferred stock which have
been designated as Series A Preferred by the Board of Directors, none of which
are issued and outstanding. The 1,666,667 Series A Preferred shares which were
issued and outstanding in 1997 were converted into 3,333,334 shares of common
stock of the Company on January 31, 1998 (see "Certain Relationships and Related
Transactions"). There are 266,667 shares of preferred stock which have been
designated Series B Preferred by the Board of Directors, of which 266,667 were
issued in connection with the Shore Merger (see "Certain Relationships and
Related Transactions") and are presently outstanding. The Series B Preferred
shares are nonvoting but are convertible into as many as 1,333,333 shares of
common stock, contingent upon the results of drilling and leasing activity on
mineral acreage in Louisiana acquired in the Shore Merger. Shares of authorized
preferred stock may be issued from time to time by the Board of Directors in one
or more series, with each series having such designation rights (including
voting rights or the absence thereof) and preferences as may be determined by
the directors.
The Board of Directors believes that it is in the best interests of the
Company to amend the Company's Articles of Incorporation to increase authorized
common stock to 20,000,000 shares of common stock, $.02 par value, and to
increase the authorized preferred stock to 10,000,000 shares to have additional
shares available for issuance should the Company determine to raise equity
capital and for purposes of facilitating future acquisitions. A copy of the
proposed Articles of Amendment to the Company's Articles of Incorporation which
has been approved by the Board of Directors is included herewith as Exhibit "A".
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSAL TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY.
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<PAGE> 19
APPROVAL OF AMENDMENT TO THE COMPANY'S
1995 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
At the Annual Meeting, the stockholders will be asked to approve an
amendment to the Company's 1995 Stock Option and Stock Appreciation Rights Plan
(the "Plan"). The Plan provides for the granting of "options" to acquire common
stock and/or the granting of rights to "receive cash or shares back upon the
appreciated value of the Company's shares relative to the date the option or
right was granted." The amendment, if approved, will increase the number of
shares of the Company's common stock available for the grant of options and
rights to purchase common stock under the Plan by 1,000,000 shares, from 500,000
shares to 1,500,000 shares.
Presently, an aggregate 500,000 shares of common stock are authorized
for issuance under the Plan. As of April 30, 1998, 80,000 shares of common stock
remained available for issuance under the Plan; however, the Compensation
Committee has recommended that options covering 232,000 additional shares be
issued, including 192,000 optioned shares to 20 employees and 40,000 optioned
shares to four nonemployee directors, subject to the proposed amendment to the
Plan being approved at the Annual Meeting (see "Executive Compensation").
The Company has in the past used, and intends in the future to use,
stock options as an important incentive device to motivate and reward its
employees and believes that equity incentives represented by stock options
enhance the Company's ability to attract and retain needed personnel.
The primary features of the Plan are summarized below. A copy of the
Plan, with the proposed amendment, is included herewith as Exhibit "B".
SUMMARY OF THE PLAN
The Plan is administered by the Compensation Committee (the
"Committee") of the Board of Directors. At least two members of the Committee
must be disinterested nonemployee directors. The Committee is authorized to
determine the employees, including officers, to whom options or rights are
granted. Each option or right granted shall be on such terms and conditions
consistent with the Plan as the Committee may determine, but the duration of any
option or right shall be not greater than ten years or less than five years from
the date of grant.
Options or rights grants shall be made only to persons who are officers
or salaried employees of the Company or are nonemployee directors. The aggregate
number of shares of common stock of the Company which may be subject to options
or rights under the Plan is presently 500,000. Subject to shareholder approval
of the proposed amendment, this number would be increased to 1,500,000. As of
April 30, 1998, options covering 420,000 shares had been issued under the Plan.
The option price of shares covered by options granted under the Plan
may not be less than the fair market value at the time the option is granted.
The option price must be paid in full in cash or cash equivalent at the time of
purchase or prior to delivery of the shares in accordance with cash payment
arrangements acceptable to the Committee. If the Committee so determines, the
option price may also be paid in shares of
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<PAGE> 20
the Company's common stock already owned by the optionee. The Committee has
discretion to determine the time or times when options become exercisable,
within the limits set forth in the Plan. All options and rights granted under
the Plan will, however, become fully exercisable if there is a change in control
(as defined in the Plan) of the Company.
No option is transferable by the optionee otherwise than by will or by
the laws of descent or distribution, and during an optionee's lifetime is
exercisable only by the optionee or the optionee's duly appointed legal
representative.
Each option granted under the Plan constitutes either an incentive
stock option, intended to qualify under Section 422 of the Code, or a
nonqualified stock option, not intended to qualify under Section 422, as
determined in each case by the Committee. Each incentive stock option terminates
not later than 15 years from the date of grant, and each nonqualified option
expires not later than five years from the date of grant.
The Committee may grant a stock appreciation right in connection with
any option granted under the Plan. Any such right will provide that the Company,
at the election of the optionee and subject to specified conditions, will
purchase all or any part of such option to the extent exercisable at the date of
such election, for an amount (in the form of cash, shares of the Company's
common stock or any combination thereof as the Committee in its discretion
determines) equal to the excess of the fair market value of the shares covered
by the option or part thereof so purchased over the option price of such shares.
Shares covered by any option purchased are not available for grant of further
options. As of April 30, 1998, no stock appreciation rights are outstanding
under the Plan.
If an optionee ceases to be an employee of the Company for any reason
other than death or retirement, any option or right to the extent then
exercisable may be exercised within three months after cessation of employment.
Should an optionee die after ceasing to be an employee, any option or
stock appreciation right exercisable at the time of the optionee's death may be
exercised within 90 days after death by the optionee's estate or by the person
designated in the optionee's will.
In no case, however, may an option or stock appreciation right be
exercised following the termination date of the option.
The Company may establish procedures for ensuring payment or
withholding of income or other taxes in connection with the issuance of shares
under options. Such procedures may include provision for such payment or
withholding by retention of shares otherwise issuable to the optionee.
FEDERAL TAX CONSEQUENCES OF THE PLAN
Under present federal income tax laws, options under the Plan have the
following consequences:
(1) Upon the granting of an option or right under the
Plan, the optionee will have no taxable income, and the Company will
have no tax deduction.
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<PAGE> 21
(2) Upon exercise of a nonqualified option, the optionee
will realize ordinary taxable income inn an amount equal to the excess,
if any, of the fair market value of the shares at the time the option
is exercised over the option price of such shares. Gain or loss
realized by an optionee on disposition of the shares will generally be
capital gain or loss to the optionee and will not result in any
additional tax consequences to the Company.
(3) Exercise of an incentive stock option will not, by
itself, result in the recognition of taxable income to the optionee or
entitle the Company to a deduction at the time of such exercise.
However, the excess of the fair market value of the shares over the
option price on the date of exercise must be included as an adjustment
in computing alternative minimum taxable income. The optionee will
recognize capital gain or loss upon resale of the shares received upon
such exercise, provided that the optionee held such shares for at least
one year after the date of transfer to the optionee and for at least
two years after the grant of the option. Generally, if the shares are
not held for both of these periods, the optionee will recognize
ordinary income upon disposition in an amount equal to the excess of
the fair market value of the shares on the date of such exercise over
the option price of such shares. The balance of any gain or any loss
will be treated as a capital gain or loss to the optionee.
(4) The exercise of a stock appreciation right will
result in the recognition of ordinary income by the optionee on the
date of exercise in an amount equal to the amount of cash received.
(5) The Company will be allowed a deduction equal to the
amount of ordinary income realized by the optionee at the time the
optionee recognizes such income, provided applicable withholding
requirements are satisfied.
(6) Rights under the Plan conditioned on or accelerated
by a change in control or ownership of the Company may under federal
income tax laws result in "parachute payments" which may be
nondeductible by the Company and may subject the optionee to a 20%
excise tax.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE PROPOSED AMENDMENT TO THE 1995 STOCK OPTION AND STOCK
APPRECIATION RIGHTS PLAN.
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<PAGE> 22
APPROVAL OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has, subject to shareholder
approval, selected KPMG Peat Marwick, LLP as the Company's independent public
accountants for the year 1998 and recommends approval of such selection by the
shareholders. Schultz, Watkins & Company has served in this capacity since 1994.
One or more representatives of Schultz, Watkins & Company will have the
opportunity to make a statement at the Annual Meeting if they desire to do so
and will be available to respond to appropriate questions.
CHANGE IN INDEPENDENT ACCOUNTANTS
In large part because of the Company's rapid growth, in 1998 the
Company made the decision to change to a national accounting firm. Schultz,
Watkins & Company resigned as independent accountants for the Company. The
independent accountant's reports on the financial statements of the Company for
the two fiscal years ended December 31, 1996 and December 31, 1997 did not
contain an adverse opinion or a disclaimer of opinion, and the reports were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company's fiscal years ending December 31, 1996 and December
31, 1997, there were no disagreements with Schultz, Watkins & Company on any
matter of accounting principle or practice, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of
Schultz, Watkins & Company, would have caused Schultz, Watkins & Company to make
a reference to the subject matter of the disagreements in connection with their
report. During the Company's fiscal years ending December 31, 1996 and 1997,
there did not occur any event listed in paragraphs (a)(1)(v)(A) through (D) of
Regulation S-K, Item 304.
Effective ___________, 1998, the Company engaged KPMG Peat Marwick, LLP
as independent accountants to audit the Company's financial statements for the
fiscal years ending December 31, 1998 and December 31, 1999. Neither the Company
nor any person acting on behalf of the Company consulted KPMG Peat Marwick, LLP
regarding (i) either the application of accounting principles to a specified
transaction, either complete or proposed, or the type of opinion that might be
rendered on the Company's financial statements or (ii) any matter that was
either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of
Regulation S-K, Item 304 and the related instructions) or a reportable event (as
described in paragraph (a)(1)(v) of Regulation S-K, Item 304).
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR
APPROVAL OF THE FIRM OF KPMG PEAT MARWICK, LLP AS INDEPENDENT PUBLIC ACCOUNTANTS
FOR 1998.
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<PAGE> 23
MISCELLANEOUS
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material being prepared for the 1999 annual meeting of
shareholders of the Company must be submitted in accordance with applicable
Securities and Exchange Commission rules and received by the Company at its
principal offices, 1221 Lamar Street, Suite 1020, Houston, Texas 77010 no later
than February 26, 1999.
FINANCIAL STATEMENTS
Financial Statements, the Notes to Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations for 1997 with comparisons to 1996 and other relevant information are
included in the Company's 1997 Annual Report to Shareholders which accompanies
this Proxy Statement and are incorporated herein by reference.
DISCRETIONARY AUTHORITY
At the time of mailing this Proxy Statement, the Board of Directors was
not aware of any other matters which might be presented at the meeting. If any
matter not described in this Proxy Statement should properly be presented, the
persons name in the accompanying form of proxy will vote such proxy in
accordance with their judgment.
By Order of the Board of Directors
----------------------------------------
Kelly G. Griffin, Assistant Secretary
DATED this 28th day of April, 1998
================================================================================
A copy of the Company's 1997 Annual Report to the Securities and Exchange
Commission on Form 10-KSB referred to above may be obtained without charge by
any beneficial owner of the Company's common stock upon written request
addressed to Kelly G. Griffin, Assistant Secretary, Middle Bay Oil Company,
Inc., 1221 Lamar Street, Suite 1020, Houston, Texas 77010. Requests can be made
by telephone by calling (713) 759-6808.
================================================================================
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<PAGE> 24
EXHIBIT "A"
ARTICLES OF AMENDMENT
TO THE
AMENDED ARTICLES OF INCORPORATION
OF
MIDDLE BAY OIL COMPANY, INC.
I.
The name of the corporation is MIDDLE BAY OIL COMPANY, INC.
II.
As of the Effective Time set forth in Article IV hereof, Article III of
the Amended Articles of Incorporation of MIDDLE BAY OIL COMPANY, INC. is amended
to read as follows:
"III.
The Corporation has authority to issue not more than 30,000,000
shares of capital stock which are divided into classes as follows:
(a) Twenty million (20,000,000) shares of common stock with $.02
par value, designated "Common Stock" which, except as specifically granted
to the preferred stock as set forth below, are entitled to the entire
stock voting power in regard to the Corporation, to all dividends declared
and to all assets of the Corporation upon liquidation.
(b) Ten million (10,000,000) shares of preferred stock with $.02
par value, designated "Preferred Stock."
(c) The designations and the powers, preferences and rights and
the qualifications, limitations or restrictions of the preferred stock
shall be as follows:
The Board of Directors is expressly authorized at any time and from
time to time to provide for the issuance of shares from the authorized
preferred stock which may be issued in one or more series, with such
designations, preferences and relative participating optional or other
special rights, qualifications, limitations or restrictions thereof, as
shall be stated and expressed in the resolution or resolutions providing
for the issuance thereof adopted by the Board of Directors
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<PAGE> 25
and as are not stated or expressed in Articles of Incorporation or any Amendment
thereto, including (but without limiting the generality of the foregoing) the
following:
(1) the distinctive designation of a series, if any, and the
number of shares which shall constitute such series,
which number may be increased (except where otherwise
provided by the Board of Directors in creating such
series) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like
action of the Board of Directors;
(2) the annual rate of dividends payable on preferred shares
or on the shares of any series created, whether the
dividends shall be cumulative, noncumulative or
partially cumulative dividends and the date from which
dividends shall be accumulated, if dividends are to be
cumulative;
(3) the time or times when and the price or prices at which
preferred shares or shares of any series created, shall
be redeemable and the sinking fund provisions, if any,
for the purchase or redemption of such shares;
(4) the amount payable on preferred shares or shares of any
series created and the rights of holders of such shares
in the event of any liquidation, dissolution or winding
up of the affairs of the Corpora tion;
(5) the rights, if any, of the holders of preferred shares
or shares of any series created to convert such shares
into, or exchange such shares for, shares of common
stock or shares of any other series of preferred stock,
if any, and the terms and conditions of such conversions
or exchange; and
(6) the voting rights, if any which holders of such shares
may exercise.
The Board of Directors is expressly authorized to vary the
provisions relating to the foregoing matters between the various series of
Preferred Shares, but in all other respects the shares of each series of
Preferred Shares, shall be of equal rank with each other, regardless of
series. All of the Preferred Shares of any one series shall be identical
with each other in all respects.
(d) Dividend Rights. The holders of the Preferred Shares of any
series shall be entitled to receive, as and when declared by the Board of
Directors, out of
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<PAGE> 26
funds legally available for that purpose under the laws of the State of
Alabama, preferential dividends which may be either cumulative or
noncumulative at the rate per annum fixed by the Board of Directors for
such series. Such dividends shall be payable at the time determined by the
Board of Directors. If Preferred Shares of more than one series are
outstanding, and the stated dividend is not paid in full, all series of
Preferred Shares shall share ratably in the payment of dividends including
accumulations, if any, in accordance with the sum which would be payable
on such shares if all dividends were declared and paid in full.
Accumulations of dividends shall not bear interest. So long as any
Preferred Shares shall remain outstanding, no dividends shall be declared
or paid to any distributions made on the Common Shares or on any other
class of shares junior to the Preferred Shares, and no share of common or
of any other class junior to the Preferred Shares shall be purchased or
retired, and no monies shall be made available for a sinking fund for such
purpose unless dividends for all past dividend periods shall have been
paid on all outstanding Preferred Shares of all series. Subject to the
above provisions, and not otherwise, dividends may be paid from time to
time on the Common Shares or other junior issues out of funds legally
available for the purpose as and when declared by the Board of Directors.
(e) Redemption.
(1) The Corporation, on the sole authority of the board of
Directors, may at its option redeem all or any part of
any series of the Preferred Shares on the terms,
including redemption price, and to the extent, if any,
therefor affixed by the Board of Directors. Such
redemption may be effected only after dividends which
have been declared or accrued on any series of Preferred
Shares have been paid. If less than all of the Preferred
Shares of any series is to be redeemed, the redemption
shall be in such amount and by such method, whether by
lot or pro rata, or by such other method as may then be
required by law or by the rules and regulations of any
stock exchange upon which the Preferred Shares may at
that time be listed, as may from time to time be
determined by the Board of Directors. Written notice of
redemption stating the date and place of redemption
shall be mailed by the Corporation, not less than thirty
(30) days nor more than forty-five (45) days prior to
the redemption date, to the record holders of the shares
to be re deemed, directed to their last noted addresses
as shown by the corporate records.
(2) If notice of redemption is given as provided above, and
if on the redemption date the Corporation has set apart
in trust
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<PAGE> 27
for the purpose, sufficient funds for such redemption,
then from and after the redemption date, notwithstanding
that any certificate for such shares has not been
surrendered for cancellation, the Preferred Shares
called for redemption shall no longer be deemed outstand
ing and all rights with respect to such shares shall
forthwith cease and terminate, except on the right of
the holders thereof to receive the redemption price,
without interest, upon surrender of certificates of the
shares called for redemption.
(3) Any funds so set apart or deposited which, at the end of
one (1) year after the redemption date, remain unclaimed
by the holder(s) of Preferred Shares called for
redemption, shall be released and returned to the
Corporation upon demand, and shall thereafter be
available for general corporate purposes, and the
depository, if any, shall thereupon be relieved of all
responsibility therefor to such holders. Any interest
accrued on funds so deposited shall be paid to the
Corporation from time to time.
(4) Preferred Shares which are redeemed as provided in this
section, or are reacquired for retirement pursuant to
any sinking fund which may be established therefor, may
be held as Treasury Shares or may be canceled and
retired in the manner provided by law, and appropriate
proceedings to effect the corresponding reduction in the
stated capital of the Corporation shall be taken.
(f) Rights on Liquidation. In the event of the liquidation,
dissolution, or winding up of the Corporation, whether
voluntary or involuntary, resulting in any distribution of its
assets to its shareholders, the holders of the Preferred
Shares then outstanding shall be entitled to receive the
amount per share theretofore affixed by the Board of Directors
of the various series, plus any accrued interest, and no more,
before any payment or distribution of the assets of the
Corporation is made to or set apart for the holders of Common
Shares or any other class junior to the Preferred Shares. If
the assets of the Corporation distributable to the holders of
all the Preferred Shares are insufficient for the payment to
them of the full preferential amount described above, such
assets shall be distributed ratably among the holders of all
Preferred Shares of all series in accordance with the amounts
which would be payable on such distribution of all sums
payable were discharge in full. After payment for the
preferential amounts required to be paid to the holders of all
Preferred Shares then outstanding, the holders of Preferred
Shares and/or any other class junior to the Preferred Shares
shall be entitled, to
-4-
<PAGE> 28
the exclusion of the holders of any of the Preferred Shares, to share in
all remaining assets of the Corporation in accordance with their
respective interests.
For the purposes of this Section and any certificate filed pursuant
to law and setting forth the designation, description, and terms of any
series of Preferred Shares, a consolidation or merger of the Corporation
with any other corporation or corporations shall not be deemed a
liquidation, or winding up of the Corporation."
All other provisions of the Amended Articles of Incorporation shall remain
in full force and effect.
III.
This amendment was duly approved by the shareholders at the Annual Meeting
of Shareholders held in accordance with the provisions of Section 10-2B-7.01 of
the Alabama Business Corporation Act on May 28, 1998. At such Annual Meeting,
there were a total of 7,830,766 shares of common stock issued and outstanding
and eligible to vote on the amendment. ____________ shares were voted in favor
of the amendment, and _________ shares were voted against the amendment.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed and attested by its duly authorized officers this
__________ day of ____________________, 1998.
MIDDLE BAY OIL COMPANY, INC.
ATTEST:
By:
--------------------------------------
John J. Bassett, President
- --------------------------------------
Secretary
[CORPORATE SEAL]
-5-
<PAGE> 29
EXHIBIT "B"
AMENDMENT NO. 1
TO THE
AMENDED AND RESTATED 1995 STOCK OPTION
AND STOCK APPRECIATION RIGHTS PLAN
OF
MIDDLE BAY OIL COMPANY, INC.
As of the date set forth below, Section 3 of the Amended and Restated
1995 Stock Option and Stock Appreciation Rights Plan of Middle Bay Oil Company,
Inc. is amended to read as follows:
"3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of
Section 15 hereof, the aggregate number of Shares that may be subject to
Options or Rights shall not exceed 1,500,000, which Shares may be either
Treasury Shares or authorized but unissued Shares. If the Shares that
would be issued or transferred pursuant to any such Incentive Award are
not issued or transferred and cease to be issuable or transferable for any
reason, the number of Shares subject to such Incentive Award will no
longer be charged against the limitation provided for herein and may again
be made subject to Incentive Awards."
IN WITNESS WHEREOF, the Corporation has caused its duly authorized
officers to affix their signatures and the seal of the Corporation to this
amendment on the _______ day of May, 1998.
MIDDLE BAY OIL COMPANY, INC.
ATTEST:
By:
--------------------------
- --------------------------------------- John J. Bassett, President
Secretary
[CORPORATE SEAL]
<PAGE> 30
APPENDIX A
PRELIMINARY COPY
PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF
MIDDLE BAY OIL COMPANY, INC.
The undersigned, a shareholder of record of Middle Bay Oil Company,
Inc. (the "Company"), hereby appoints John J. Bassett and Frank C. Turner, II,
and each of them, with power of substitution, to represent and to vote all of
the shares of the Company which the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held at the offices of the
Company located at 1221 Lamar Street, Suite 1020, Houston, Texas, on Thursday,
May 28, 1998 at 10:00 a.m. Central Daylight Time, and at any adjournment or
adjournments thereof, hereby revoking all proxies heretofore given with respect
to such shares; and the undersigned hereby instructs said proxy to vote all such
shares of stock at the Annual Meeting in accordance with the following
instructions: (INDICATE BY CHECK MARK)
I. ELECTION OF DIRECTORS
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) [ ] listed below [ ]
John J. Bassett - C. J. Lett, III - Stephen W. Herod -
Edward P. Turner, Jr. Frank E. Bolling, Jr. - Alvin V. Shoemaker -
Gary Christopher
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the line provided hereinafter:
)
-------------------------------------------------------------
II. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE COMPANY'S
AUTHORIZED CAPITAL STOCK FROM 10,000,000 SHARES TO 20,000,000 SHARES OF
COMMON STOCK AND FROM 5,000,000 SHARES TO 10,000,000 SHARES OF PREFERRED
STOCK
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. PROPOSAL TO AMEND THE 1995 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
TO INCREASE TO 1,500,000 THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE TO
OPTION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IV. PROPOSAL TO APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK, LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS FOR 1998
[ ] FOR [ ] AGAINST [ ] ABSTAIN
V. OTHER MATTERS
WITH discretionary authority WITHOUT AUTHORITY
to vote upon any other to vote upon any other
matters [ ] [ ] matters
Shareholders approving the proposals set forth herein should mark the
"For" box herein; those opposing such action should register their position by
marking the appropriate "Against" or "Abstain" box herein or by not returning
this Proxy Form. SIGNED BUT UNMARKED PROXY FORMS WILL BE DEEMED TO AUTHORIZE A
VOTE "FOR" THE PROPOSALS SET FORTH HEREIN.
[Continued on the reverse side hereof]
<PAGE> 31
The invalidity, illegality or unenforceability of any particular provision
of this Proxy Form shall be construed in all respects as if such invalid,
illegal or unenforceable provision were omitted without affecting the validity,
legality or enforceability of the remaining provisions hereof.
YOUR VOTE IS IMPORTANT. IF YOU ARE UNABLE TO ATTEND THE
ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN
THIS PROXY FORM, USING THE ENCLOSED ENVELOPE.
Please sign below exactly as name appears on this Proxy Form. If shares
are registered in more than one name, the signatures of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating his title. Trustees, guardians, executors and
administrators should sign in their official capacity, giving their full title
as such. If a partnership, please sign in the partnership name by authorized
persons.
The undersigned acknowledges receipt of the Notice of said Annual Meeting
and the Proxy Statement dated April 28, 1998 by signing this Proxy.
(Number of Shares)
(Paste mailing label from
Transfer Agent here)
(Signature of Shareholder)
(Additional Signatures, if held jointly)
Dated: , 1998
------------------------------------
(Title or Authority, if applicable)
