<PAGE>
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:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
PETROCORP INCORPORATED
- -------------------------------------------------------------------------------
(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>
PETROCORP INCORPORATED
16800 GREENSPOINT PARK DRIVE
SUITE 300, NORTH ATRIUM
HOUSTON, TEXAS 77060
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1998
To the Shareholders of
PetroCorp Incorporated:
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of PetroCorp Incorporated (the "Company") will be held at the Sheraton
Crown Hotel and Conference Center, 15700 John F. Kennedy Blvd., Houston, Texas
77032, at 2:30 p.m., Houston time, on Thursday, May 7, 1998, for the following
purposes:
1. To elect three persons to serve as directors of the classified
Board of Directors until the 2001 annual meeting and until their successors
are elected and have qualified.
2. To ratify the reappointment of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December 31,
1998.
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
Shareholders of record at the close of business on March 17, 1998 will be
entitled to notice of and to vote at the Annual Meeting and any adjournment or
adjournments thereof.
Shareholders are cordially invited to attend the Annual Meeting in person.
Those who will not attend and who wish their shares voted are requested to sign,
date and mail promptly the enclosed proxy for which a stamped return envelope is
provided.
By Order of the Board of Directors,
/s/ CRAIG K. TOWNSEND
Craig K. Townsend, Secretary
Houston, Texas
April 9, 1998
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO
PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY. IF YOU ATTEND THE ANNUAL
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE>
PETROCORP INCORPORATED
16800 GREENSPOINT PARK DRIVE
SUITE 300, NORTH ATRIUM
HOUSTON, TEXAS 77060
------------------------
PROXY STATEMENT
------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of PetroCorp Incorporated, a Texas
corporation (the "Company"), for use at the Annual Meeting of Shareholders to be
held on Thursday, May 7, 1998, at the Sheraton Crown Hotel and Conference
Center, 15700 John F. Kennedy Blvd., Houston, Texas 77032, at 2:30 p.m., Houston
time, and at any adjournment or adjournments thereof (such meeting and
adjournment(s) thereof referred to as the "Annual Meeting"). It is anticipated
that the proxy and this Proxy Statement will be mailed to shareholders on or
about April 9, 1998.
In addition to solicitation by mail, solicitation of proxies may be made by
personal interview, special letter, telephone or telegraph by the officers,
directors and employees of the Company. Brokerage firms will be requested to
forward proxy materials to beneficial owners of shares registered in the names
of such firms and will be reimbursed for their expenses. The cost of
solicitation of proxies will be paid by the Company.
A proxy received by the Company may be revoked by the shareholder giving
the proxy at any time before it is exercised. A shareholder may revoke a proxy
by notification in writing to the Company at 16800 Greenspoint Park Drive, Suite
300, North Atrium, Houston, Texas 77060, Attention: Secretary. A proxy may also
be revoked by execution of a proxy bearing a later date or by attendance at the
Annual Meeting and voting by ballot. A proxy in the form accompanying this
Proxy Statement, when properly executed and returned, will be voted in
accordance with the instructions contained therein. A proxy received by the
Company which does not withhold authority to vote or on which no specification
has been indicated will be voted in favor of the nominees for director named in
this Proxy Statement and in favor of the reappointment of Price Waterhouse LLP
as the Company's independent accountants.
A quorum for the transaction of business at the Annual Meeting will be
present if the holders of a majority of the shares of Common Stock entitled to
vote are represented at the Annual Meeting in person or by proxy. Abstentions
and broker non-votes are counted as present in determining whether the quorum
requirement is satisfied. Directors will be elected by a plurality of the votes
cast by the holders at the Annual Meeting. In the event the shareholders do not
approve the reappointment of Price Waterhouse LLP to audit the Company's
financial statements, the Audit Committee and Board of Directors will consider
the appointment of other accountants. Abstentions from voting on any matter
will be included in the voting tally and will have the same effect as a vote
withheld on the election of directors or against the ratification of the
appointment of the independent accountants, as the case may be. Because broker
non-votes are not considered "shares present" with respect to matters decided by
a plurality of the votes or requiring the affirmative vote of a majority of
shares represented in person or by proxy at the Annual Meeting, broker non-votes
will not affect the outcome with respect to the election of directors or the
ratification of the reappointment of the independent accountants.
At the date of this Proxy Statement, management of the Company does
not know of any business to be presented at the Annual Meeting other than those
matters set forth in the Notice accompanying this Proxy Statement. If any other
business should properly come before the Annual Meeting, it is intended that the
shares represented by proxies will be voted with respect to such business in
accordance with the judgment of the persons named in the proxy.
<PAGE>
COMMON STOCK OUTSTANDING AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on March 17, 1998 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. At that date, there were outstanding 8,591,519
shares of common stock, par value $.01 per share, of the Company ("Common
Stock"), and the holders thereof will be entitled to one vote for each share of
Common Stock held of record by them on that date for each proposition presented
at the Annual Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK.
The following table sets forth information with respect to the shares of
Common Stock owned of record and beneficially as of March 17, 1998 by all
persons who own of record or are known by the Company to own beneficially more
than 5% of the outstanding Common Stock, by each director and executive officer,
and by all directors and executive officers as a group:
<TABLE>
<CAPTION>
SHARES OWNED BENEFICIALLY
-------------------------
NAME NUMBER PERCENT
---- ------ -------
<S> <C> <C>
W. Neil McBean (1)................................................................................ 244,946 2.8%
Michael L. Lord (1)............................................................................... 81,504 0.9
A.F. (Tony) Pelletier (1)......................................................................... 101,504 1.2
J. Les Watson (1)................................................................................. 20,500 *
Craig K. Townsend (1)............................................................................. 48,621 0.6
Lealon L. Sargent (1)............................................................................. 328,185 3.8
Thomas N. Amonett (2)............................................................................. 6,000 *
G. Jay Erbe, Jr. (3).............................................................................. 1,736,500 20.2
Gary R. Christopher (4)........................................................................... 4,098,957 47.7
Stephen M. McGrath (5)............................................................................ 189,720 2.2
Robert C. Thomas (2).............................................................................. 6,000 *
All directors and executive officers as a group (11 persons) (6).................................. 6,862,437 74.9
Kaiser-Francis Oil Company (7)(8)................................................................. 4,092,457 47.6
USF&G Corporation (8)(9).......................................................................... 1,736,000 20.2
</TABLE>
_____________________
* Less than 0.5%.
(1) Mr. McBean's amount includes 153,250 shares, Mr. Lord's amount includes
73,000 shares, Mr. Pelletier's amount includes 93,000 shares, Mr. Watson's
amount includes 20,000 shares, Mr. Townsend's amount includes 45,000 shares
and Mr. Sargent's amount includes 157,750 shares, all subject to issuance
within 60 days upon the exercise of stock options.
(2) Mr. Amonett's amount includes 5,000 shares and Mr. Thomas' amount includes
5,000 shares subject to issuance within 60 days upon the exercise of stock
options.
(3) Includes 873,000 shares owned by Park Avenue Exploration Corporation and
858,000 shares owned by United Stated Fidelity and Guaranty Company, both
wholly-owned subsidiaries of USF&G Corporation. Also includes 5,000 shares
subject to issuance within 60 days upon the exercise of stock options; these
options were issued to this director, who assigned them to his employer.
This director is an officer of USF&G Corporation or a subsidiary thereof and
may be deemed to be the beneficial owner of these shares. This director
disclaims beneficial ownership of these shares.
(4) Includes 4,092,457 shares owned by Kaiser-Francis Oil Company ("Kaiser-
Francis"). This director is an employee of Kaiser-Francis and may be deemed
to be the beneficial owner of these shares. This director disclaims
beneficial ownership of these shares. Also includes 5,000 shares subject to
issuance within 60 days upon the exercise of stock options.
(5) Includes 184,720 shares owned by CIBC-Oppenheimer Corp. Also includes 5,000
shares subject to issuance within 60 days from the exercise of stock
options; these options were issued to this director, who assigned them to
his employer. This director is an officer of CIBC-Oppenheimer Corp. and may
be deemed to be the beneficial owner of these shares. This director
disclaims beneficial ownership of these shares.
(6) Includes 567,000 shares subject to issuance within 60 days upon the exercise
of stock options. Also includes certain shares as to which beneficial
ownership is disclaimed by Messrs. Erbe, Christopher and McGrath. If the
aggregate of 6,018,177 shares as to which beneficial ownership is disclaimed
by these persons were excluded, the percentage as a group would be 9.2%.
2
<PAGE>
(7) Address is 6733 South Yale, Tulsa, Oklahoma 74136. Kaiser-Francis files a
Schedule 13D.
(8) Because of a voting agreement between Kaiser-Francis and USF&G Corporation,
which agreement relates to the election of members of the Board of
Directors, these entities may be deemed a "group" for purposes of
calculating beneficial ownership under the federal securities laws. In such
case, the group would beneficially own 5,828,457 shares, or 67.8%, of the
Common Stock.
(9) Address is 100 Light Street, Baltimore, Maryland 21202. Consists of 873,000
shares owned by Park Avenue Exploration Corporation and 858,000 shares owned
by United States Fidelity and Guaranty Company. Includes 5,000 shares
subject to issuance within 60 days from the exercise of stock options. Both
of these companies are wholly-owned subsidiaries of USF&G Corporation, which
has the power to direct the voting and disposition of the shares held by
such subsidiaries and, therefore, may be deemed to be the beneficial owner
of such shares. The address of the subsidiaries is also 100 Light Street,
Baltimore, Maryland 21202.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Company's Board of Directors is composed of seven persons who hold
office for staggered three-year terms. Three directors are to be elected at the
Annual Meeting as Class II directors to serve until their terms expire in 2001.
The Company recommends voting for the election of each of the nominees for
director listed below. If, for any reason, at the time of the election one or
more of such nominees should be unable to serve, the proxy will be voted for a
substitute nominee or nominees selected by the Board of Directors.
Unless authority is withheld, duly executed proxies will be voted for the
election of Messrs. W. Neil McBean, Thomas N. Amonett and Robert C. Thomas to
hold office until the annual meeting of shareholders to be held in the year 2001
and until each of their respective successors is elected and qualified.
THE COMPANY RECOMMENDS VOTING "FOR" EACH OF THE NOMINEES.
NOMINEES FOR DIRECTOR
The following table sets forth the name and age of each nominee listed in
the enclosed form of proxy for Class II directors to hold office until the
annual meeting of shareholders to be held in the year 2001, his principal
position with the Company and his term as director of the Company.
NAME AGE TERM OF OFFICE POSITION
- ---- --- -------------- --------
W. Neil McBean...................... 50 1983-Present President and Chief
Executive Officer
Thomas N. Amonett................... 54 1994-Present --
Robert C. Thomas.................... 69 1997-Present --
W. Neil McBean has been Chief Executive Officer of the Company since 1996
and President since 1986. He has also been a director since 1983. Mr. McBean
co-founded PetroCorp in 1983, and previously served as Senior Vice President.
Mr. McBean has 29 years of experience in the oil and gas industry. During 1982
and 1983, he was Vice President of Production for ENI Exploration Company.
Prior to that time, he spent 13 years with Tenneco Oil Company, where he served
in a range of management and technical capacities. Mr. McBean received a
B.A.Sc. in Chemical Engineering from the University of British Columbia.
Thomas N. Amonett has been a director of the Company since 1993. He has
served as President and Chief Executive Officer of American Residential
Services, Inc. since November 1997. He served as interim President and Chief
Executive Officer of Weatherford Enterra, Inc. from July 1996 to November 1997.
From 1992 to 1996, he served as Chairman of the Board and President of Reunion
Resources Company. Prior to that time, he was engaged in the practice of law
with Fulbright & Jaworski, L.L.P., where he was of counsel from 1986 to 1992.
Mr. Amonett also served as Chairman of the Board of Weatherford Enterra, Inc.
from 1986 to 1989 and continues to serve as a director of that corporation. Mr.
Amonett also currently serves as a director of American Residential Services,
Inc., ITEQ, Inc., Home USA, Inc. and Reunion Industries, Inc.
3
<PAGE>
Robert C. Thomas was elected by the Board to fill a vacant director
position effective April 1, 1997. Since 1994, Mr. Thomas has been retired from
Tenneco Gas Company, where he served as Chairman and Chief Executive Officer
from 1990. He originally joined Tenneco in 1956 and served in a variety of
engineering, management and executive positions in both Tenneco Oil Company and
Tenneco Gas Company. Mr. Thomas is currently a Senior Associate with Cambridge
Energy Research Associates and a director of Marine Drilling Companies, Inc.
OTHER DIRECTORS
The following table sets forth the name and age of each director of the
Company not up for election this year, his principal position with the Company,
the year he became a director of the Company and the year that his term as a
director expires.
TERM DIRECTOR
NAME AGE EXPIRES SINCE POSITION
- ---- --- ------- ----- --------
Lealon L. Sargent............ 68 2000 1983 Chairman of the Board
Gary R. Christopher.......... 48 1999 1996 Director
G. Jay Erbe, Jr.............. 51 2000 1992 Director
Stephen M. McGrath........... 62 1999 1986 Director
Lealon L. Sargent has been Chairman of the Board of the Company since 1984
and a director since 1983. Mr. Sargent co-founded PetroCorp in July 1983, and
previously served as Chief Executive Officer and as President and Chief
Operating Officer. Mr. Sargent worked in the oil and gas industry for over 39
years before retiring from the Company's management at the end of 1997. From
1981 to 1983, Mr. Sargent was President of ENI Exploration Company. From 1980
to 1981, he was President of Hamilton North America. Prior to that time, Mr.
Sargent spent the majority of his career with Tenneco Oil Company, rising to the
position of Senior Vice President of Worldwide Exploration and of North American
Onshore Exploration and Production. He received a B.S. in Geology from the
University of Oklahoma and an A.M.P. from Harvard Graduate School of Business.
Gary R. Christopher has been a director of the Company since August 1996.
He has been Acquisitions Coordinator of Kaiser-Francis Oil Company since January
1996. Prior to that, he served for five years as Senior Vice President and
Manager of Energy Lending for Bank of Oklahoma.
G. Jay Erbe, Jr. rejoined the Board of Directors in 1997 after having
previously served as a director of the Company from 1992 to 1996. Mr. Erbe has
been Vice President of USF&G Corporation or of one of its subsidiaries since
1991. He is also President of Park Avenue Exploration Corporation, having
assumed that office in 1992 after having been Executive Vice President since
1990. Prior to that time, he was Vice President and Chief Financial Officer of
Manekin Corporation, a regional real estate developer, property manager and
brokerage firm, for four years.
Stephen M. McGrath has been a director of the Company since 1986. Mr.
McGrath has served as a Managing Director for CIBC-Oppenheimer Corp. since 1997.
Previously, Mr. McGrath served as an Executive Vice President of Oppenheimer &
Co., Inc. and as the Director of its Corporate Finance Department. Prior to his
employment by Oppenheimer in 1983, he was with Warner-Lambert Company for 11
years as Senior Vice President of Planning and Development. Before joining
Warner-Lambert Company, Mr. McGrath was Controller and Assistant Treasurer of
Sterling Drug, Inc. and a CPA for Price Waterhouse & Co. He also serves as a
director of Alliance Pharmaceutical Corporation and of several privately held
companies.
4
<PAGE>
VOTING AGREEMENT
Kaiser-Francis and USF&G Corporation (along with its affiliates Park Avenue
Exploration Corporation and United States Fidelity and Guaranty Company) are
parties to a voting agreement pursuant to which each of the parties agrees to
vote all shares of voting stock of the Company beneficially owned by it, to
cause those shares owned by its affiliates to be likewise voted, and to take
certain other actions to elect and include one designee of each of Kaiser-
Francis and USF&G Corporation as a director of the Company for so long as such
party, together with its affiliates, beneficially owns 10% of the outstanding
voting stock of the Company. Mr. Christopher is the designee of Kaiser-Francis
Oil Company and Mr. Erbe is the designee of USF&G Corporation.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the Company's last fiscal year, the Board of Directors of the
Company held four meetings. No director attended less than 75% of the meetings
of the Board of Directors held during the period he served as a director or of
any committee of which he was a member held during the period he served as a
member of a committee.
The Audit Committee, composed at the end of the last fiscal year of Messrs.
Erbe, Christopher, McGrath and Thomas, met two times during the last fiscal
year. The Audit Committee reviews with the Company's independent public
accountants the plan, scope and results of the annual audit and the procedures
for and results of internal controls.
The Compensation Committee, composed at the end of the last fiscal year of
Messrs. Amonett, Christopher and Erbe, met three times during the last fiscal
year. The Compensation Committee approves the salaries and other compensation
of officers, administers any existing bonus plans for executive and other
officers, makes recommendations to the Board regarding any present or future
stock option plans and, pursuant to the Company's Stock Option Plan, awards
stock options to executive and other officers who have been recommended by
management.
The Nominating Committee, composed at the end of the last fiscal year of
Messrs. Amonett, Christopher, Erbe and Thomas, did not meet during the last
fiscal year but the entire Board did address director nominations at its
meetings. This committee nominates persons for election by the Company's
shareholders to the Board of Directors. Shareholders who wish to nominate
persons for election to the Board of Directors must comply with the provisions
of the Company's Bylaws described below under "Nominations and Proposals for
Next Annual Meeting."
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is reimbursed for
expenses incurred in attending meetings of the Board of Directors or a committee
thereof and receives an annual retainer (paid on a quarterly basis) of $10,000,
plus a fee of $1,000 for each meeting of the Board attended and $500 for each
meeting of a committee attended.
EXECUTIVE AND OTHER OFFICERS
The following table sets forth the names, ages and positions of each
executive officer of the Company and one additional non-executive officer, all
of whom serve at the discretion of the Board of Directors. Effective at the end
of 1997, Mr. Lealon L. Sargent and Mr. Fletcher S. Hicks, Jr., the Company's
Land Manager and Assistant Secretary, retired from active management roles at
the Company. Mr. Sargent remains on the Board of Directors and will continue to
serve as its Chairman.
YEARS
EMPLOYED BY
NAME AGE POSITION THE COMPANY
- ---- --- -------- -----------
W. Neil McBean.................. 50 President and Chief Executive 14
Officer
Michael L. Lord................. 47 Vice President - Corporate 14
Development
A. F. (Tony) Pelletier.......... 45 Vice President - U.S. 14
Operations
J. Les Watson................... 52 Vice President - Canadian 5
Operations
Craig K. Townsend............... 38 Vice President - Finance, 14
Secretary and Treasurer
Laurent A. (Larry) Baillargeon.. 49 Corporate Land Manager, 1
General Counsel and
Assistant Secretary
5
<PAGE>
Michael L. Lord was elected Vice President-Corporate Development in May
1996 after serving as the Company's Acquisitions Manager for 13 years. With
over 24 years experience in the oil and gas industry, Mr. Lord oversees the
Company's acquisition activities and serves as Director of Marketing. In 1982,
he was Manager of Acquisitions at ENI Exploration, and from 1978 to 1982 he held
the same position at Damson Oil. Prior to that time, Mr. Lord served in various
capacities in both field operations and with the Office of Economic Planning and
Exploration for Standard Oil of Indiana. Mr. Lord is a registered professional
engineer and received his B.S. in Chemical Engineering from the University of
Oklahoma.
A.F. (Tony) Pelletier was elected Vice President-U.S. Operations in
November 1997 after serving as Vice President-Production since May 1996. With
22 years experience in the oil and gas industry, Mr. Pelletier is responsible
for the Company's exploration and production activities in the United States.
Mr. Pelletier joined the Company in 1984 and has previously served as General
Manager - Gulf, Rockies and Canada Division, Engineering Manager and Chief
Reservoir Engineer. From 1978 to 1984, he served in a variety of engineering
and supervisory positions with Exxon Company, USA. Mr. Pelletier is a
registered professional engineer and received a B.S. in Mechanical Engineering
and an M.Eng. in Civil Engineering from Texas A&M University.
J. Les Watson was elected Vice President-Canadian Operations in November
1997 after serving as the Company's Canadian Exploration Manager for five years.
With 29 years experience in the Canadian oil and gas industry, Mr. Watson is
responsible for the Company's exploration and production activities in Canada.
Prior to joining the Company in 1993, Mr. Watson was Exploration Manager for BHP
Petroleum (Canada) Ltd. and previously held various management positions with
several independent oil companies in Calgary after his initial employment with
Amoco Canada in 1969. Mr. Watson is a registered professional geologist and has
a B.Sc. in Honours Geology from the University of British Columbia.
Craig K. Townsend was elected Vice President-Finance, Secretary and
Treasurer in May 1996 after serving as the Company's Controller for nine years.
With 16 years experience in the oil and gas industry, Mr. Townsend is
responsible for the Company's finance and accounting activities. Prior to
joining the Company in 1983, he served for two years in the oil and gas audit
division of Arthur Andersen & Co. Mr. Townsend is a certified public accountant
and has a B.P.A. in Accounting from Mississippi State University.
Laurent A. (Larry) Baillargeon has been the Corporate Land Manager and
General Counsel for the Company since September 1997 and was appointed Assistant
Secretary of the Company in November 1997. Mr. Baillargeon has over 24 years of
land and legal experience in the oil and gas industry. Prior to joining
PetroCorp, Mr. Baillargeon served in a variety of land and legal capacities with
Shell Oil Company, Tenneco Oil Company and several independent organizations.
Most recently Mr. Baillargeon was in a private law practice in San Antonio,
Texas, specializing in oil and gas and corporate matters. He is a member of the
Bar in both Texas and Massachusetts, as well as a Certified Professional
Landman, and has a B.A. from Assumption College and a J.D. from South Texas
College of Law.
6
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth for the three fiscal years ended December
31, 1997, 1996 and 1995 all compensation received by the chief executive officer
during 1997 and by each of the five other most highly compensated executive
officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(2)
---------------
ANNUAL COMPENSATION SECURITIES
FISCAL ------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) STOCK OPTIONS COMPENSATION(3)
- --------------------------- ---- ------ -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
W. Neil McBean (4) 1997 $212,500 $ (5) 0 $9,000
President and Chief 1996 200,000 160,000 30,000 9,000
Executive Officer 1995 200,000 0 0 9,000
Lealon L. Sargent (4) 1997 214,151 (5) 0 9,000
Chairman of the Board and 1996 214,151 118,000 30,000 9,000
former Chief Executive Officer 1995 214,151 0 0 9,000
Michael L. Lord (6) 1997 153,267 10,000 0 9,000
Vice President - Corporate 1996 144,600 40,000 0 8,900
Development
A.F. (Tony) Pelletier (6) 1997 152,913 10,000 0 9,000
Vice President - U.S. Operations 1996 142,500 40,000 20,000 8,900
J. Les Watson (7) 1997 99,531 16,560 0 7,130
Vice President - Canadian
Operations
Craig K. Townsend (6) 1997 96,750 10,000 0 6,510
Vice President - Finance, 1996 88,250 20,000 20,000 5,900
Secretary and Treasurer
</TABLE>
_______________________
(1) Except for Messrs. McBean and Sargent, the bonus is related to the fiscal
year; however, it is payable in three installments, 50% in the following
year (the year granted) and 25% in each of the two years thereafter,
provided that the executive officer is still employed by the Company.
(2) No officers or employees of the Company participate in a restricted stock
plan, stock appreciation right plan or other long-term incentive plan.
(3) Consists of the Company's matching 401(k) contribution for such officers
except Mr. Watson. Mr. Watson receives a matching contribution from the
Company related to his Canadian Registered Retirement Savings Plan (RRSP).
(4) Mr. Sargent served as Chief Executive Officer of the Company until May 1996,
when he retired from that office and was succeeded by Mr. McBean, who had
been serving as the Company's President and Chief Operating Officer. Mr.
Sargent continued to serve as the executive Chairman of the Board until he
retired from an active management role with the Company effective at the end
of 1997.
(5) Because Mr. McBean's and Mr. Sargent's bonuses under the Management Annual
Incentive Compensation Plan are in part based on quantitative performance
measures that include publicly-reported data of other independent oil and
gas companies that is not yet available, the total amount of bonuses related
to 1997 are not calculable at the date hereof. See the discussion of the
plan under "Compensation Committee Report on Executive Compensation" below.
(6) Messrs. Lord, Pelletier and Townsend began serving as executive officers in
May 1996.
(7) Mr. Watson began serving as an executive officer in November 1997.
7
<PAGE>
The following table sets forth at December 31, 1997 the number of options
and the value of unexercised options held by each of the executive officers
named in the Summary Compensation Table. None of these individuals exercised
any options during the last fiscal year.
FISCAL YEAR ENDED DECEMBER 31, 1997 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED
UNEXPIRED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997 (1)
---------------------------- --------------------------
NAME AND PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C>
W. Neil McBean
President and Chief
Executive Officer................ 153,250 0 $209,663 $0
Lealon L. Sargent
Chairman of the Board and
former Chief Executive Officer... 157,750 0 224,288 0
Michael L. Lord
Vice President - Corporate
Development...................... 73,000 0 87,750 0
A. F. (Tony) Pelletier
Vice President - U.S.
Operations....................... 93,000 0 125,150 0
J. Les Watson
Vice President - Canadian
Operations....................... 20,000 0 37,400 0
Craig K. Townsend
Vice President - Finance,
Secretary and Treasurer.......... 45,000 0 37,400 0
</TABLE>
_________________________
(1) Based on the $8.25 per share closing price on The Nasdaq Stock Market at
December 31, 1997.
OTHER EMPLOYEE BENEFITS
Pursuant to an agreement with the Company, Mr. Sargent will receive $50,000
per year for ten years following his retirement from the Company, which was
effective at the end of 1997. Should his death occur prior to the receipt of
all benefits under this agreement, Mr. Sargent's surviving spouse or estate, as
applicable, will receive the remainder of such payments.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation provide that the liability of
directors for monetary damages shall be limited to the fullest extent
permissible under Texas law. This limitation of liability does not affect the
availability of injunctive relief or other equitable remedies.
The Company's Bylaws provide that the Company shall indemnify its directors
and officers to the fullest extent possible under Texas law. These
indemnification provisions require the Company to indemnify such persons against
certain liabilities and expenses to which they may become subject by reason of
their service as a director or officer of the Company or any of its affiliated
enterprises. The provisions also set forth certain procedures, including the
advancement of expenses, that apply in the event of a claim for indemnification.
8
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the performance of the Company's Common Stock
to the Standard & Poor's 500 Stock Index ("S&P 500 Index") and to the Standard &
Poor's Domestic Oil Index ("S&P Domestic Oil Index"). The graph assumes that
the amount of investment was $100 on October 28, 1993 (the first day the Common
Stock was traded after the Company's initial public offering) and that all
dividends were reinvested.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
10/28/93 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
PetroCorp Incorporated $ 100.00 $ 92.86 $ 103.57 $ 69.05 $ 88.10 $ 78.57
S&P 500 Index $ 100.00 $ 100.27 $ 101.59 $ 139.77 $ 171.86 $ 229.20
S&P Domestic Oil Index $ 100.00 $ 92.93 $ 97.51 $ 111.01 $ 140.39 $ 167.04
</TABLE>
PURSUANT TO SEC RULES, THIS SECTION OF THIS PROXY STATEMENT IS
NOT DEEMED "FILED" WITH THE SEC AND IS NOT INCORPORATED BY
REFERENCE INTO THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
9
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee ("the Committee") of the Company's Board of
Directors is pleased to present its report on executive compensation. This
report describes the components of the Company's executive officer compensation
program and the basis on which compensation is determined for the Chief
Executive Officer and other executive officers of the Company.
Committee and Philosophy. The Committee's duties include (i) establishing
the compensation program for the Chief Executive Officer, (ii) reviewing and
approving recommendations made by the Chief Executive Officer regarding the
compensation program for other executive officers, (iii) approving changes to
the base salary and incentive or bonus payments for the Chief Executive Officer
and other executive officers, and (iv) administering the Company's stock option
plan. Recommendations of the Committee are subject to the approval of the
Board of Directors. The following principles guide the Committee in its
deliberations:
. Providing a competitive total compensation program that enables the
Company to retain, motivate and reward its executive officers.
. Creating compensation opportunities based on the Company's
performance.
. Coordinating the compensation programs with the Company's annual and
long-term objectives and strategies.
. Working closely with the Chief Executive Officer to assure that the
compensation program supports the management style and culture of the
Company.
The three principal components of the Company's compensation program for
executive officers are base salary, annual incentive or bonus compensation, and
periodic grants under the stock option plan.
In determining overall compensation and executive performance, the
Committee places strong emphasis on performance measures that align the
officers' interests with those of shareholders, such as growth in oil and gas
reserves and in the underlying asset value of the Company, cash flows from
operating activities, reserve replacement costs per barrel of oil equivalent
("BOE") and production costs and general and administrative expenses per BOE, as
well as competitive compensation data. The Board of Directors has from time to
time retained outside compensation consultants to conduct compensation surveys
and advise the Committee concerning compensation matters, and the Committee has
surveyed the executive compensation levels of companies in the oil and gas
industry similar to the Company and believes that the overall compensation for
its executives is lower than the median of the companies surveyed.
Base Salary. Base salary levels are evaluated within the context of
prevailing base salaries paid to comparable executives in similar organizations
in the oil and gas industry. An individual officer's base salary is adjusted up
or down based on a subjective assessment of such officer's assigned duties and
responsibilities, current performance, potential, initiative, and other factors
determined by the Committee. In addition, the Company's financial performance
and business conditions are important factors in determining the appropriate
base salary for each executive officer. The Committee also takes into
consideration the recommendations of the Chief Executive Officer as to the
appropriate base salaries for other executive officers.
Annual Incentive Compensation Plan. In the fall of 1994 the Company's
Board of Directors approved adoption by the Company of the Executive Management
Annual Incentive Compensation Plan (the "Incentive Plan") to be administered by
the Committee. Messrs. McBean and Sargent were covered by the Plan for 1997,
and additional participants may be added to the Incentive Plan in the future
upon recommendation by the Chief Executive Officer and approval of the
Committee. A new plan year begins on January 1 of each year unless otherwise
determined by the Compensation Committee. Quantitative performance measures
will be established by the Compensation Committee in each plan year that reflect
the operating and financial success of the Company. These performance measures
will be used to determine the amount of the incentive bonus that is actually
earned. Such performance measures may change from year to year and the weight
given to each measure may also change to better reflect the Company's financial
and
10
<PAGE>
operating goals for a particular year. In 1997, each of the following
performance measures were weighted equally: (i) SEC 10 Value/Finding Costs
Ratio, which is the Company's 3-year trailing average ratio of SEC 10 value per
BOE (the discounted estimated pre-tax value of future net revenues) to finding
costs per BOE, divided by the 3-year industry peer group average (with such peer
group being determined by the Compensation Committee based on its subjective
determination of which independent oil and gas companies most closely resemble
the Company in size, operations and structure); (ii) Reserve Replacement Ratio,
which is the total proven oil and gas reserves found during the year divided by
the total oil and gas production volume during the year; (iii) Cash Flow Per
Share Growth, which is the percentage increase from the previous year's cash
flow from operations on a per share basis; (iv) Return on Net Assets, which is
the net income after taxes for the year divided by the average net assets during
the year computed; and (v) Discretionary Board Assessment, which is the Board's
subjective assessment of the Company's overall performance based on qualitative
factors and other financial or operating performance measures. Each performance
factor is measured against a pre-established target, and bonuses are earned to
the degree such targets are reached and surpassed. During 1997, participants in
the Incentive Plan were eligible to earn bonuses up to an amount equal to their
respective base salary. The amounts that the Committee could award Messrs.
McBean and Sargent have not yet been determined pending the receipt of certain
quantitative information that is not yet available. During 1996, the Committee
awarded Messrs. McBean and Sargent $160,000 and $118,000, respectively. In 1995,
Messrs. McBean and Sargent requested that the Committee not grant them any
incentive compensation due to the difficult year experienced by the Company.
Other Annual Bonuses. Executive officers who do not participate in the
Incentive Plan may be given annual bonuses not determined pursuant to the
Incentive Plan. Such annual bonuses are awarded based on the Committee's
subjective determination of improvements in productive measures such as growth
in oil and gas reserves and in the underlying asset value of the Company, cash
flows from operating activities, finding costs per BOE and production costs and
general and administrative expenses per BOE. The Committee does not assign
specific weights to any of these factors when it determines the Company's
overall performance for the year and makes awards from a bonus fund established
based on its determination of this performance. Typically, these bonuses are
payable in three installments (50% in the year granted, 25% one year after grant
and 25% two years after grant) and are dependent upon the executive officer or
key employee remaining with the Company. The Committee takes into consideration
the recommendations of the Chief Executive Officer as to appropriate bonuses for
other executive officers.
Stock Option Plan. The Stock Option Plan is maintained by the Company to
provide the Chief Executive Officer and the other executive officers with an
additional incentive to promote the financial success of the Company as
reflected by increased value of the Company's Common Stock. In connection with
a major transaction and the reorganization of the Company into a corporation in
1992, the Chief Executive Officer and the other executive officers were each
granted a significant number of stock options. In 1996, smaller numbers of
stock options were granted to the Chief Executive Officer and other officers in
order to provide further incentives. No options were granted in 1997. These
options are, by their nature, at risk as to ultimate value, and the Committee
believes that this aligns the officers' rewards and incentives with
shareholders' interests. By their terms, all of these options vested in 1996
upon the sale by two significant shareholders of all of their Common Stock to
Kaiser-Francis. See "Common Stock Outstanding and Principal Holders Thereof "
above.
Chief Executive Officer's Compensation. During 1997, Mr. McBean served as
Chief Executive Officer of the Company. The Committee determines the
compensation of the Chief Executive Officer in substantially the same manner as
the compensation of the other officers. In establishing the base salary for Mr.
McBean for the 1997 fiscal year, the Committee assessed (i) the performance of
the Company, (ii) total return to shareholders and (iii) progress toward
implementation of the Company's strategic business plan. In addition, the
Committee took into consideration the compensation levels of chief executives in
similar oil and gas organizations. Mr. McBean's total compensation package also
includes a large portion in the form of stock options that were awarded in 1992
and in 1996. As discussed above under "Annual Incentive Compensation Plan," a
bonus for Mr. McBean has not yet been determined for fiscal year 1997.
Omnibus Budget Reconciliation Act of 1993. Section 162(m) of the Omnibus
Budget Reconciliation Act of 1993 limits the deductibility to the Company of
cash compensation in excess of $1 million paid to the Company's chief executive
officer and the next four highest paid officers during any fiscal year,
beginning with 1994, unless such compensation meets certain requirements.
During 1997, the Committee reviewed compensation programs in light of
11
<PAGE>
the requirements of this law. The Committee does not expect the new law to
impact the Company in 1998 or for the foreseeable future in any significant way,
if at all.
COMPENSATION COMMITTEE
THOMAS N. AMONETT
GARY R. CHRISTOPHER
G. JAY ERBE, JR.
PURSUANT TO SEC RULES, THIS SECTION OF THIS PROXY STATEMENT IS NOT
DEEMED "FILED" WITH THE SEC AND IS NOT INCORPORATED BY REFERENCE
INTO THE COMPANY'S ANNUAL REPORT ON FORM 10-K.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From time to time in the past, the Company has raised necessary working
capital through the issuance of debt to related parties. In July 1993, United
States Fidelity and Guaranty Company (a wholly-owned subsidiary of USF&G
Corporation) purchased $10.0 million of Senior Adjustable Rate Notes Series A,
due June 30, 1999 (the "Series A Notes"). PetroCorp used the proceeds of the
Series A Notes, together with proceeds from the issuance of other notes to
unaffiliated parties, to refinance a $22.0 million 5.5% senior note payable to
USF&G Corporation. Interest on the Series A Notes is adjustable based on a
spread of 115 basis points over the London Interbank Offered Rates ("LIBOR").
The Company may select a rate that will be applicable for a one, three or six-
month period. Interest is payable in arrears at the end of the selected period.
Mandatory redemptions commenced on December 31, 1994 for the Series A Notes. Mr.
Erbe is an officer of USF&G Corporation.
CERTAIN TRANSACTIONS
From time to time in the past, the Company has raised necessary working
capital through the issuance of debt to related parties, including a subsidiary
of USF&G Corporation. See "Compensation Committee Interlocks and Insider
Participation" above. Mr. Erbe is an officer of USF&G Corporation.
In connection with the purchase by Kaiser-Francis of Common Stock from two
significant shareholders during 1996, Kaiser-Francis succeeded to rights under a
registration rights agreement previously entered into between the Company and
those shareholders, which agreement is substantially similar to another
registration rights agreement previously entered into between the Company and
two subsidiaries of USF&G Corporation. Kaiser-Francis Oil Company also
succeeded to those former shareholders' rights under a voting agreement with
USF&G Corporation. See "Voting Agreement" above. Mr. Christopher is an officer
of Kaiser-Francis, and Mr. Erbe is an officer of USF&G Corporation.
All such transactions were approved by the Board of Directors of the
Company, and the Company believes that each such transaction was on terms that
were comparable to those that might have been obtained by the Company on an
arm's length basis from unaffiliated parties.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, the Company's
directors, executive officers, and ten percent shareholders are required to
report to the Securities and Exchange Commission, by specific due dates,
transactions and holdings in the Company's Common Stock. Subject to and in
accordance with Item 405 of Regulation S-K, the Company believes that during the
fiscal year ended December 31, 1997, all such filing requirements were satisfied
in a timely manner.
12
<PAGE>
PROPOSAL NO. 2 - RATIFICATION AND APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Price Waterhouse LLP as
its independent accountants to audit the accounts of the Company for the fiscal
year ending December 31, 1998. Price Waterhouse LLP has advised the Company
that it will have a representative in attendance at the Annual Meeting who will
have the opportunity to make a statement if such representative desires to do so
and who will respond to appropriate questions presented at such meeting.
Management recommends that the reappointment of Price Waterhouse LLP as
independent accountants of the Company for the fiscal year ending December 31,
1998 be ratified by the shareholders. Unless otherwise indicated, all properly
executed proxies will be voted for such ratification. An adverse vote will
cause the Audit Committee and Board of Directors to consider the appointment of
other accountants in the following year.
THE COMPANY RECOMMENDS VOTING "FOR" PROPOSAL NO. 2.
OTHER MATTERS
The Board of Directors knows of no matters other than those described above
that are likely to come before the Annual Meeting. If any other matters
properly come before the meeting, persons named in the accompanying form of
proxy intend to vote such proxy in accordance with their best judgment on such
matters.
NOMINATIONS AND PROPOSALS FOR NEXT ANNUAL MEETING
A shareholder wishing to nominate a candidate for election to the Board of
Directors at any annual or special meeting is required pursuant to the Company's
Bylaws to give written notice to the Secretary of the Company, together with a
written consent of such person to serve as a director, not later than the close
of business on the tenth day following the date on which notice of such meeting
is first given to shareholders. In addition, the notice must comply with
certain provisions set forth in the Company's Bylaws and may be disregarded if
such provisions are not observed.
Any proposals of holders of Common Stock of the Company intended to be
presented at the annual meeting of shareholders of the Company to be held in
1999 must be received by the Company at 16800 Greenspoint Park Drive, Suite 300,
North Atrium, Houston, Texas 77060, Attention: Secretary, no later than December
10, 1998, to be included in the proxy statement relating to that meeting.
By Order of the Board of Directors,
Craig K. Townsend, Secretary
April 9, 1998
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 TO INTERESTED SECURITY HOLDERS
ON REQUEST. THE COMPANY WILL FURNISH TO ANY SUCH PERSON ANY EXHIBITS DESCRIBED
IN THE LIST ACCOMPANYING SUCH REPORT UPON PAYMENT OF REASONABLE FEES RELATING TO
THE COMPANY'S FURNISHING SUCH EXHIBITS. REQUESTS FOR COPIES SHOULD BE DIRECTED
TO THE COMPANY AT 16800 GREENSPOINT PARK DRIVE, SUITE 300, NORTH ATRIUM,
HOUSTON, TEXAS 77060, ATTENTION: SECRETARY.
13
<PAGE>
________________________________________________________________________________
PROXY PETROCORP INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS -- MAY 7, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of PetroCorp Incorporated (the
"Company") hereby appoints W. Neil McBean and Craig K. Townsend, or any one of
them, his or her proxies with full power of substitution, to vote at the Annual
Meeting of Shareholders of the Company to be held on May 7, 1998, at 2:30 p.m.,
Houston time, at the Sheraton Crown Hotel and Conference Center, 15700 John F.
Kennedy Blvd., Houston, Texas, 77032, and at any adjournment thereof, the
number of votes which the undersigned would be entitled to cast if personally
present on all matters coming before the meeting.
1. Election of directors for a term expiring in 2001:
[_] FOR [_] WITHHOLD AUTHORITY
all nominees listed below to vote for all nominees
(except as marked below) listed below
W. Neil McBean Thomas N. Amonett Robert C. Thomas
2. Proposal to ratify the appointment of Price Waterhouse LLP as the
Company's independent accountants for the fiscal year ending December
31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
3. To consider and take action, in accordance with their best judgment,
upon any other matter which may properly come before the meeting or
any adjournment thereof.
All as more particularly described in the proxy statement dated April 9, 1998
relating to such meeting, receipt of which is hereby acknowledged.
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE, DRAW A LINE
THROUGH OR STRIKE OUT THAT NOMINEE'S NAME AS SET FORTH ABOVE.
(continued and to be signed on other side)
________________________________________________________________________________
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR the nominees listed in Proposal 1 and FOR Proposal 2.
-----------------------------------
-----------------------------------
Signature of Shareholder(s)
Please sign your name exactly as
name appears hereon. Joint owners
must each sign. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as it appears
herein.
Dated: ______________________, 1998
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
________________________________________________________________________________
