<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-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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[_] 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
PETROCORP INCORPORATED
6733 South Yale Avenue
Tulsa, Oklahoma 74136
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held May 19, 2000
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 Tulsa
Room, 9th Floor, Bank of Oklahoma Tower, 1 Williams Center, Tulsa, Oklahoma
74172, at 11:00 a.m., Tulsa time, on Friday, May 19, 2000, for the following
purposes:
1. To elect two persons to serve as directors of the classified Board
of Directors until the 2003 annual meeting and until their successors are
elected and have qualified.
2. To approve the adoption of the Company's 2000 Stock Option Plan.
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 20, 2000 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,
Steve Berlin, Secretary
Tulsa, Oklahoma
April 14, 2000
WHETHER OR NOT YOU PLAN TO BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND MAIL THE ENCLOSED PROXY PROMPTLY. IF YOU ATTEND THE ANNUAL
MEETING, YOU CAN VOTE EITHER IN PERSON OR BY YOUR PROXY.
<PAGE>
PETROCORP INCORPORATED
6733 South Yale Avenue
Tulsa, Oklahoma 74136
--------------------
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 Friday, May 19, 2000, at the Tulsa Room, 9th Floor, Bank of Oklahoma
Tower, 1 Williams Center, Tulsa, Oklahoma 74172, at 11:00 a.m., Tulsa 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 14,
2000.
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 6733 South Yale Avenue, Tulsa,
Oklahoma 74136, 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 approval of the Company's 2000 Stock Option Plan.
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. 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. Approval of the Company's 2000
Stock Option Plan will be by the affirmative vote of a majority of shares
represented in person or by proxy at the Annual Meeting. 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 approval
of the Company's 2000 Stock Option Plan.
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 20, 2000 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 8,683,019
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 April 5, 2000 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, nominee for director and
executive officer set forth on the "Summary Compensation Table," and by all
directors and executive officers as a group:
<TABLE>
<CAPTION>
Shares Owned Beneficially
-----------------------------
Name Number Percent
- ---- ----------------- ----------------
<S> <C> <C>
Gary R. Christopher (1)....................................................... 4,336,957 49.9%
W. Neil McBean (2)............................................................ 246,046 2.8
A.F. (Tony) Pelletier (2)..................................................... 106,504 1.2
J. Les Watson (2)............................................................. 25,500 *
Craig K. Townsend (2)......................................................... 48,621 *
Laurent A. (Larry) Baillargeon (2)............................................ 500 *
Michael L. Lord (2)........................................................... 48,528 *
Lealon L. Sargent (2)......................................................... 330,185 3.7
Thomas N. Amonett (3)......................................................... 8,000 *
G. Jay Erbe, Jr............................................................... 500 *
Mark W. Files................................................................. 0 *
Stephen M. McGrath (2)........................................................ 2,000 *
Robert C. Thomas (3).......................................................... 8,000 *
All directors and executive officers as a group (18 persons) (4).............. 5,205,341 56.1
Kaiser-Francis Oil Company (5)................................................ 4,327,457 49.8
St. Paul Fire and Marine Insurance Company (6)................................ 1,738,000 20.0
Royce & Associates, Inc....................................................... 760,100 8.8
</TABLE>
* Less than 1.0%.
(1) Includes 4,327,457 shares owned by Kaiser-Francis Oil Company ("KFOC").
This director is an employee of KFOC and may be deemed to be the beneficial
owner of these shares. This director disclaims beneficial ownership of
these shares. Also includes 6,000 shares subject to issuance within 60
days upon the exercise of stock options.
(2) Mr. McBean's amount includes 154,250 shares, Mr. Pelletier's amount
includes 98,000 shares, Mr. Watson's amount includes 25,000 shares, Mr.
Townsend's amount includes 45,000 shares, Mr. Lord's amount includes 46,000
shares, Mr. Sargent's amount includes 159,750 shares and Mr. McGrath's
amount includes 2,000 shares, all subject to issuance within 60 days upon
the exercise of stock options.
(3) Mr. Amonett's amount includes 7,000 shares and Mr. Thomas's amount includes
7,000 shares subject to issuance within 60 days upon the exercise of stock
options.
(4) Includes all directors and all executive officers set forth on the "Summary
Compensation Table" and the table of "Executive and Other Officers."
Includes 588,000 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 Mr. Christopher. If the aggregate of
4,327,457 shares as to which beneficial ownership is disclaimed by Mr.
Christopher were excluded, the percentage as a group would be 9.5%.
(5) Address is 6733 South Yale, Tulsa, Oklahoma 74136. KFOC files a Schedule
13D.
(6) Address is 385 Washington Street, St. Paul, Minnesota 55102. Consists of
873,000 shares owned by Park Avenue Exploration Corporation and 858,000
shares owned by United States Fidelity and Guaranty
2
<PAGE>
Company, both wholly-owned subsidiaries of St. Paul Fire and Marine
Insurance Company ("St.Paul") acquired in connection with St. Paul's
acquisition of USF&G Corporation in February 1999. St. Paul 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 Park Avenue Exploration Corporation is 6225
Centennial Way, Baltimore, Maryland 21209. The address of United States
Fidelity and Guaranty Company is 385 Washington Street, St. Paul,
Minnesota 55102. Also includes 7,000 shares subject to issuance within
60 days from the exercise of stock options. These options were issued to
Mr. Erbe as a director, and he assigned them to St. Paul when he was an
officer of St. Paul or a subsidiary thereof. Mr. Erbe severed his
relationship with St. Paul effective November 15, 1999.
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. Two directors are to be elected at the
Annual Meeting as Class I directors to serve until their terms expire in 2003.
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.
G. Jay Erbe, Jr. is currently a Class I director, but he is not standing
for re-election. Mr. Erbe's term will expire upon the election of his
successor.
Unless authority is withheld, duly executed proxies will be voted for the
election of Lealon L. Sargent and Mark W. Files to hold office until the annual
meeting of shareholders to be held in the year 2003 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 I directors to hold office until the annual
meeting of shareholders to be held in the year 2003, his principal position with
the Company and his term as director of the Company.
<TABLE>
<CAPTION>
Name Age Term of Office Position
- ------------------------------------------- ----------- ---------------- -----------------------------------
<S> <C> <C> <C>
Lealon L. Sargent 70 1983-Present Chairman of the Board
Mark W. Files 58 None Director
</TABLE>
Lealon L. Sargent has been Chairman of the Board of the Company 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.
Mark W. Files has been nominated as a director upon the recommendation of
St. Paul Fire and Marine Insurance Company, a significant shareholder of the
Company. Since 1993, he has been a member of the firm, Graham Partners, LLC, a
company engaged in consulting for emerging businesses on growth strategies.
Prior to such time, he was the Chief Financial Officer of Graham Resources, an
independent oil and gas company.
3
<PAGE>
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.
<TABLE>
<CAPTION>
Term Director
Name Age Expires Since Position
- ----- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Gary Christopher...................... 50 2002 1996 President & Chief Executive Officer
Thomas N. Amonett..................... 56 2001 1993 Director
W. Neil McBean........................ 51 2001 1983 Director
Stephen M. McGrath.................... 64 2002 1985 Director
Robert C. Thomas...................... 70 2001 1997 Director
</TABLE>
Gary R. Christopher has been a director of the Company since August 1996
and was elected President and Chief Executive Officer of the Company as of
August 3, 1999. 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.
Thomas N. Amonett has been a director of the Company since 1993. He has
served as President and Chief Executive Officer of Champion Technologies, Inc.
since October 1999. Prior thereto, he served as President and Chief Executive
Officer of American Residential Services, Inc. from October 1997 until April
1999. He served as interim President and Chief Executive Officer of Weatherford
Enterra, Inc. from July 1996 to October 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 currently serves as
a director of ITEQ, Inc., and Reunion Industries, Inc.
W. Neil McBean served as Chief Executive Officer of the Company from 1996
until August 1999 and President from 1986 until August 1999. He has been a
director since 1983. Mr. McBean co-founded PetroCorp in 1983, and previously
served as Senior Vice President. Mr. McBean has 30 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.
Stephen M. McGrath has been a director of the Company since 1986. Mr.
McGrath served as a Managing Director for CIBC-Oppenheimer Corp. from 1997 until
his retirement in April 1998. 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.
Robert C. Thomas has been a director since April 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.
Meetings and Committees of the Board of Directors
During the Company's last fiscal year, the Board of Directors of the
Company held five meetings. No director attended less than 75% of the total
number of meetings of the Board of Directors and committees of which he was a
member held during the period he served.
4
<PAGE>
The Audit Committee, composed at the end of the last fiscal year of Messrs.
Amonett, Erbe, Christopher, McGrath and Thomas, met one time 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 and Benefits Committee (the "Compensation Committee"),
composed at the end of the last fiscal year of Messrs. Amonett, Christopher and
Erbe, met two 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. Mr. Christopher resigned from
the Compensation Committee effective April 7, 2000.
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.
Under the 1997 Non-Employee Director Stock Option Plan, each director not
an employee of the Company receives options to purchase 5,000 shares of Common
Stock on the date of his election or appointment. Each year thereafter, as of
the date following the date of the Annual Meeting of the Shareholders, each non-
employee director who has served as a member of the Board for no less than one
year automatically receives an option to purchase 1,000 shares of Common Stock.
The Board of Directors has adopted, subject to approval by the shareholders of
the Company, a new stock option plan to supplant the Amended & Restated 1992
PetroCorp Stock Option Plan and the 1997 Non-Employee Director Stock Option
Plan. See "Proposal No. 2 - Approval of the Company's 2000 Stock Option Plan."
Executive and Other Officers
The following table sets forth the names, ages and positions of each
executive officer of the Company, all of whom serve at the discretion of the
Board of Directors.
<TABLE>
<CAPTION>
Name Age Position
- ----- ------- ------------
<S> <C> <C>
Gary R. Christopher...................... 50 President and Chief Executive Officer
A. F. (Tony) Pelletier................... 46 Vice President - U.S. Operations
Steve Berlin............................. 55 Chief Financial Officer, Secretary and Treasurer
Richard L. (Rick) Dunham................. 47 Vice President - Engineering
Craig Dolinsky........................... 45 Vice President - Land
Ted Jacobson............................. 59 Vice President - Operations
Michael W. Moore......................... 53 Vice President - Marketing
David H. Stevens......................... 51 Vice President - Exploration
J. Les Watson............................ 53 Vice President - Canadian Operations
Steven E. Amos........................... 45 Corporate Controller
</TABLE>
Gary R. Christopher's background information is set forth above under the
heading "Other Directors."
A.F. (Tony) Pelletier was elected Vice President-U.S. Operations in
November 1997 after serving as Vice President-Production since May 1996. With
23 years experience in the oil and gas industry, Mr. Pelletier is
5
<PAGE>
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.
Steve Berlin was elected Chief Financial Officer, Secretary and Treasurer
in November 1999. Mr. Berlin is also Vice President, Chief Financial Officer
and Assistant Secretary of Kaiser-Francis, where he has been employed since
February 1999. Prior to joining Kaiser-Francis, Mr. Berlin was on the faculty of
the University of Tulsa, where he taught business and finance courses to
graduate and undergraduate students. From 1973 through 1996, Mr. Berlin worked
for CITGO Petroleum Corporation and its predecessors in various financial and
management positions, including the last ten years as Chief Financial Officer.
Mr. Berlin has an MBA from the University of Wisconsin and is a graduate of the
Stanford Executive Program. He is a Certified Public Accountant and has been
honored by the Oklahoma society of CPA's as its Outstanding CPA in Industry.
Mr. Berlin has served on several boards including the Goodwill Industries, the
American Petroleum Institute, and the American Assembly of Collegiate Schools of
Business.
Richard L. (Rick) Dunham was elected Vice President - Engineering in
November 1999. Mr. Dunham is an employee of Kaiser-Francis and has held various
positions since joining Kaiser-Francis in 1985. He has been a member of the
management committee, Manager of Canadian Enhancements, Special Projects
Manager, and has performed duties as a Petroleum, Reservoir, and Acquisitions
Engineer. In addition, Mr. Dunham has considerable experience in reserve
analysis, economics and risk analysis, gas marketing and contracts, and oil and
gas litigation throughout the US and western Canada. Mr. Dunham graduated Magna
Cum Laude in Petroleum Engineering from the University of Missouri at Rolla in
1973, and joined Shell Oil Company in New Orleans, working South Louisiana and
Offshore in Operations and Reservoir Engineering. From 1979 through 1985 he
held positions as Acquisitions Engineer, Enhanced Recovery Projects Manager,
Operations and Engineering Manager for MAPCO, R&R Exploration, Twin Eagle
Petroleum, Petra Petroleum, and Santa Fe Minerals.
Craig Dolinsky was elected Vice President - Land in November 1999. Mr.
Dolinsky has been a Landman with Kaiser-Francis from 1981 to present. His land
responsibilities have included several large acquisitions as well as exploration
and development of key plays in Oklahoma, Texas and Wyoming. In 1991, he began
Kaiser-Francis' land efforts in Canada. He continues to be involved in
exploration and development strategies, contracts, acquisitions and litigation
in both the US and Canada. Mr. Dolinsky has a B.A. in Business Administration
from Western State College of Colorado and is a member of the American
Association of Petroleum Landmen, Tulsa Association of Petroleum Landmen and
Canadian Association of Petroleum Landmen.
Ted Jacobson was elected Vice President - Operations in November 1999. Mr.
Jacobson is also Manager of Drilling and Production for Kaiser-Francis. He has
been employed by Kaiser-Francis since 1980. Mr. Jacobson began his oil and gas
career in 1967 with Sunray DX Oil Company (later Sun Oil Company) in Corpus
Christi, Texas, as a drilling and production engineer. From 1969 through 1978,
he served in various positions such as Production Engineer, Manager of
Conservation, Area Engineer and Region Manager of Engineering in Tulsa,
Oklahoma. From 1978 until 1980, he was District Engineer with Sun Gas in the
Houston, Texas, offshore office. Mr. Jacobson graduated from St. Johns
University in Minnesota in 1963 with a B.A. in Math and Physics. He served in
the U.S. Army Corp of Engineers from 1963 until 1967, when he was discharged
with the rank of Captain.
Michael W. Moore was elected Vice President - Marketing in November 1999.
Mr. Moore is an Assistant Secretary for Kaiser-Francis and has been Manager of
Marketing for Kaiser-Francis since he joined the Company in 1980. Prior to that
time, he served as General Counsel and Manager of Gas Marketing for Edwin L. Cox
in Dallas, Texas. He also worked as an attorney for Tennessee Gas Pipeline Co.,
Columbia Gulf Pipeline Co. and Texas Oil and Gas Corp. Mr. Moore has an
undergraduate degree from Southern Methodist University and graduated from the
University of Houston Law School in 1969.
David H. Stevens was elected Vice President - Exploration in November 1999.
Mr. Stevens has been employed at Kaiser-Francis as a geologist and geophysicist
since 1987. He has supervised Kaiser-Francis prospect generating efforts in the
Gulf Coast as well as all Kaiser-Francis geophysical operations during that
time. Mr. Stevens has held various exploration management positions since
graduating from the University of Wyoming
6
<PAGE>
with a bachelors degree in geology and geophysics in 1971, including
Exploration Offshore Project Leader with Conoco in Houston, Exploration
Projects Director with Conoco in Oklahoma City, Regional Exploration Manager
with Grace Petroleum in Oklahoma City and Exploration Vice President with
Indian Wells Oil Co. in Tulsa.
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 30 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.
Steven E. Amos was elected Corporate Controller in February 2000. Mr. Amos
has been an employee of Kaiser-Francis for nine years. Prior to that, he held
various positions with several independent oil companies in Tulsa and worked for
the C.P.A. firm of Arthur Young & Company. Mr. Amos is a C.P.A. and has a
degree in accounting from the University of Arkansas and an M.B.A. from the
University of Tulsa.
7
<PAGE>
Executive Compensation
The following table sets forth for the three fiscal years ended December
31, 1999, 1998 and 1997 all compensation received by the chief executive officer
and by each of the six other most highly compensated executive officers of the
Company.
<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Compensation(1)
-------------
Securities
Fiscal Annual Compensation Underlying All Other
-------------------
Name and Principal Position Year Salary Bonus Stock Options Compensation(2)
- -------------------------------------- ------ --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Gary R. Christopher (3) 1999 $ 0 $ 0 0 $ 0
President and Chief
Executive Officer
W. Neil McBean (4) 1999 115,794 104,500 0 210,000
Former President and Chief 1998 204,167 40,000 0 9,500
Executive Officer 1997 212,500 35,000 0 9,000
A.F. (Tony) Pelletier 1999 235,093 0 0 165,000
Executive Vice President 1998 155,000 31,000 0 9,500
and Chief Operating Officer 1997 152,913 10,000 0 9,000
J. Les Watson (5) 1999 195,280 0 0 191,218
Vice President - 1998 109,066 23,790 0 7,710
Canadian Operations 1997 99,531 16,560 0 7,130
Craig K. Townsend (6) 1999 164,594 20,000 0 127,200
Former Vice President - Finance, 1998 112,742 0 0 7,487
Secretary and Treasurer 1997 96,750 10,000 0 6,510
Laurent A. (Larry) Baillargeon (7) 1999 102,895 2,500 0 145,000
Former Vice President - 1998 128,333 0 0 6,750
Corporate Land and General Counsel
Michael L. Lord (8) 1999 74,142 43,500 0 167,906
Former Vice President - 1998 155,000 31,000 0 9,500
Corporate Development 1997 153,267 10,000 0 9,000
</TABLE>
(1) No officers or employees of the Company participate in a restricted stock
plan, stock appreciation right plan or other long-term incentive plan.
(2) The amounts for 1999 consist of (i) the Company's matching 401(k)
contribution of $10,000 for each of such officers except Mr. Watson, who
receives a matching contribution from the Company related to his Canadian
Registered Retirement Savings Plan (RRSP) and (ii) severance payments in
the following amounts: Mr. McBean $200,000; Mr. Pelletier $155,000;
Mr. Watson $181,218; Mr. Townsend $117,200; Mr. Baillargeon $135,000; and
Mr. Lord $157,812. Severance payments are included in Restructuring Cost
in the 1999 financial statements. All severance amounts were paid by the
end of January 2000 except for $133,333 payable to Mr. McBean in eight
monthly installments.
(3) Mr. Christopher began serving as an executive officer on August 3, 1999.
No direct compensation is paid to Mr. Christopher by the Company. He is an
employee of Kaiser-Francis and is compensated by Kaiser-Francis, which in
turn has a Management Agreement with the Company.
(4) Mr. McBean's service as an executive officer ended on August 3, 1999.
(5) Mr. Watson began serving as an executive officer on November 13, 1997.
(6) Mr. Townsend's service as an executive officer ended on December 31, 1999.
(7) Mr. Baillargeon began serving as an executive officer in November 1998.
Mr. Baillargeon's service as an executive officer ended on August 15, 1999.
(8) Mr. Lord's service as an executive officer ended on March 31, 1999.
8
<PAGE>
The following table sets forth at December 31, 1999 the number of options
and the value of unexercised options held by each of the executive officers
named in the Summary Compensation Table. Mr. Lord exercised 27,000 options on
November 15, 1999.
Fiscal Year Ended December 31, 1999 Option Values
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexpired Options at In-the-Money Options at
December 31, 1999 December 31, 1999 (1)
--------------------------------------- ------------------------------------
Name and Principal Position Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------- ------------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Gary R. Christopher
President and Chief
Executive Officer.................... 6,000 0 $ 0 $0
W. Neil McBean
Former President and Chief
Executive Officer.................... 153,250 0 38,391 0
A. F. (Tony) Pelletier
Vice President - U.S. Operations.... 93,000 0 21,938 0
J. Les Watson
Vice President - Canadian
Operations........................... 20,000 0 0 0
Craig K. Townsend
Former Vice President - Finance,
Secretary and Treasurer.............. 45,000 0 0 0
Laurent A. (Larry) Baillargeon
Former Vice President - Corporate
Land and Former General Counsel 0 0 0 0
Michael L. Lord
Former Vice President - Corporate
Development.......................... 46,000 0 0 0
</TABLE>
________________________________________
(1) Based on the $5.81 per share closing price on the American Stock Exchange
at December 31, 1999.
Retention and Severance Arrangements
In connection with the Company's previously announced receipt of various
offers from third parties to purchase certain assets of, or merge with, the
Company, the Board of Directors adopted retention and severance plans for the
employees and executive officers of the Company that are designed to retain the
services of such persons while the Company pursues alternatives with third
parties.
The Severance Plan provides all of the Company's employees, except for
executive officers described below who participate in a separate plan, with
severance pay, subsidized medical benefits and outplacement services.
The Executive Severance Plan provides for twelve months of severance pay
for Messrs. McBean, Pelletier, Watson, Townsend, Baillargeon and Lord upon
either an involuntary termination by the Company or voluntary termination
following certain actions by the Company such as a reduction in responsibilities
or pay. Each of these executive officers would also be entitled to receive
subsidized medical benefits for twelve months and three days of outplacement
services for each year of service to the Company. Certain severance amounts
were paid to named executive officers as set forth above in the "Summary
Compensation Table."
The Board of Directors also amended all of the outstanding options
currently granted to employees, including executive officers, to increase from
30 days to two years the length of time during which an employee may exercise
such options after an involuntary termination by the Company or voluntary
termination following certain actions by the Company such as a reduction in
responsibilities or pay.
9
<PAGE>
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.
10
<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 December 31, 1994 and that all dividends
were reinvested.
[Performance Graph Appears Here]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
--------- -------- -------- -------- -------- --------
PetroCorp Incorporated $ 100.00 66.67 85.06 75.86 52.87 53.45
S&P 500 Index $ 100.00 137.58 169.17 225.60 290.08 351.12
S&P Domestic Oil Index $ 100.00 113.85 143.98 171.31 139.08 172.69
===============================================================================================================================
</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.
11
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation 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 Compensation 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 Compensation Committee are
subject to the approval of the Board of Directors. The following principles
guide the Compensation 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
Compensation 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 Compensation Committee concerning compensation matters, and the
Compensation 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 Compensation 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 Compensation 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 Compensation Committee. Messrs. McBean, Lord, Pelletier and Watson were
covered by the Plan for 1999, and additional participants may be added to the
Incentive Plan in the future upon recommendation by the Chief Executive Officer
and approval of the Compensation 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 operating goals for a
12
<PAGE>
particular year. In 1999, 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. No amounts were awarded in 1999 for
1998. During 1999, participants in the Incentive Plan were eligible to earn
bonuses up to an amount equal to their respective base salary. The amounts the
Compensation Committee could award Messrs. McBean, Pelletier, Watson and Lord
have not yet been determined pending the receipt of certain quantitative
information.
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 Compensation 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 Compensation 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 1999. These
options are, by their nature, at risk as to ultimate value, and the Compensation
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.
Retention and Severance Arrangements. In connection with the Company's
previously announced receipt of various offers from third parties to purchase
certain assets of, or merge with, the Company, the Board of Directors adopted
retention and severance plans for the employees and executive officers of the
Company that are designed to retain the services of such persons while the
Company pursues alternatives with third parties. These plans are described
above under the heading "Retention and Severance Arrangements." As set forth
above in the "Summary Compensation Table," certain amounts were paid to named
executive officers pursuant to these plans, effective at year end.
Chief Executive Officer's Compensation. Mr. McBean served as Chief
Executive Officer of the Company until August 3, 1999, as of which date Mr.
Christopher was elected to assume the office. The Compensation 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 1999 fiscal year, the Compensation 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 Compensation Committee took into consideration the
compensation levels of chief executives in similar oil and gas organizations.
Mr. McBean's total compensation package also included a large portion in the
form of stock options that were awarded in 1992 and in 1996.
13
<PAGE>
No direct compensation is paid to Mr. Christopher by the Company. He is an
employee of Kaiser-Francis and is compensated by Kaiser-Francis, which in turn
has a Management Agreement with the Company.
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 1999, the Compensation Committee reviewed compensation programs in light
of the requirements of this law. The Compensation Committee does not expect the
new law to impact the Company in 2000 or for the foreseeable future in any
significant way, if at all.
Future Compensation Program. The Company's executive officer compensation
program described above was in effect for the Company's fiscal year ended
December 31, 1999. However, with the implementation of the Company's Management
Agreement with Kaiser-Francis, as described below under "Certain Transactions,"
no executive officers will receive direct compensation from the Company in
future years except pursuant to the 2000 Stock Option Plan described below. See
"Proposal No. 2 - Approval of the Company's 2000 Stock Option Plan."
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 St. Paul)
purchased $10.0 million of Senior Adjustable Rate Notes Series A, which were
paid in full 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 which was subsequently acquired by St. Paul. 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, who is retiring as a
director, was formerly an officer of St. Paul. Mr. Files has been nominated as
a director upon the recommendation of St. Paul, but he is not employed by or
otherwise associated with St. Paul.
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 St. Paul. See "Compensation Committee Interlocks and Insider Participation"
above. Mr. Erbe, who is retiring as a director, was formerly an officer of St.
Paul.
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 St. Paul. Mr. Christopher is an employee of Kaiser-Francis.
As part of a restructuring plan, on August 3, 1999, the Company's Board of
Directors entered into a Management Agreement with its largest shareholder,
Kaiser-Francis, under which Kaiser-Francis provides management, technical, and
administrative support services for all of the Company's operations in the
United States and Canada. The Management Agreement received shareholder
approval on October 28, 1999, and was effective November 1, 1999. The Company
also entered into an Interim Agreement with Kaiser-Francis to provide certain
14
<PAGE>
services pending receipt of shareholder approval of the Management Agreement.
As the Management Agreement was effective November 1, 1999, the Interim
Agreement ceased as of October 31, 1999.
Kaiser-Francis' compensation for rendering services under the Management
Agreement has three components:
. a Services Fee;
. an Overriding Royalty; and
. a working interest or "Back-In," to be effective after "prospect payout," as
more fully described below.
For properties not operated by the Company, the Services Fee payable to
Kaiser-Francis is, in most cases, equal to $50.00 per month per well. As to
properties operated by the Company, Kaiser-Francis receives as its Services Fee
the administrative and overhead fees charged under applicable operating
agreements. The Company estimates that the aggregate Services Fee will equal
approximately $1.4 million per year at the current level of operation.
As to new prospects identified by Kaiser-Francis, Kaiser-Francis receives
an overriding royalty interest of 1% or 2%, proportionately reduced in the event
the Company owns less than the entire interest in the burdened leases or the
Company's leases cover less than the entire mineral interest in the subject
lands. (An "overriding royalty interest" is a percentage interest in the gross
production from an oil and gas lease, free of the expense of production.)
In addition to the overriding royalty interest, Kaiser-Francis receives,
after "prospect payout" (as described below), an assignment of 15% or 25% of the
Company's working interest in the new prospects it identifies. "Prospect
payout" is deemed to have occurred (and Kaiser-Francis is entitled to a
percentage of the Company's working interest in a prospect) when the cumulative
net proceeds received from the prospect equal the cumulative exploration and
development costs associated with the prospect.
Kaiser-Francis does not receive an overriding royalty or an assignment of
working interest with respect to the Company's acquired proved oil and gas
reserves. Further, on certain excluded lands that are within existing areas of
mutual interest ("AMIs") with third parties, Kaiser-Francis does not receive an
overriding royalty or an assignment of working interest with respect to new
prospects identified during the term of the AMIs.
In addition, the Company reimburses Kaiser-Francis for certain direct out-
of-pocket expenses identified in the Management Agreement that are incurred by
Kaiser-Francis in performing its obligations thereunder.
In 1999, Kaiser-Francis received $100,000 from the Company for rendering
services under the Interim Agreement. In addition, Kaiser-Francis received
$218,000 and $21,000 from the Company in 1999 for management fees and cost
reimbursements, respectively, under the Management Agreement.
All of the above-referenced 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, 1999, all such filing requirements were satisfied
in a timely manner, except that initial reports on Form 3 for David H. Stevens
and Craig Dolinsky were filed late.
15
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF THE COMPANY'S
2000 STOCK OPTION PLAN
The Company's Board of Directors has adopted, subject to approval by the
shareholders of the Company, the 2000 Stock Option Plan (the "Plan") to supplant
the Amended & Restated 1992 PetroCorp Stock Option Plan and the 1997 Non-
Employee Director Stock Option Plan. The text of the Plan is attached to this
proxy statement as Appendix A. If the Plan is approved by the Company's
shareholders, it will be deemed effective as of February 25, 2000.
The Company recommends voting "For" the approval of the Plan.
2000 Stock Option Plan
The Plan is designed to encourage superior performance by employees of the
Company's management firm and to attract and retain the services of capable and
qualified employees. In addition, the Plan will encourage the Company's
directors to own shares of the Company's stock and thereby align their interests
more closely with the interests of the other shareholders of the Company,
encourage the highest level of director performance by providing the directors
with a direct interest in the Company's attainment of financial goals, and
provide a financial incentive to attract and retain the most qualified
directors. All forms of compensation under the Plan relate to the Common Stock
of the Company. The maximum aggregate number of shares of Common Stock with
respect to which options, directors options and stock appreciation rights may be
granted from time to time under the Plan is 600,000; provided, however, that no
more than 225,000 shares will be subject to new grants in any one year. The Plan
will terminate on the tenth anniversary of its approval by shareholders;
however, no awards shall be made pursuant to the Plan after December 31, 2005.
The Plan will be administered by the Compensation Committee of the
Company's Board of Directors. Subject to the terms of the Plan, the
Compensation Committee will select the employees to be granted awards, determine
the terms and provisions of awards, construe the Plan, prescribe and rescind
rules and regulations relating to the Plan and make any other determinations
necessary or advisable for the administration of the Plan. Included among these
powers are the power to set the exercise price for the Common Stock subject to
the options, to set the date on which the options become fully vested (which may
be no earlier than six months after the grant date) and to determine the period
during which the options may be exercised (which may not exceed ten years from
the grant date). The Compensation Committee may delegate the power to select
employees to be granted awards under the Plan to the President of the Company.
Approximately ten key employees and six non-employee directors may be eligible
to participate in the Plan. Because members of the Compensation Committee are
not eligible for grants under the Plan, Mr. Christopher resigned from the
Compensation Committee, effective April 7, 2000, so as to become a Plan
participant. All options granted under the Plan will be incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). The Compensation Committee may
also grant awards of stock appreciation rights under the Plan; however, those
stock appreciation rights may only be granted in tandem with the grant of an
option.
Each director of the Company who is not also an employee of the Company
will receive awards automatically under the Plan. Those directors who were in
office when the Plan was approved by the Board of Directors will receive a
director option ("Director Option") for 5,000 shares of Common Stock on the
first of the month of the first fiscal year following the date of approval.
Directors elected or appointed after the initial grant date will receive a
Director Option for 5,000 shares of Common Stock on their date of election or
appointment. In addition, each director serving on the day of the regular
Annual Meeting of Shareholders of the Company, starting with the 2001 Annual
Meeting, will automatically receive a Director Option for 5,000 shares of Common
Stock. If there are insufficient shares of Common Stock available to make the
automatic director awards under the Plan on the applicable date, then all
directors who are entitled to a grant on that applicable date will share ratably
the number of shares then available under the Plan. Those directors will have
no right to receive a grant in the future with respect to any deficiency of
shares available on the grant date.
Director Options become fully vested six months after the grant date (or
earlier in the event of an acceleration date). The option purchase price of
Director Options will be the fair market value of the stock on its effective
grant date. Each Director Option automatically includes a stock appreciation
right. Director Options
16
<PAGE>
expire ten years from the grant date; however, they may be terminated earlier
if the director ceases to be a director of the Company. Upon the director's
resignation date, vested Director Options may be exercised within three years.
To the extent Director Options are not exercisable on the resignation date,
they will terminate immediately.
Subject to shareholder approval, the Board of Directors on February 25,
2000 authorized the grant of options to purchase an aggregate of 97,000 shares
of Common Stock at an exercise price of $6.125 per share under the Plan to
officers and key employees of the Company or the Company's management firm,
Kaiser-Francis Oil Company. These options will become fully vested on February
25, 2001. On February 25, 2000, the closing price per share of the Company's
Common Stock was $6.125 as reported on the American Stock Exchange. On April 5,
2000, the closing price per share of the Company's Common Stock was $5.50 as
reported on the American Stock Exchange. Future grants will be made to such
persons solely at the discretion of the Compensation Committee of the Company's
Board of Directors and may not be determined as of the date of this Proxy
Statement. It is anticipated that Mr. Christopher, who did not receive a grant
of options in February, will be granted options as an officer of the Company to
purchase 15,000 shares of Common Stock in the near future.
Each non-employee director of the Company who served on the date this Plan
was approved by the Board of Directors will receive an option for 5,000 shares
of Common Stock of the Company on January 1, 2001, pending shareholder approval
of the Plan. Each non-employee director elected or appointed thereafter will
receive an option for 5,000 shares of Common Stock on the date of his or her
appointment. Each non-employee director will receive an option for 5,000 shares
of Common Stock on the date of each Annual Meeting of Shareholders of the
Company starting in 2001.
<TABLE>
<CAPTION>
Name & Position Number of Units(1)
------------------ -------------------
<S> <C>
Gary Christopher, 15,000
President and Chief Executive Officer
W. Neil McBean, 0
Former President and Chief Executive Officer
A. F. (Tony) Pelletier, 5,000
Executive Vice President and
Chief Operating Officer
J. Les Watson, 5,000
Vice President - Canadian Operations
Craig K. Townsend, 0
Former Vice President--Finance, Secretary and
Treasurer
Laurent A. (Larry) Baillargeon, 0
Former Vice President--Corporate Land and
General Counsel
Michael L. Lord, 0
Former Vice President--Corporate Development
Executive Group 63,000
Non-Executive Director Group 0
Non-Executive Officer Employee Group 34,000
</TABLE>
- ----------------------------
(1) No dollar value is assigned to the stock options because the exercise price
for stock options other than Director Options is the fair market value of
the underlying Company Common Stock on the date of grant.
At April 5, 2000, nonstatutory stock options to purchase 672,500 shares of
Common Stock and Incentive Stock Options to purchase 37,000 shares of Common
Stock, granted under the Amended & Restated 1992
17
<PAGE>
PetroCorp Stock Option Plan and the 1997 Non-Employee Director Stock Option
Plan, respectively, remained outstanding. The options granted under the Amended
& Restated 1992 PetroCorp Stock Option Plan have exercise prices ranging from
$5.00 to $10.00 and are fully vested. The options granted under the 1997 Non-
Employee Director Stock Option Plan have exercise prices ranging from $6.75 to
$8.63 and are fully vested.
Upon the death of a participant in the Plan, all of that participant's
outstanding options and stock appreciation rights immediately become fully
vested and exercisable for a three-year period, unless the original period of
the option or stock appreciation right expires earlier. If the employment of a
Plan participant is terminated due to retirement or disability, or by the
Company without cause, all vesting ceases and the participant's currently vested
options and stock appreciation rights remain exercisable for a three-year
period, unless the original period expires earlier. If a participant's
employment is terminated for any reason other than death, disability, retirement
or by the Company without cause, any outstanding options or stock appreciation
rights may be exercised by the participant within three months following the
termination, unless the original period expires earlier. If a participant's
employment is terminated by the Company with cause, all options and stock
appreciation rights not otherwise vested or earned as of the date of the
termination will be immediately forfeited.
If a change in control of the Company occurs while unexercised options,
including Director Options, or stock appreciation rights remain outstanding
under the Plan, then all such unexercised options and stock appreciation rights
will become exercisable in full as of the acceleration date following the change
in control. No unexercised options or stock appreciation rights will become
exercisable due to a change in control, however, if such an acceleration of
exercisability would result in an "Excess Parachute Payment" under Section 280G
of the Code and as further described in the Plan itself.
The Board of Directors of the Company may suspend, terminate, modify or
amend the Plan, provided that shareholders must approve any amendment that would
increase the aggregate number of shares that may be issued under the Plan or
that would materially modify the requirements as to eligibility for
participation in the Plan. No shareholder approval is required, however, if
such increase or modification results from adjustments authorized by the
Compensation Committee in response to a change in the capitalization of the
Company.
The following is a description of certain federal income tax consequences
of the issuance and exercise of Incentive Stock Options under the Plan. An
Incentive Stock Option does not result in taxable income to the optionee or
deduction to the Company at the time it is granted or exercised. The
difference, however, between fair market value of the stock on the date of
exercise and the option price therefor will be an item of tax preference that
may be included in the optionee's "alternative minimum taxable income." Upon
disposition of the stock after the expiration of two years after the date of the
grant and one year after the acquisition of the shares pursuant to the exercise
of the option ("ISO holding period"), the optionee will generally recognize
long-term capital gain or loss based on the difference between the disposition
proceeds and the option price paid for the stock. If the stock is disposed of
prior to the expiration of the ISO holding period, the optionee generally will
recognize taxable compensation, and the Company will have a corresponding
deduction, in the year of the disposition equal to the excess of the fair market
value of the stock on the date of exercise of the option over the option price.
Any additional gain realized on the disposition will normally constitute capital
gain. If the amount realized upon such a disqualifying disposition is less than
fair market value of the stock on the date of exercise, the amount of
compensation income will be limited to the excess of the amount realized over
the optionee's adjusted basis in the stock.
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.
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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
2001 must be received by the Company at 6733 South Yale Avenue, Tulsa, Oklahoma
74136, Attention: Secretary, no later than December 30, 2000, to be included in
the proxy statement relating to that meeting.
By Order of the Board of Directors,
Steve Berlin, Secretary
April 14, 2000
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 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 6733 SOUTH YALE AVENUE, TULSA, OKLAHOMA 74136, ATTENTION:
SECRETARY.
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APPENDIX A
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PETROCORP INCORPORATED
2000 STOCK OPTION PLAN
STATEMENT OF PURPOSE
One purpose of the PetroCorp Incorporated 2000 Incentive Stock Compensation
Plan (the "Plan") is to encourage superior performance by employees of the
Company's management firm ("employees"), by allowing the Board of Directors of
PetroCorp Incorporated ("PEC") to award several forms of incentive compensation
to employees of the Company. By providing incentive compensation commensurate
and competitive with that provided by other companies, the Plan should also
assist in attracting and retaining the services of qualified and capable
employees.
In order to further the identity of interest of employees with the
stockholders of PEC, all of the forms of compensation under the Plan relate to
PEC Common Stock. Employees' success in enhancing stockholder value will
translate directly into an enhanced benefit for the employee.
An additional purpose of the Plan is to encourage the Directors to own
shares of the Company's stock and thereby to align their interests more closely
with the interests of the other stockholders of PEC, to encourage the highest
level of Director performance by providing the Directors with a direct interest
in PEC's attainment of its financial goals, and to provide a financial incentive
that will help attract and retain the most qualified Directors.
I. DEFINITIONS
Unless the context indicates otherwise, the following terms have the
meanings set forth below:
"Acceleration Date" means the earliest date on which either of the
following events shall first have occurred: (i) the acquisition described in
clause (a) of the definition of "Change in Control" contained in this Section I,
or (ii) the stockholder approval or adoption described in clause (c) of such
definition.
"Award" means a grant of Options, Director Options or Stock Appreciation
Rights pursuant to the Plan.
"Board" means the Board of Directors of PEC.
"Cause" means (a) the willful and continued failure by the Participant
(other than a Director) to substantially perform his duties with the Company
(other than any such failure resulting from his incapacity due to physical or
mental illness), or (b) the willful engaging by the Participant (other than a
Director) in conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise. For purposes of this definition, no act, or
failure to act, shall be deemed "willful" unless done, or omitted to be done, by
the Participant not in good faith and without reasonable belief that his action
or omission was in the best interest of the Company.
A "Change in Control" shall be deemed to have occurred if:
(a) any "person," as such term is used in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), other than any
trustee or other fiduciary holding securities under an employee benefit plan of
PEC or any company owned, directly or indirectly, by the stockholders of PEC in
substantially the same proportions as their ownership of stock of PEC, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of PEC representing an additional 25
percentage points or more of the combined voting power percentage of PEC's then
outstanding securities;
(b) the stockholders of PEC approve a merger or consolidation of PEC with
any other company other than (i) a merger or consolidation which would result in
the voting securities of PEC outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 65% of the combined voting power
of the voting securities of PEC (or such surviving entity) outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to
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implement a recapitalization of PEC (or similar transaction) in which no
"person" (as hereinabove defined) acquires more than an additional 25% ownership
percentage of the combined voting power of PEC's then outstanding securities; or
(c) the stockholders of PEC adopt a plan of complete liquidation of PEC or
approve an agreement for the sale or disposition by PEC of all or substantially
all of PEC's assets. For purposes of this clause (c), the term "the sale or
disposition by PEC of all or substantially all of PEC's assets" shall mean a
sale or other disposition transaction or series of related transactions
involving assets of PEC or of any direct or indirect subsidiary of PEC
(including the stock of any direct or indirect subsidiary of PEC) in which the
value of the assets or stock being sold or otherwise disposed of (as measured by
the purchase price being paid therefor or by such other method as the Board of
Directors of PEC determines is appropriate in a case where there is no readily
ascertainable purchase price) constitutes more than two-thirds of the fair
market value of PEC (as hereinafter defined). For purposes of the preceding
sentence, the "fair market value of PEC" shall be the aggregate market value of
the outstanding shares of common stock of PEC (on a fully diluted basis) plus
the aggregate market value of PEC's other outstanding equity securities. The
aggregate market value of the shares of common stock of PEC shall be determined
by multiplying the number of shares of PEC's common stock (on a fully diluted
basis) outstanding on the date of the execution and delivery of a definitive
agreement with respect to the transaction or series of related transactions (the
"Transaction Date") by the average closing price of the shares of common stock
of PEC for the ten trading days immediately preceding the Transaction Date. The
aggregate market value of any other equity securities of PEC shall be determined
in a manner similar to that prescribed in the immediately preceding sentence for
determining the aggregate market value of the shares of common stock of PEC or
by such other method as the Board shall determine is appropriate.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation and Benefits Committee of the Board.
"Common Stock" means the common stock, $0.01 par value, of PEC.
"Company" means collectively PEC and all companies in which PEC owns,
directly or indirectly, more than 50% of the voting stock.
"Director" means a member of the Board who is not also an employee of the
Company.
"Director Option" means an option to purchase shares of Common Stock
granted pursuant to Section XVII.
"Disability" means the inability of a Participant to continue to perform
the duties of his or her employment with respect to the Company or as a member
of the Board, as the case may be, as determined by the Committee.
"Fair Market Value" shall mean, other than with respect to a Director
Option, the value per share equal to the Market Price as of the date of
determination unless, with respect to an Award to a key employee, the Board or
the Committee shall, in good faith and using any fair and reasonable means
selected in its discretion, determine another value to be used for such purpose.
With respect to a Director Option, Fair Market Value shall mean the average of
the highest and lowest prices of the Common Stock as reported by the
consolidated tape of the American Stock Exchange on the applicable date (or if
there are no transactions on that date, the last preceding date on which there
were transactions).
"Grant Date" as used with respect to a particular Award means the date as
of which such Award is granted pursuant to the Plan.
"Option" means an option, other than a Director Option to purchase shares
of Common Stock granted by the Committee pursuant to the Plan.
"Incentive Stock Option" means an Option that is intended to qualify as an
Incentive Stock Option as described in Section 422 of the Code.
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"Market Price" means the average of the daily closing prices per share of
the Common Stock for the 10 consecutive trading days immediately preceding the
day as of which "Market Price" is being determined. The closing price for each
day shall be the last sale price regular way or, in case no such sale takes
place on such day, the average of the closing bid and asked prices regular way,
in either case on the American Stock Exchange, or, if shares of the Common Stock
are not listed or admitted to trading on the American Stock Exchange, on the
principal national securities exchange on which the shares are listed or
admitted to trading, or if the shares are not so listed or admitted to trading,
the average of the highest reported bid and lowest reported asked prices as
furnished by the National Association of Securities Dealers, Inc., through
NASDAQ, or through a similar organization if NASDAQ is no longer reporting such
information. If shares of Common Stock are not listed or admitted to trading on
any exchange or quoted through NASDAQ or any similar organization, the "Market
Price" shall be determined by the Board in good faith using any fair and
reasonable means selected in its discretion.
"Participant" means any key employee or Director who has an Award
outstanding under the Plan.
"Plan" means the PetroCorp Incorporated 2000 Incentive Stock Compensation
Plan as set forth herein and as may be amended from time to time.
"Restricted Period" means the period of time during which Options and Stock
Appreciation Rights are not exercisable.
"Retirement" means an employee's leaving the employment, other than for
Cause, before reaching age 65. With respect to a Director, "Retirement" means
ceasing to be a member of the Board on or after reaching age 65.
"Stock Appreciation Right" means the right, granted by the Committee
pursuant to the Plan, to receive a payment equal to the increase in the Fair
Market Value of a share of Common Stock subsequent to the Grant Date of such
Award.
II. STOCK AND PHANTOM UNITS SUBJECT TO THE PLAN
Subject to adjustment as provided in the Plan, the maximum aggregate number
of shares of Common Stock with respect to which Options, Directors Options and
Stock Appreciation Rights may be granted from time to time under the Plan is
600,000; provided, however, no more than 225,000 shares shall be subject to new
grants in any one year. The Common Stock issued under the Plan may be either
previously authorized but unissued shares or treasury shares acquired by PEC.
In the event that any Award expires, lapses, is forfeited or otherwise
terminates, any shares of Common Stock allocable to the terminated portion of
such Award may again be made subject to an Award under the Plan. Further, to
the extent an Award is paid in cash, rather than in Common Stock, or shares of
Common Stock are tendered to the Company, or withheld by the Company from an
Award, as payment of the exercise price of an Award or in satisfaction of any
Company tax withholding obligation, such shares of Common Stock may again be
made subject to an Award under the Plan.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. The members of the
Committee shall not be eligible to participate in the Plan, except as provided
in Section XVII. The Committee shall select or may delegate to the President of
the Company the selection of, from time to time, those employees to be granted
Awards under the Plan. The Committee shall also determine the terms and
provisions of Awards, which need not be identical. The Committee shall construe
the Plan, prescribe and rescind rules and regulations relating to the Plan and
make all other determinations deemed necessary or advisable for the
administration of the Plan, subject to the limitations of Sections XXI and XXII.
IV. ELIGIBILITY
Subject to the discretion of the Committee, all officers and key employees
of the Company or the Company managing the Company who have responsibility for
the growth and profitability of the Company are eligible to receive Awards under
the Plan; provided, however, no employee may receive in any calendar year an
Award or
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Awards of Options and/or Stock Appreciation Rights with respect to more than
20,000 shares of Common Stock. Directors shall automatically participate in the
Plan as provided in Section XVII.
V. OPTIONS
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Options to employees to purchase shares of Common Stock.
All Options granted will be Incentive Stock Options and will be subject to the
requirements of Section VI of the Plan.
The purchase price of the Common Stock subject to any Options shall be
determined by the Committee. Such price shall be subject to adjustment as
provided in Section XIII of the Plan.
Options shall not be exercisable prior to the date that is twelve months
after the Grant Date. In addition, the Committee may include in each agreement
evidencing the Option grant a provision stating that the Option granted therein
may not be exercised in whole or in part for an additional period(s) of time
specified in such agreement, and may further limit the exercisability of the
Option in such manner as the Committee deems appropriate, including, without
limitation, the achievement of performance goals. The Committee may, in its
discretion, at any time and from time-to-time accelerate the exercisability of
all or part of any Option, provided that the Company's shareholders, by majority
vote have approved such acceleration unless such acceleration is specifically
provided for herein.
The period of any Option, which is the time period during which the Option
may be exercised, shall be determined by the Committee and shall not extend more
than ten years after the Grant Date.
Options shall not be transferable other than by will or the laws of descent
and distribution and during the Participant's lifetime shall be exercisable only
by the Participant.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Options. Termination for any reason other than Cause
(including terminations pursuant to formal severance programs sponsored by the
Company or an affiliate), or terminations by reason of death, Disability or
Retirement, shall result in a lapse of all or a proportion of the Restricted
Period applicable to any outstanding Award as set forth in Section XI.
A person electing to exercise an Option shall give written notice of such
election to the Company in such form as the Committee may require. Upon
exercise of an Option, the full option purchase price for the shares with
respect to which the Option is being exercised shall be payable to the Company
(i) in cash or by check payable and acceptable to the Company or (ii) subject to
the approval of the Committee, (a) by tendering to the Company shares of Common
Stock owned by such person having an aggregate Fair Market Value as of the date
of exercise and tender that is not greater than the full option purchase price
for the shares with respect to which the Option is being exercised and by paying
any remaining amount of the option purchase price as provided in (i) above
(provided that the Committee may, upon confirming that such person owns the
number of additional shares being tendered, authorize the issuance of a new
certificate for the number of shares being acquired pursuant to the exercise of
the Option less the number of shares being tendered upon the exercise and return
to such person (or not require surrender of) the certificate for the shares
being tendered upon the exercise) or (b) by such person delivering to the
Company a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to the Company cash or a check
payable and acceptable to the Company to pay the option purchase price and any
withholding taxes; provided that in the event such person chooses to pay the
option purchase price and withholding taxes as provided in (ii)(b) above, such
person and the broker shall comply with such procedures and enter into such
agreements of indemnity and other agreements as the Committee shall prescribe as
a condition of such payment procedure. Payment instruments will be received
subject to collection.
Notwithstanding any other provision in the Plan, if a Change in Control
occurs while unexercised Options, and Stock Appreciation Rights relating
thereto, remain outstanding under the Plan, then from and after the Acceleration
Date, all Options and Stock Appreciation Rights shall be exercisable in full,
whether or not otherwise exercisable; provided, however, that no Option or Stock
Appreciation Right shall become exercisable by reason of this paragraph to the
extent that such acceleration of exercisability, when aggregated with other
payments or benefits
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to the Participant pursuant to this Plan or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person, would, as
determined by tax counsel selected by the Company, result in "Excess Parachute
Payments" (as defined below) equal to or greater than three times the "base
amount" as defined in Section 280G of the Code. "Excess Parachute Payments"
shall mean "parachute payments" as defined in Section 280G of the Code other
than (1) health and life insurance benefits and (2) payments attributable to any
award, benefit or other compensation plan or program based upon the number of
full or fractional months of any restricted period (relating thereto) which has
elapsed prior to the date of the Change in Control. Furthermore, such payments
or benefits provided to a Participant under this Plan shall be reduced to the
extent necessary so that no portion thereof shall be subject to the excise tax
imposed by Section 4999 of the Code, but only if, by reason of such reduction,
the Participant's net after tax benefit shall exceed the net after tax benefit
if such reduction were not made. "Net after tax benefit" shall mean the sum of
(i) all payments and benefits which a Participant receives or is then entitled
to receive from the Company that would constitute a "parachute payment" within
the meaning of Section 280G of the Code, less (ii) the amount of federal income
taxes payable with respect to the payments and benefits described in (i) above
calculated at the maximum marginal income tax rate for each year in which such
payments and benefits shall be paid to the Participant (based upon the rate for
such year as set forth in the Code at the time of the first payment of the
foregoing), less (iii) the amount of excise taxes imposed with respect to the
payments and benefits described in (i) above by Section 4999 of the Code.
VI. INCENTIVE STOCK OPTIONS
An Option designated by the Committee as an "Incentive Stock Option" is
intended to qualify as an "incentive stock option" within the meaning of Section
422 of the Code and shall satisfy, in addition to the conditions of Section V,
the conditions set forth in this Section VI.
The purchase price of the Common Stock subject to an Incentive Stock Option
shall be the greater of the Fair Market Value of the Common Stock on the Grant
Date or the "fair market value" of the Common Stock as such term is used for
purposes for Section 422(b)(4) of the Code.
An Incentive Stock Option shall not be granted to an employee who, on the
Grant Date, owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of PEC, or of its parent or subsidiary
corporations.
VII. INTENTIONALLY LEFT BLANK
VIII. STOCK APPRECIATION RIGHTS
The Committee may, from time to time and subject to the provisions of the
Plan, grant Awards of Stock Appreciation Rights to employees of the Company
subject to the limitation in Section II. An Award of Stock Appreciation Rights,
in the Committee's discretion, may only be made in tandem with the grant of an
Option; however, there is no obligation for the committee to award any Stock
Appreciation Rights in tandem with any grant.
The period of any Stock Appreciation Right, which is the time period during
which the Stock Appreciation Right may be exercised, shall be determined by the
Committee and shall be in tandem with the period of such Option.
Stock Appreciation Rights shall not be transferable other than by will or
the laws of descent and distribution and during the Participant's lifetime shall
be exercisable only by the Participant.
Termination for Cause, as defined in Section I, shall result in forfeiture
of all outstanding Stock Appreciation Rights. Termination by the Company for
any reason other than Cause (including terminations pursuant to formal severance
programs sponsored by the Company or an affiliated company), or termination by
reason of death, Disability or Retirement, shall result in a lapse on all or a
portion of the Restricted Period applicable to any outstanding Award as set
forth in Section XI.
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Subject to any restrictions or conditions imposed by the Committee, upon
the exercise of a Stock Appreciation Right, the Company shall pay the amount, if
any, by which the Fair Market Value of a share of Common Stock on the date of
exercise exceeds the Fair Market Value of a share of Common Stock on the Grant
Date. The amount payable by the Company upon the exercise of a Stock
Appreciation Right may be paid in cash less any required government withholdings
with respect to the Stock Appreciation Right and its tandem Option.
IX. INTENTIONALLY LEFT BLANK
X. CONTINUED EMPLOYMENT
Participation in the Plan shall confer no rights to continued employment
with the Company, nor shall it restrict the rights of the Company to terminate a
Participant's employment relationship at any time.
XI. TERMINATION OF EMPLOYMENT
In the event of a Participant's termination of employment with the Company
by reason of death, the Restricted Period shall lapse on all of the
Participant's outstanding Awards.
In the event of a Participant's termination of employment with the Company
by reason of Disability, Retirement or by the Company for any reason other than
Cause, a portion of all of the Participant's outstanding Awards shall be
immediately forfeited to the extent not then otherwise vested. The portion of
an Award forfeited shall be a fraction, the denominator of which is the total
number of months of any Restricted Period applicable to the Award (rounded up to
the nearest whole month) and the numerator of which is the number of months
remaining in such Restricted Period (rounded up to the nearest whole month) as
of the termination of employment.
Options and Stock Appreciation Rights which are or become exercisable at
the time of a Participant's termination of employment with the Company (i) by
reason of Disability or Retirement or by the Company for any reason other than
Cause, may be exercised by the Participant within three years following such
termination of employment and (ii) for any reason other than Cause, death or a
reason specified in (i), may be exercised by the Participant within three months
following such termination but, in either event, not after the expiration of the
period of the Option and Stock Appreciation Right. Options and Stock
Appreciation Rights which are or become exercisable at the time of a
Participant's termination of employment with the Company by reason of death, may
be exercised by the Participant's designated beneficiary, or in the absence of
such designation, by the person to whom the Participant's rights pass by will or
the laws of descent and distribution at any time within three years after the
Participant's death but not after the expiration of the period of the Option and
Stock Appreciation Right. Options and Stock Appreciation Rights that do not
become exercisable as provided above, or that are not otherwise vested, shall be
forfeited on termination.
In the event of a Participant's termination of employment with the Company
for any reason other than as provided above, all Awards not otherwise vested or
earned as of the date of such termination of employment shall be immediately
forfeited on termination.
Notwithstanding the foregoing however, the Committee may determine that
termination of employment by reasons of any other special circumstances not set
forth above shall not terminate an Award or a portion thereof.
XII. AWARD AGREEMENT
Each person granted an Award pursuant to the Plan shall sign an Award
Agreement which signifies the offer of the Award by the Company and the
acceptance of the Award by the person in accordance with the terms of the Award
and the provisions of the Plan. Each Award Agreement shall reflect the terms
and conditions of the Award.
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XIII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event of a change in the capitalization of PEC due to a stock split,
stock dividend, recapitalization, merger, consolidation, combination, or similar
event, the aggregate shares subject to the Plan and the terms of any existing
Awards shall be adjusted by the Committee to reflect such change.
XIV. INTENTIONALLY LEFT BLANK
XV. SECURITIES LAW AGREEMENT
If, at the time of the exercise of any Option and Stock Appreciation Right
in the opinion of counsel for the Company, it is necessary or desirable, in
order to comply with any then applicable laws or regulations relating to the
sale of securities, for the individual exercising the Option, agree to hold any
shares issued to the individual for investment and without intention to resell
or distribute the same and for the individual to agree to dispose of such shares
only in compliance with such laws and regulations, the individual will, upon the
request of the Company, execute and deliver to the Company a further agreement
to such effect.
XVI. WITHHOLDING FOR TAXES
Any cash payment under the Plan shall be reduced by any amounts required to
be withheld or paid with respect thereto under all present or future federal,
state and local taxes and other laws and regulations that may be in effect as of
the date of each such payment ("Tax Amounts"). Any issuance of Common Stock
pursuant to the exercise of an Option or other distribution of Common Stock
under the Plan shall not be made until appropriate arrangements have been made
for the payment of any amounts that may be required to be withheld or paid with
respect thereto. Such arrangements may, at the discretion of the Committee,
include allowing the Participant to tender to the Company shares of Common Stock
owned by the Participant, being part of the broker-cash less exercise procedure;
or to request the Company to withhold a portion of the shares of Common Stock
being acquired pursuant to the exercise or otherwise distributed to the
Participant, which have a Fair Market Value per share as of the date of such
Award exercise, tender or withholding that is not greater than the sum of all
Tax Amounts, together with payment of any remaining portion of all Tax Amounts
in cash or by check payable and acceptable to the Company.
XVII. AUTOMATIC DIRECTOR AWARDS
Each Director who served in such capacity the date this Plan was approved
by the Board shall automatically receive on the first of the month of the first
fiscal year following such date, a Director Option for 5,000 shares of Common
Stock. Each Director who is elected or appointed to the Board for the first
time after that initial grant date shall automatically receive, on the date of
his or her election or appointment, a Director Option for 5,000 shares of Common
Stock.
On the date of the regular Annual Meeting of Stockholders of the Company in
each year that this Plan is in effect (commencing with the 2001 Annual Meeting
of Stockholders), each Director who is serving on that day, including a Director
who was elected for the first time at such annual meeting, shall automatically
receive the following:
1. Director Options. A Director Option grant for 5,000 shares of Common
Stock. Each Director Option will be subject to all of the limitations contained
in the following provisions:
(a) Each Director Option shall become exercisable (vested) on the earlier
of (i) the first day that is more than six months following its Grant Date or
(ii) an Acceleration Date occurring after the Grant Date, provided that in no
event shall any Director Option be exercisable prior to the approval of this
Plan by the Company's stockholders.
(b) The option purchase price of each Director Option shall be the Fair
Market Value of the Common Stock on its effective Grant Date.
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(c) Each Director Option shall automatically include a Stock Appreciation
Right, as if granted pursuant to Section VIII.
(d) Each Director Option that is vested may be exercised in full at one
time or in part from time to time by giving written notice to the Company,
stating the number of shares of Common Stock with respect to which the Director
Option is being exercised, accompanied by payment in full of the option purchase
price for such shares, which payment may be (i) in cash by check acceptable to
the Company, (ii) by the transfer to the Company of shares of Common Stock
already owned by the optionee having an aggregate Fair Market Value at the date
of exercise equal to the aggregate option purchase price, (iii) from the
proceeds of a sale through a broker of some or all of the shares to which such
exercise relates, or (iv) by a combination of such methods of payment.
(e) Each Director Option shall expire 10 years from the Grant Date thereof,
but shall be subject to earlier termination as follows: (1) to the extent
exercisable as of the date a Director ceases to serve as a director of the
Company (the "Resignation Date"), the Director Option may be exercised only
within three years of such Resignation Date by the optionee or the optionee's
legal representative or the person to whom the Nonemployee Director's rights
shall pass by will or the laws of descent and distribution, as the case may be,
and to the extent not so exercised shall terminate on the third anniversary of
the Resignation Date and (2) to the extent not exercisable as of the Resignation
Date, the Director Option shall terminate on such Resignation Date.
In the event that the number of shares of Common Stock available for
Director Awards under this Plan is insufficient to make all automatic Awards
provided for in this Section XVII on the applicable date, then all Directors who
are entitled to a grant on such date shall share ratably in the number of shares
then available for grant under this Plan and shall have no right to receive a
grant with respect to the deficiencies in the number of available shares and all
future grants under this Section XVII shall terminate.
Grants made pursuant to this Section XVII shall be subject to all of the
terms and conditions of this Plan; however, if there is a conflict between the
terms and conditions of this Section XVII and the terms and conditions of any
other Section, then the terms and conditions of this Section XVII shall control.
The Committee may not exercise any discretion with respect to this Section XVII
which would be inconsistent with the intent that this Plan meet the requirements
of Rule 16b-3.
XVIII. DESIGNATION OF BENEFICIARY
Each Participant to whom an Award has been made under this Plan may
designate a beneficiary or beneficiaries (which beneficiary may be an entity
other than a natural person) to exercise any rights or receive any payment that
under the terms of such Award may become exercisable or payable on or after the
Participant's death. At any time, and from time to time, any such designation
may be changed or canceled by the Participant without the consent of any such
beneficiary. Any such designation, change or cancellation must be on a form
provided for that purpose by the Committee and shall not be effective until
received by the Committee. If no beneficiary has been named by a deceased
Participant, or the designated beneficiaries have predeceased the Participant,
the beneficiary shall be the Participant's estate. If a Participant designates
more than one beneficiary, any such exercise or payment under this Plan shall be
made in equal shares unless the Participant has designated otherwise, in which
case the exercise or payment shall be made in the shares designated by the
Participant.
XIX. PREEMPTION BY APPLICABLE LAWS AND REGULATIONS
Anything in the Plan or any agreement entered into pursuant to the Plan to
the contrary notwithstanding, if, at any time specified herein or therein for
the making of any determination, the issuance or other distribution of shares of
Common Stock, the payment of consideration to an employee as a result of the
exercise of any Stock Appreciation Right, any law, regulation or requirement of
any governmental authority having jurisdiction in the premises shall require
either the Company or the Participant (or the Participant's beneficiary), as the
case may be, to take any action in connection with any such determination, the
shares then to be issued or distributed, or such payment, the issue or
distribution of such shares or the making of such determination or payment, as
the case may be, shall be deferred until such action shall have been taken.
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XX. EFFECTIVE DATE AND DURATION OF PLAN
This Plan amendment and restatement shall become effective as of February
25, 2000 subject to its approval by the stockholders of PEC. Unless previously
terminated by the Board, the Plan shall terminate on the tenth anniversary of
its approval by the stockholders; provided, however, that such termination shall
not terminate any Award then outstanding. No Awards shall be made pursuant to
this Plan after December 31, 2005.
XXI. TERMINATION AND AMENDMENT
The Board may suspend, terminate, modify or amend the Plan, provided that
any amendment that would increase the aggregate number of shares which may be
issued under the Plan or materially modify the requirements as to eligibility
for participation in the Plan, shall be subject to the approval of PEC's
stockholders, except that any such increase or modification that may result from
adjustments authorized by Section XIII does not require such approval; provided,
further, that no amendment or modification shall be made to Section XVII more
than once every six months, other than to comport with changes in the Code or
the Employee Retirement Income Security Act of 1974, as amended, or rules
promulgated thereunder. No suspension, termination, modification or amendment
of the Plan may terminate a Participant's existing Award or materially adversely
affect a Participant's rights under such Award.
XXII. MISCELLANEOUS
(a) Nothing contained in the Plan shall be construed as conferring upon any
employee the right to continue in the employ of the Company.
(b) No person shall have any rights as a stockholder with respect to shares
covered by such person's Option, until the date of the issuance of shares
pursuant thereto. No adjustment will be made for dividends or other
distributions or rights for which the record date is prior to the date of such
issuance.
(c) Nothing contained in the Plan shall be construed as giving any person,
such person's beneficiaries or any other person any equity or other interest of
any kind in any assets of the Company or creating a trust of any kind or a
fiduciary relationship of any kind between the Company and any such person.
(d) Nothing contained in the Plan shall be construed to prevent the Company
from taking any corporate action that is deemed by the Company to be appropriate
or in its best interest, whether or not such action would have an adverse effect
on the Plan or any award made under the Plan. No employee, beneficiary or other
person shall have any claim against the Company as a result of any such action.
(e) No grantee nor any beneficiary thereof shall have the power or right to
sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of any
such grantee's or beneficiary's interest arising under the Plan or in any Award
received under the Plan; nor shall such interest be subject to seizure for the
payment of any grantee's or beneficiary's debts, judgments, alimony, or separate
maintenance or be transferable by operation of law in the event of a grantee's
or beneficiary's bankruptcy or insolvency and to the extent any such interest
arising under the Plan or Award received under the Plan is awarded to a spouse
pursuant to any divorce proceeding, such interest shall be deemed to be
terminated and forfeited notwithstanding any vesting provisions or other terms
herein or in the agreement evidencing such award.
(f) All rights and obligations under the Plan shall be governed by, and the
Plan shall be construed in accordance with, the laws of the State of Oklahoma
without regard to the principles of conflicts of laws. Titles and headings to
Sections herein are for purposes of reference only, and shall in no way limit,
define or otherwise affect the meaning or interpretation of any provisions of
the Plan.
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<PAGE>
Proxy PETROCORP INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS -- MAY 19, 2000
This Proxy Is Solicited on Behalf of the Board of Directors
The undersigned holder of Common Stock of PetroCorp Incorporated (the
"Company") hereby appoints Gary R. Christopher and Steve Berlin, 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 19, 2000, at 11:00
a.m., Tulsa time, at the Tulsa Room, 9th Floor, Bank of Oklahoma Tower, 1
Williams Center, Tulsa, Oklahoma 74172, 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 2003:
[_] FOR [_] WITHHOLD AUTHORITY
all nominees listed below
to vote for all nominees
(except as marked below)
listed below
Lealon L. Sargent Mark W. Files
2. Proposal to approve the adoption of the Company's 2000 Stock Option Plan.
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 14, 2000
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: ______________________, 2000
Please mark, sign, date and return in the enclosed envelope, which requires
no postage if mailed in the United States.
