UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 toss.240.14a-12
MEXCO ENERGY CORPORATION
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
MEXCO ENERGY CORPORATION
214 W. Texas Ave., Suite 1101
Midland, Texas 79701
(432) 682-1119
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held September 14, 2004
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of the Stockholders of MEXCO
ENERGY CORPORATION ("the Company") will be held at Petroleum Club of Midland,
501 West Wall, Midland, Texas 79701, at 2:00 p.m. on September 14, 2004, for the
following purposes:
1. Electing Directors of the Company.
2. Considering and voting upon the proposal to approve the Mexco Energy
Corporation 2004 Incentive Stock Plan;
3. Considering and voting upon a proposal to appoint Grant Thornton LLP
as independent certified public accountants of the Company for the
fiscal year ending March 31, 2005.
4. Considering all other matters as may properly come before the meeting.
The Board of Directors has fixed the close of business on July 12, 2004, as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournment or adjournments thereof.
DATED this 12th day of July 2004.
BY ORDER OF THE BOARD OF DIRECTORS
DONNA GAIL YANKO, SECRETARY
IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE URGED TO EXECUTE THE
ACCOMPANYING PROXY CARD, WHICH REQUIRES NO POSTAGE, AND RETURN IT PROMPTLY.
ANY STOCKHOLDER GRANTING A PROXY MAY REVOKE SAME AT ANY TIME PRIOR
TO ITS EXERCISE. ALSO, WHETHER OR NOT YOU GRANT A PROXY, YOU MAY VOTE IN
PERSON IF YOU ATTEND THE MEETING.
1
MEXCO ENERGY CORPORATION
214 W. Texas Ave., Suite 1101
Midland, Texas 79701
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held Tuesday, September 14, 2004
SOLICITATION OF PROXY
The accompanying proxy is solicited on behalf of the Board of Directors of
Mexco Energy Corporation (the "Company") for use at the Annual Meeting of
Stockholders of the Company to be held on Tuesday, September 14, 2004, and at
any adjournment or adjournments thereof. In addition to the use of the mails,
proxies may be solicited by personal interview, telephone and telegraph by
officers, directors and other employees of the Company, who will not receive
additional compensation for such services. The Company may also request
brokerage houses, nominees, custodians and fiduciaries to forward the soliciting
material to the beneficial owners of stock held of record and will reimburse
such persons for forwarding such material. The Company will bear the cost of
this solicitation of proxies. Such costs are expected to be nominal. Proxy
solicitation will commence with the mailing of this Proxy Statement on or about
July 12, 2004.
Any stockholder giving a proxy has the power to revoke the same at any time
prior to its exercise by executing a subsequent proxy or by written notice to
the Secretary of the Company or by attending the meeting and withdrawing the
proxy.
PURPOSE OF MEETING
As stated in the Notice of Annual Meeting of Stockholders accompanying this
Proxy Statement, the business to be conducted and the matters to be considered
and acted upon at the annual meeting are as follows:
1. Electing Directors of the Company;
2. Considering and voting upon a proposal to approve the Mexco Energy
Corporation 2004 Incentive Stock Plan;
3. Considering and voting upon a proposal to appoint Grant Thornton LLP
as independent certified public accountants of the Company for the
fiscal year ending March 31, 2005; and
4. Considering all other matters as may properly come before the meeting.
VOTING RIGHTS
The voting securities of the Company consist solely of common stock, par
value $0.50 per share ("Common Stock").
The record date for stockholders entitled to notice of and to vote at the
meeting is the close of business on July 12, 2004, at which time the Company had
outstanding and entitled to vote at the meeting 1,736,041 shares
2
of Common Stock. Stockholders are entitled to one vote, in person or by proxy,
for each share of Common Stock held in their name on the record date.
Stockholders representing a majority of the Common Stock outstanding and
entitled to vote must be present or represented by proxy to constitute a quorum.
The election of directors will require the affirmative vote of a majority
of the Common Stock present or represented by proxy at the meeting and entitled
to vote thereon. Cumulative voting for directors is not authorized.
If the enclosed Proxy is properly executed and returned prior to the Annual
Meeting, the shares represented thereby will be voted as specified therein. IF A
SHAREHOLDER DOES NOT SPECIFY OTHERWISE ON THE RETURNED PROXY, THE SHARES
REPRESENTED BY THE SHAREHOLDER'S PROXY WILL BE VOTED FOR THE ELECTION OF THE
NOMINEES LISTED BELOW UNDER "ELECTION OF DIRECTORS", FOR APPROVAL OF THE MINUTES
OF THE 2003 ANNUAL MEETING OF SHAREHOLDERS, FOR THE APPOINTMENT OF GRANT
THORNTON LLP, FOR THE 2004 INCENTIVE STOCK PLAN AND ON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF.
3
ELECTION OF DIRECTORS
At the Annual Meeting to be held on September 14, 2004, seven persons are
to be elected to serve on the Board of Directors for a term of one year and
until their successors are duly elected and qualified. All of the current
Directors have announced that they are available for election to the Board of
Directors. The Company's nominees for the seven directorships are:
Thomas R. Craddick Jack D. Ladd
William G. Duncan Nicholas C. Taylor
Thomas Graham, Jr. Donna Gail Yanko
Arden R. Grover
For information about each nominee, see "Directors and Executive Officers."
DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors currently consists of four persons who are employees
of the Company and three persons who are not employees of the Company (i.e.,
outside directors). Set forth below are the names, ages and positions of the
Company's Directors and executive officers as of July 12, 2004.
Director of the
Name Age Position with the Company Company Since
---------------------- --- ------------------------- -------------
Thomas R. Craddick 60 Director 1998
William G. Duncan, Jr. 61 Director 1994
Thomas Graham, Jr. 70 Director and Chairman of the Board 1997
Director 1990 to 1994
Arden R. Grover 78 Director 2001
Jack D. Ladd 54 Director 1998
Nicholas C. Taylor 66 President and Director 1983
Donna Gail Yanko 60 Vice President, Secretary, Director 1990
The Board of Directors elects executive officers annually. Executive
officers hold office until their successors are elected and have qualified.
Set forth below are descriptions of the principal occupations during at
least the past five years of the Company's directors and executive officers.
THOMAS R. CRADDICK was elected to the Board of Directors of the Company in
March 1998. Since 1968 to the present, Mr. Craddick has served as a
Representative and in 2003 became Speaker of the House of Representatives of the
State of Texas. Throughout his tenure of the past 18 sessions of the
Legislature, Representative Craddick has served on various committees and
conferences. For more than the past seven years Mr. Craddick has been the sales
representative for Mustang Mud, Inc., as well as the owner of Craddick
Properties and owner and President of Craddick, Inc., both of which invest in
oil and gas properties and real estate.
WILLIAM G. DUNCAN, JR.*, in November 2000, co-founded First Bankers Trust
Company and currently serves as Executive Trust Officer of the company. He
previously held several positions, including President, with Southeastern
Financial Services, Louisville, Kentucky since 1991, and served as Chairman of
the Board of Kentucky Home Trust Co., both of which companies were purchased in
March 2000 by National Guardian Life Insurance, Madison, Wisconsin. Mr. Duncan
has been a Director of the Company since 1994 and is a member of the
compensation committee.
4
THOMAS GRAHAM, JR. was appointed Chairman of the Board of Directors, by the
Directors of the Company in July 1997, having served as a director from 1990
through 1994. From July 1994 through July 1997, Mr. Graham served as a United
States Ambassador. For nearly fifteen years prior thereto, Mr. Graham served as
the General Counsel, United States Arms Control and Disarmament Agency, as well
as Acting Director and as Acting Deputy Director of such agency successively, in
1993 and 1994. In these and prior positions he served in a senior position in
every arms control negotiation in which the United States participated from 1970
- 1997. He served as a board member and subsequently Vice Chairman of Thorium
Power Inc. beginning in 1997. He currently serves as Special Counsel at the law
firm of Morgan, Lewis and Bockius in Washington, D.C. He serves as Fellow at the
Eisenhower Institute. In addition he is Board Chairman of the Lawyers Alliance
for World Security, Board Member of the United States Industry Coalition
(helping U.S. business in Russia), Chairman of the Bi-partisan Security Group
(working with the U.S. Congress) and adjunct professor at Stanford University
and the University of Washington (Seattle). He is the author of "Disarmament
Sketches" University of Washington Press, 2002 and co-author of "Cornerstone of
Security", University of Washington Press, 2003.
ARDEN R. GROVER* was elected to the Board of Directors of the Company in
September 2001. Mr. Grover has been an independent oil and gas producer for more
than 40 years and managing partner of Grover Family L.P., an oil and gas
producing company. He is a Director of Glencoe Resources Ltd., Calgary, Alberta,
Canada and Momentum Energy, LLC, Midland, Texas. He is an advisory Director of
Caithness Resources Inc., a Geothermal Energy Company, New York City and Clear
Lake National Bank, San Antonio. Mr. Grover is also a past President of the
Permian Basin Petroleum Association.
JACK D. LADD* was elected to the Board of Directors of the Company in March
1998 and is a member of the compensation committee. For 25 years, Mr. Ladd has
been a shareholder of the law firm of Stubbeman, McRae, Sealy, Laughlin &
Browder, Inc., Midland, Texas. Mr. Ladd was a partner in various real estate
partnerships and is an arbitrator for the National Association of Securities
Dealers, and a mediator certified by the Attorney Mediation Institute. Mr. Ladd
also serves as director for Map Resources, Inc., a company that invests in oil
and gas minerals and royalties. In 2002, Mr. Ladd was appointed by the Governor
of Texas as a member of the State Securities Board to serve a six year term and
in 2003, the Select Committee on Education of the State of Texas.
NICHOLAS C. TAYLOR was elected President, Treasurer and Director of the
Company in April 1983 and continues to serve as President and Director on a part
time basis, as required. Mr. Taylor served as Treasurer until March 1999. From
July 1993 to the present, Mr. Taylor has been involved in the independent
practice of law and other business activities including independent oil and gas
production. For more than the prior 19 years, he was a director and shareholder
of the law firm of Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Midland,
Texas, and a partner of the predecessor firm. In 1995, he was appointed by the
Governor of Texas to the State Securities Board through January 2001. In
addition to serving as chairman for four years, he continued to serve as a
member of such board to 2004.
DONNA GAIL YANKO served as Vice President part-time and Director of the
Company since 1990. She also has served as Corporate Secretary of the Company
since 1992 and from 1986 to 1992 as Assistant Secretary of the Company. From
1986 to the present, on a part-time basis, she has assisted the President of the
Company in his personal business activities.
TAMMY L. MCCOMIC. Ms. McComic joined the Company in 2001, and was elected
Chief Financial Officer and Vice President in 2003. Prior thereto, Ms. McComic
served the Company as Controller, Treasurer and Assistant Secretary. From 1994
to 2001 Mrs. McComic was Regional Controller and Credit Manager for Transit Mix
Concrete & Materials Company, a subsidiary of Trinity Industries, Inc. Ms.
McComic is a certified public accountant.
5
*Indicates independence has been determined by the Board of Directors in
accordance with the American Stock Exchange.
MEETINGS AND COMMITTEES OF DIRECTORS
During fiscal year ended March 31, 2004, eleven meetings of the Board of
Directors were held which all of the respective members attended except two
members were absent from two meetings each.
The Audit Committee is a standing committee of the Board of Directors and
currently consists of Messrs. Grover, Ladd and Duncan, all of whom are
independent, non-employee directors. Mr. Duncan, currently serving as Chairman
of the Audit Committee, has been named the Audit Committee Financial Expert
based on a qualitative assessment of Mr. Duncan's level of knowledge, experience
and formal education. The functions of the Committee are to determine whether
management has established internal controls which are sound, adequate and
working effectively; to ascertain whether Company assets are verified and
safeguarded; to review and approve external audits; to review audit fees and the
appointment of independent public accountants; and to review non-audit services
provided by the independent public accountants. The Committee held four meetings
during fiscal year ended March 31, 2004. All members attended these meetings.
For additional information, see "Report of the Audit Committee".
The Compensation Committee currently consists of Messrs. Duncan, Ladd and
Taylor, all of whom are non-employee directors except for Mr. Taylor. The
function of the Committee is to determine compensation for the officers of the
Company that is competitive to enable the Company to motivate and retain the
talent needed to lead and grow the Company's business. The Committee held two
meetings during fiscal year ended March 31, 2004. All members attended these
meetings.
MANAGEMENT COMPENSATION
The compensation levels of the Company are believed to be competitive and
in line with those of comparable companies and to align the interests of the
Company's employees with those of its stockholders through potential stock
ownership.
The following table sets forth information concerning annual and long-term
compensation paid or accrued to executive officers for services in all
capacities to the Company for the fiscal year ended March 31, 2004.
SUMMARY COMPENSATION TABLE
Securities All
Name and Underlying Other
Principal Position Year Salary Bonus Options Compensation
------------------ ---- ----------- ---------- --------------- ------------
Nicholas C. Taylor 2004 $ - $ - - $ 1,100
President & CEO 2003 $ - $ - - $ 1,100
2002 $ - $ - - $ 1,000
Donna Gail Yanko 2004 $ 18,750 $ 2,500 5,000 $ -
Vice President & 2003 $ 10,500 $ 4,448 - $ -
Secretary 2002 $ 10,200 $ 4,605 - $ -
Tamala L. McComic 2004 $ 75,400 $ 7,500 20,000 $ -
Vice President, 2003 $ 62,400 $ 8,896 10,000 $ -
Treasurer & Asst Sec. 2002 $ 41,600 $ 6,215 10,000 $ -
Thomas Graham, Jr. 2004 $ 24,000 $ - - $ -
Chairman 2003 $ 24,000 $ - - $ -
2002 $ 24,000 $ - - $ -
Thomas R. Craddick 2004 $ 1,200 $ - - $ -
Director 2003 $ 1,200 $ - 10,000 $ -
2002 $ 1,200 $ - - $ -
6
o All other compensation is comprised of director fees. There are no
employment agreements or retirement benefit plans. Currently non-employee
directors are paid $100 per meeting. The sole compensation received by the
President and CEO of the Company for such period consisted of director's
fees.
EMPLOYEE INCENTIVE STOCK OPTION PLAN
------------------------------------
The Company adopted an employee incentive stock plan effective September
15, 1997. Under the plan, 350,000 shares were available for distribution.
Awards, granted at the discretion of the compensation committee of the Board,
include stock options and restricted stock. Stock options may be incentive stock
options or non-qualified stock options. The exercise price of each option will
not be less than the market price of the Company's stock on the date of grant.
The maximum term of the options is ten years. Restricted stock may be granted
with a condition to attain a specified goal. The purchase price will be at least
$5.00 per share of restricted stock. The awards of restricted stock must be
accepted within sixty days and will vest as determined by agreement. Holders of
restricted stock have all rights of a shareholder of the Company. At March 31,
2004, no restricted stock had been granted under the plan.
The following table sets forth certain information with respect to the
exercise of options to purchase Common Stock during the fiscal year ended March
31, 2004, and unexercised options held at March 31, 2004 by each of the named
executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2004
AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Options at
Acquired Options at March 31, 2004 March 31, 2004
On Value ----------------------------- ------------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
Donna Gail Yanko 0 $ 0 37,500 7,500 $ 29,500 $ 9,750
Tamala L. McComic 0 $ 0 7,500 32,500 $ 26,625 $ 75,375
Thomas Graham, Jr. 0 $ 0 37,500 2,500 $ 29,500 $ 2,000
Thomas R. Craddick 0 $ 0 22,500 7,500 $ 32,375 $ 26,625
Martha R. Starek 0 $ 0 250 4,750 $ 888 $ 8,863
(1) The closing price per share on March 31, 2004, was $7.55 as reported by the
American Stock Exchange.
Defined Benefit Plans and Other Arrangements. Long-term incentive
compensation for senior executive officers is not a policy of the Company.
Accordingly, no awards or payouts have been made. The Company has no retirement
or pension plan except for its Incentive Stock Option Plan. This plan is
described above.
OPTION GRANTS IN LAST FISCAL YEAR TABLE
Number of Grants
Securities Percentage of
Underlying Total Options Exercise After 10 Years
Options Granted to Price Expiration Stock Price Appreciation
Granted (1) Employees (per Share) Date 5% per Year 10% per year
----------- --------- ----------- ---- ----------- ------------
Tamala L. McComic 20,000 68.97% 6.00 07/10/2013 $ 75,467 $ 191,249
Martha R. Starek 4,000 13.79% 6.00 07/10/2013 $ 15,093 $ 38,250
Donna Gail Yanko 5,000 17.24% 6.00 07/10/2013 $ 18,867 $ 47,812
7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ending March 31, 2003, a member of the Board of Directors
and a Company employee entered into an agreement with Falcon Bay, LLC, whereby
he receives a commission from Falcon Bay Operating, LLC for any transactions
consummated between Falcon Bay Operating, LLC and the Company in the course of
the Exploration Agreement.
During the year ending March 31, 2004, a member of the Board of Directors
and a Company employee entered into an agreement with Deepwater Resources, L.P.
and Gary Martin, whereby he received a 1.5% overriding royalty on certain leases
related to the Lodgepole Prospect in Stark County, North Dakota. In January
2004, the Company purchased a one-quarter interest in these leases and/or
options to lease.
PROPOSED RESOLUTION TO APPROVE THE
MEXCO ENERGY CORPORATION 2004 INCENTIVE STOCK PLAN
In July 2004, the Board of Directors of the Company adopted the Mexco
Energy Corporation 2004 Incentive Stock Plan. The effect of the plan is to
replace, modify and extend the termination date of the existing stock option
plan to September 14, 2009. The Plan provides for the award of stock options up
to 325,000 shares of which 125,000 may be the subject of stock grants without
restrictions and without payment by the recipient and stock awards of up to
125,000 shares with restrictions including payment for the shares and employment
of not less than three years from the date of the award. The terms of the stock
options are similar to those of the Company's Stock Option Plan except that the
term of the Plan is five years from the date of its adoption. The text of the
plan is set forth in Exhibit A hereto.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY VOTE FOR THE PROPOSED
RESOLUTION.
THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE SHARES OF STOCK OF THE
COMPANY ENTITLED TO VOTE AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THE
RESOLUTION.
BOARD REPORT ON EXECUTIVE COMPENSATION
Compensation for executive officers and selected consultants is based on
the principle that compensation must be competitive to enable the Company to
motivate and retain the talent needed to lead and grow the Company's business,
and to provide rewards which are closely linked to the Company and individual
performance.
Executive compensation is based on performance against a combination of
financial and non-financial measures. In addition to business results, employees
are expected to uphold a commitment to integrity, maximizing the development of
each individual, and continually improving the environmental quality of its
services and operations. In upholding these financial and non-financial
objectives, executives not only contribute to their own success, but also help
ensure that the business, employees, stockholders and communities in which we
live and work will prosper.
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee makes recommendations regarding
compensation subject to approval of the entire Board of Directors.
REPORT OF THE AUDIT COMMITTEE
To the Stockholders of Mexco Energy Corporation:
It is the responsibility of the members of the Audit Committee to
contribute to the reliability of the Company's Financial Statements. In keeping
with this goal, the Board of Directors adopted a written charter (attached to
this proxy statement as Exhibit B) to govern the Audit Committee. Upon
evaluation of the charter's adequacy in 2004, the Audit Committee is satisfied.
In addition to written consent, the Audit Committee met five times during fiscal
2004. The members of the Audit Committee are independent directors.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. It has also discussed with the independent
auditors the matters required to be discussed by Statement on Accounting
Standards No. 61, Communication with Audit Committees, as amended, by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. Additionally, the Audit Committee has received the written
disclosures and the letter from the independent accountants at Grant Thornton
LLP, as required by Independent Standards Board Standard No. 1, Independence
Discussions with Audit Committees, and has discussed with the independent
accountants that firm's independence from the Company and its management. The
Audit Committee has concluded that non-audit services provided by Grant Thornton
LLP do not result in conflict in maintaining that firm's independence.
Audit fees billed to the Company by Grant Thornton LLP for the audit of the
Company's annual financial statements and the review of those financial
statements included in the Company's quarterly reports on Form 10-Q totaled
approximately $40,935 during the Company's 2004 fiscal year and $26,080 during
the Company's 2003 fiscal year. Fees for audit related services total $300 and
$1,225 for fiscal years ending March 31, 2004 and March 31, 2003, respectively.
The Company has obtained no other services from Grant Thornton LLP.
Based on reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors that the financial statements for fiscal
2004 be included in the Company's Annual Report on Form 10-K.
July 12, 2004 Audit Committee
William G. Duncan
Arden R. Grover
Jack D. Ladd
9
PERFORMANCE GRAPH
The following graph shows how an initial investment of $100 in the
Company's Common Stock would have compared to an equal investment in the S&P 500
Index or in an index of Peer Group Competitors over a five-year period beginning
March 31, 1999 and ending March 31, 2004. The selected Peer Group consists of
several larger independent oil and gas producers: Noble Affiliates, Inc., Pogo
Producing Company, Anadarko Petroleum Corporation, Apache Corporation, and
Parallel Petroleum Corporation. This group of companies is used by the Company
for certain comparisons.
[LINE GRAPH]
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MEXCO ENERGY CORPORATION, THE S & P 500 INDEX
AND A PEER GROUP
================================================================================
1999 2000 2001 2002 2003 2004
--------------------------------------------------------------------------------
MEXCO $100 $70 $64 $60 $74 $91
--------------------------------------------------------------------------------
S&P 500 $100 $116 $90 $89 $66 $88
--------------------------------------------------------------------------------
PEER GROUP $100 $136 $174 $168 $165 $173
================================================================================
10
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock, as of July 12, 2004, by each of the
Company's Directors, by each of the Named Officers, by all executive officers
and Directors of the Company as a group, and by each person known to the Company
to be the beneficial owner of more than 5% of any class of the Company's
outstanding Common Stock.
Number of Shares Percent
of Common Stock of
Beneficially Owned (1) Class
---------------------- ---------
Howard E. Cox, Jr. 213,400 12.29
Thomas R. Craddick 30,500 1.73
Tamala L. McComic 19,380 1.11
William G. Duncan, Jr. (4) 11,600 0.66
Thomas Graham, Jr. 125,600 (3) 7.08
Arden Grover (4) 25,000 1.44
Jack D. Ladd (4) 19,675 1.12
Nicholas C. Taylor (4) 888,811 50.90
Donna Gail Yanko 67,862 (2) 3.79
Officers and directors as a group
(8 persons) 1,188,428 67.83
(1) Included in the number of shares of Common Stock Beneficially Owned
are shares that such persons have the right to acquire within 60 days
of June 29, 2004, pursuant to options to purchase such Common Stock
(Mr. Craddick, 25,000; Ms. McComic, 17,500; Mr. Duncan, 10,000; Mr.
Graham, 37,500; Mr. Grover, 5,000; Mr. Ladd, 17,500; Mr. Taylor,
10,000 and Ms. Yanko, 38,750).
(2) Of these shares, Ms. Yanko's spouse owns 944 shares and the right to
acquire 17,500 shares pursuant to options to purchase such Common
Stock.
(3) Of these shares, Mr. Graham's spouse owns 7,000 shares.
(4) Denotes a non-employee Director.
REPORTING OF SECURITIES TRANSACTIONS
Ownership of and transactions in the Company's stock by executive officers and
directors of the Company are required to be reported to the Securities and
Exchange Commission pursuant to Section 16(a) of the Securities and Exchange Act
of 1934. All reporting requirements have been filed in a timely manner.
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP for appointment as
independent certified public accountants for the Company for the fiscal year
ending March 31, 2005, subject to ratification by the stockholders. Grant
Thornton LLP served as independent certified public accountants for the Company
for the fiscal year ended March 31, 2004. A representative of that firm will not
be present at the Annual Meeting, but will be available by telephone, and have
an opportunity to make a statement if they desire to do so and respond to
appropriate questions.
11
NEXT ANNUAL MEETING
The next Annual Meeting of the Company's stockholders is scheduled to be
held on September 25, 2005. Appropriate proposals of stockholders intended to be
presented at the 2005 Annual Meeting must be received by Ms. Donna Gail Yanko,
Secretary, no later than May 17, 2005, in order to be included in the Company's
Proxy Statement and form of Proxy relating to such meeting.
OTHER MATTERS
Management knows of no other business which will be presented at the Annual
Meeting other than as explained herein.
STOCKHOLDERS MAY OBTAIN, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL YEAR ENDED
MARCH 31, 2004, BY WRITING TO THE SECRETARY, MEXCO ENERGY CORPORATION, P.O. BOX
10502, MIDLAND, TEXAS 79702. A COPY OF THE REPORT ALSO MAY BE OBTAINED FROM THE
INTERNET AT www.sec.gov.
BY ORDER OF THE BOARD OF DIRECTORS
Donna Gail Yanko, Secretary
12
EXHIBIT A
MEXCO ENERGY CORPORATION
2004 INCENTIVE STOCK PLAN
1. PURPOSE
This Employee Incentive Stock Plan (the "Plan") is intended as an incentive
and to encourage stock ownership by certain officers and employees of Mexco
Energy Corporation or of its subsidiary companies as that term is defined in
Article 3 below (the "Subsidiaries"), so that they may acquire or increase their
proprietary interest in the success of the Company and Subsidiaries and to
encourage them to remain in the employ of the Company or of the Subsidiaries. It
is further intended that options issued pursuant to this Plan shall constitute
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as now or hereafter amended (the "Code"), except as to
those awards made pursuant to Article 11 of the Plan.
2. ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board of
Directors of the Company (the "Committee"). The Committee shall consist of not
less than three members of the Company's Board of Directors. The Board of
Directors may from time to time remove members from or add members to the
Committee. Vacancies on the Committee, howsoever caused, shall be filled by the
Board of Directors. The Committee shall select one of its members as Chairman
and shall hold meetings at such times and places as it may determine. A majority
of the Committee at which a quorum is present or acts reduced to or approved in
writing by a majority of the members of the Committee shall be the valid acts of
the Committee. No director while a member of the Committee shall be eligible to
receive an option under the Plan. The Committee shall from time to time at its
discretion make recommendations to the Board of Directors with respect to the
employees who shall be granted options and the amount of stock to be optioned to
each. All members of the Committee and majority of directors of the Company
shall be disinterested persons (as that term is hereinafter defined) for
purposes of administering the Plan and determining the employees and amount of
stock to be optioned to each. The term "disinterested person" for purposes of
the Plan shall mean an administrator of a Plan who is not at the time he or she
exercises discretion in administering the Plan eligible and has not at any time
within one year prior thereto been eligible for selection as a person to whom
stock options may be granted pursuant to the Plan.
The interpretation and construction by the Committee of any provisions of
the Plan or any option granted under it shall be final unless otherwise
determined by the Board of Directors. No member of the Board of Directors or the
Committee shall be
A-1
liable for any action or determination made in good faith with respect to the
Plan or any option granted under it.
3. ELIGIBILITY
The persons who shall be eligible to receive options shall be such
executives and other employees (including officers, whether or not they are
directors) of the Company or its Subsidiaries existing from time to time as the
Board of Directors shall elect from time to time from among those nominated by
the Committee. An optionee may hold more than one option but only on the terms
and subject to the restrictions hereinafter set forth. No person shall be
eligible to receive an option for a larger number of shares than is recommended
for him or her by the Committee. No person owning more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company, its
parent or subsidiary, shall be eligible to receive an incentive stock option
unless the option price is at least one hundred ten percent (110%) of the fair
market value of the optioned stock (as to which see paragraph 5 below).
4. STOCK
The stock subject to the options shall be shares of the Company's
authorized but unissued or reacquired $0.50 par value per share common stock
hereinafter sometimes called the "Stock." The aggregate number of shares which
may be issued under options shall not exceed 375,000 shares of Stock. The
limitations established by the preceding sentence shall be subject to adjustment
as provided in Article 5(h) of the Plan.
If any outstanding option under the Plan for any reason expires or is
terminated, the shares of the Stock allocatable to the unexercised portion of
such option may again be subjected to an option under the Plan.
The aggregate fair market value (determined at the time the option is
granted) of the Stock with respect to which options are exercisable for the
first time by any person eligible hereunder during any calendar year under this
Plan and any other plan qualifying under Section 422 of the Code which is
maintained by the Company and/or its Subsidiaries shall not exceed $100,000.
5. TERMS AND CONDITIONS OF OPTIONS
Stock options granted pursuant to the Plan shall be authorized by the Board
of Directors and shall be evidenced by agreements in such form as the Committee
shall from time to time recommend and the Board of Directors shall from time to
time approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) OPTIONEE'S AGREEMENT. Each optionee shall agree to remain in the
employ of and to render to the Company or Subsidiaries his or her
services for a period of five years from the date of the option, but
such agreement shall
A-2
not impose upon the Company or Subsidiaries any obligation to retain
the optionee in their employ for any period.
(b) NUMBER OF SHARES. Each option shall state the number of shares to
which it pertains.
(c) OPTION PRICE. Each option shall state the option price, which shall be
not less than 100% of the fair market value of the shares of Stock of
the Company on the date of the granting of the option (110% in the
case of an over 10% shareholder; as to which see paragraph 3 above).
The fair market value per share shall be deemed to be the mean between
the highest price and the lowest price of which the Stock shall have
been sold, regular way, in the over-the-counter market or other
applicable market on the day the option is granted; or if no sale of
the Company's Stock shall have been made on any stock exchange on that
day, on the next preceding day on which there was a sale of such
Stock.
(d) MEDIUM AND TIME OF PAYMENT. The option price shall be payable in
United States dollars upon the exercise of the option and may be paid
in cash or by check or payment may be made with Stock of the Company.
(e) TERM AND EXERCISE OF OPTIONS. Subject to other terms and provisions
herein contained, during the term of an option the shares with respect
to which that option may be exercised shall become exercisable to the
extent of 25% of the shares optioned on each of the four anniversaries
of the date of grant. Subject to the foregoing, each option shall be
exercisable in whole or in part at any time and from time to time
during its term. Not less than one thousand (1,000) shares may be
purchased at any one time unless the number purchased is the total
number at the time purchasable under the option. During the lifetime
of the optionee, the option shall be exercisable only by him or her
and shall not be assignable or transferable by him or her and no other
person shall acquire any rights therein. An option granted under the
Plan must be exercised by the earlier of (a) five years from the date
of the grant, or (b) the applicable time limit specified in paragraphs
(f) and (g) of this Section 5. Any option not exercised within the
applicable aforementioned time period shall automatically terminate at
the expiration of such period.
(f) TERMINATION OF EMPLOYMENT EXCEPT DEATH. If an optionee shall cease to
be employed by the Company or Subsidiaries for any reason, other than
his or her death, and no longer shall be in the employ of any of them,
such optionee shall have the right to exercise the option at any time
within three months after such termination of employment (one year if
the optionee is disabled within the meaning of Section 22(e)(3) of the
Code) to the extent his or her right to exercise such option had not
previously been exercised at the date of such termination. Whether
authorized leave of absence or
A-3
absence for military or governmental service shall constitute
termination of employment, for the purposes of the Plan, shall be
determined by the Committee, which determination, unless overruled by
the Board of Directors, shall be final and conclusive.
(g) DEATH OF OPTIONEE AND TRANSFER OF OPTION. If the optionee shall die
while in the employ of the Company or a Subsidiary or within a period
of three months after the termination of his or her employment with
the Company and all Subsidiaries and shall not have fully exercised
the option, an option may be exercised, subject to the condition that
no option shall be exercisable after the expiration of one year from
the date it is granted to the extent that the optionee's right to
exercise such option had accrued pursuant to Article 5(3) of the Plan
at the time of his or her death and had not previously been exercised,
at any time within one year after the optionee's death, by the
executors or administrators of the optionee or by any person or
persons who shall have acquired the option directly from the optionee
by bequest or inheritance.
No option shall be transferable by the optionee otherwise than by will
or the laws of descent and distribution.
(h) RECAPITALIZATION. Subject to any required action by the stockholders,
the number of shares of Stock covered by each outstanding option and
the price per share thereof in each such option shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Stock of the Company resulting from a subdivision or
consolidation of shares or the payment of a stock dividend (but only
on the Stock) or any other increase or decrease in the number of such
shares effected without receipt of consideration by the Company.
Subject to any required action by the stockholders, if the Company
shall be the surviving company in any merger or consolidation, each
outstanding option shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the option
would have been entitled. A dissolution or liquidation of the Company
or a merger or consolidation in which the Company is not the surviving
company shall cause each outstanding option to terminate, provided
that each optionee shall, in such event, have the right immediately
prior to such dissolution or liquidation or merger or consolidation in
which the Company is not the surviving company to exercise his or her
option in whole or in part.
Upon a change in the Stock of the Company as presently constituted
which is limited to a change of all its authorized shares with par
value into the same number of shares with a different par value or
without par value, the shares resulting from any such change shall be
deemed to be the Stock within the meaning of the Plan.
A-4
To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive, provided that each option continues to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
Except as hereinbefore expressly provided in this Article 5(h), the
optionee shall have no rights by reason of any subdivisions or
consolidation of shares of stock of any class or the payment of any
stock dividend or any other increase or decrease in the number of
shares of stock of any class or by reason of any dissolution,
liquidation, merger or consolidation or spin-off of assets or stock of
another company, and any issue by the Company of share of stock of any
class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Stock subject to the
option.
The grant of an option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or
business structure or to merge or to consolidate or to dissolve,
liquidate or sell, or transfer all or any part of its business or
assets.
(i) RIGHTS AS A STOCKHOLDER. An optionee or a transferee of an option
shall have no rights as a stockholder with respect to any shares
covered by his or her option until the date of the issuance of a stock
certificate to him or her for such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities
or other property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued,
except as provided in Article 5(g) hereof.
(j) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to the terms
and conditions and within the limitations of the Plan, the Board of
Directors may modify, extend or renew outstanding options granted
under the Plan, or accept the surrender of outstanding options (to the
extent not theretofore exercised) and Board of Directors shall not,
however, modify any outstanding options so as to specify a lower price
or accept the surrender of outstanding options and authorize the
granting of new options in substitution therefor specifying a lower
price. Notwithstanding the foregoing, however, no modification of an
option shall, without the consent of the optionee, alter or impair any
rights or obligations under any option theretofore granted under the
Plan.
(k) INVESTMENT PURPOSE. Each option under the Plan shall be granted on the
condition that the purchases of Stock thereunder shall be for
investment
A-5
purposes and not with a view to resale or distribution except that if
the Stock subject to such option or distribution is registered under
the Securities Act of 1933, as amended, or if a resale of such stock
without such registration would otherwise be permissible, such
condition shall be inoperative if in the opinion of counsel for the
Company such condition is not required under the Securities Act of
1933 or any other applicable law, regulation, or rule of any
governmental agency.
(l) OTHER PROVISIONS. The option agreements authorized under the Plan
shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the option, as the Committee and the
Board of Directors of the Company shall deem advisable. Any such
option agreement shall contain such limitations and restrictions upon
the exercise of the option as shall be necessary in order that such
option will be an "incentive stock option" as defined in Section 422
of the Code or to conform to any change in the law.
6. TERM OF THE PLAN
Options may be granted to the Plan from time to time within a period of
five years from the date the Plan is adopted, or the date the Plan is approved
by the stockholders, whichever is earlier.
7. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees actually and necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal therein, to which
they or any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or proceeding that
such Committee member is liable for negligence or misconduct in the performance
of his or her duties; provided that within 60 days after institution of any such
action, suit or proceeding a Committee member shall in writing offer the Company
the opportunity, at its own expense, to handle and defend the same.
8. AMENDMENT OF THE PLAN
The Board of Directors of the Company may, insofar as permitted by law,
from time to time, with respect to any shares at the time not subject to
options, suspend or discontinue the Plan or revise or amend it in any respect
whatsoever except that, without approval of the stockholders no such revision or
amendment shall change the number of shares subject to the Plan, change the
designation of the class of employees eligible to
A-6
receive options, decrease the price at which options may be granted, remove the
administration of the Plan from the Committee, or render any member of the
Committee eligible to receive an option under the Plan while serving thereon.
Furthermore, the Plan may not, without the approval of the stockholders, be
amended in any manner that will cause options issued under it to fail to meet
the requirements of incentive stock options as defined in Section 422 of the
Code, except as to those shares awarded under Article 11 of this Plan.
9. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Stock pursuant to
options will be used for general corporate purposes.
10. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee to
exercise such option.
11. STOCK AWARDS
The Committee may award to officers, directors and employees of the Company
shares of capital stock out of the 375,000 shares of Stock provided for in
Article 4 of the Plan for the purpose of additional compensation for outstanding
achievement and to encourage ownership of the Stock. These awards, in the
discretion of the Committee, may be made with or without payment therefor by any
officer, director or employee to whom such capital stock is made under such
terms and conditions as the Committee may in its sole discretion provide. Such
awards shall not constitute incentive stock options within the meaning of
Section 422 of the Code and shall not exceed 250,000 shares of Stock of the
375,000 shares of Stock provided for under Article 4 of the Plan. Of such
250,000 shares of Stock (a) 125,000 shares may be awarded without payment by any
officer, director, or employee to whom such capital stock is made under such
terms and conditions as the Committee in its sole discretion may provide and (b)
125,000 shares may be awarded with the restrictions that such shares shall not
be assignable nor may any other person acquire any rights therein and that the
officer, director or employee of the Company remain in the employment of the
Company for a period of not less than three years from the date of the award,
subject to such other terms and conditions as the Committee may in its sole
discretion may provide. Any shares not awarded under this Article 11 of the Plan
may be the subject of incentive stock options under the Plan.
12. EFFECTIVE DATE
Adoption of this Plan and shareholders' approval shall be effective
September 14, 2004.
A-7
EXHIBIT B
MEXCO ENERGY CORPORATION
AUDIT COMMITTEE CHARTER
COMPOSITION
-----------
The Audit Committee shall be composed of at least three directors who are
independent of the management of Mexco Energy Corporation (the "Company") and
are free of any relationship that, in the opinion of the Board of Directors,
would interfere with their exercise of independent judgment as a committee
member and are, or will shortly become, financially literate. In addition, the
members of the Audit Committee shall understand financial statements.
OBJECTIVE OF THE AUDIT COMMITTEE
--------------------------------
The Audit Committee shall assist the Board of Directors in fulfilling its
responsibility to the shareholders, potential shareholders, and the investment
community relating to corporate accounting, reporting practices of the Company,
and the quality and integrity of the financial reports of the Company.
SPECIFIC RESPONSIBILITIES OF THE AUDIT COMMITTEE
------------------------------------------------
In fulfilling its objective, the Audit Committee shall have the
responsibility with respect to:
The Company's Risks and Control Environment:
--------------------------------------------
To review management's overview of the risks, policies, procedures, and
controls surrounding the integrity of financial reporting and, particularly, the
adequacy of the Company's controls in areas representing significant financial
and business risks;
To establish, review and update periodically a code of ethical conduct,
ensure that management has established a system to enforce the code, and receive
updates and briefings from management and others on how compliance with ethical
policies and other relevant Company procedures is being achieved;
To review, with the Company's counsel, legal matters, including litigation,
compliance with securities trading policies, the Foreign Corrupt Practices Act
and other laws having a significant impact on the Company's business or its
financial statements; and
To investigate any matter brought to its attention within the scope of its
duties, and retain outside counsel for this purpose if, in its judgment, that is
appropriate;
B-1
The Hiring and Firing of and Relationship with the Independent Accountants:
---------------------------------------------------------------------------
To participate, on behalf of the Board of Directors, in the process by
which the Company selects the independent accountants to audit the Company's
financial statements, evaluate annually the effectiveness and objectivity of
such accountants, and recommend the engagement or replacement of independent
accountants to the Board of Directors;
To have an open line of communication with the independent accountants, who
shall have ultimate accountability to the Board of Directors and the Audit
Committee, as representatives of the shareholders;
To approve the fees and other compensation paid to the independent
accountants; and
To review the independence of the independent accountants prior to
engagement, annually discuss with the independent accountants their independence
annually based upon the written disclosures and the letter from the independent
accountants required by Independent Standards Board Standard No. 1, as modified
or supplemented, and discuss with the Board of Directors any relationships that
may adversely affect the independence of the independent accountants.
The Financial Reporting Process:
--------------------------------
To meet with the independent accountants and the financial management of
the Company with respect to major changes to the Company's auditing and
accounting principles;
To meet with the independent accountants and the financial management of
the Company together and separately with the independent accountants (a) prior
to the performance by the independent accountants of the audit to discuss the
scope of the proposed audit for the current year and the audit procedures to be
utilized; and (b) at the conclusion of the audit to discuss (i) the independent
accountants' judgments about the quality, not just the acceptability, of the
Company's accounting principles as applied in its financial reporting, the
consistency of application of the Company's accounting policies and the clarity,
consistency, and completeness of the entity's accounting information contained
in the financial statements and related disclosures, (ii) the adequacy and
effectiveness of the accounting and financial controls of the Company, including
the internal controls to expose any payments, transactions or procedures that
might be deemed illegal or otherwise improper, and any recommendations for
improvement of such internal control procedures or for new or more detailed
controls or procedures of the Company, (iii) any other results of the audit,
including any comments or recommendations, and (iv) the view of the independent
accountants with respect to the
B-2
financial, accounting and auditing personnel and the cooperation that the
independent accountants received during the course of the audit;
To review and discuss with the independent accountants and the financial
management of the Company the Company's financial results before they are made
public. In general, the Chairman of the Audit Committee may represent the entire
committee with respect to the review and discussions about interim financial
results; and
To review other reports submitted by the Company to any governmental body
of the public, including any certification, report, opinion or review rendered
by the independent accountants;
Other Responsibilities of the Audit Committee
---------------------------------------------
To review and update periodically the charter for the Audit Committee;
To review, assess and approve or disapprove conflicts of interest and
related-party transactions;
To review accounting and financial human resources and succession planning
within the Company;
To meet at least four times annually, or more frequently, as circumstances
dictate;
To report to the Board of Directors the matters discussed at each committee
meeting;
To assess the performance of the Audit Committee members through a
self-assessment process, led by the Chairman of the committee; and
To keep an open line of communication with the financial and senior
management, any internal audit personnel, the independent accountants, and the
Board of Directors.
B-3