| (4) | Date Filed: ________________ |
THE RESERVE PETROLEUM COMPANY
Notice of 2009
Annual Meeting
and
Proxy Statement
THE RESERVE PETROLEUM COMPANY
6801 N. Broadway Ext,Ext., Suite 300
Oklahoma City, Oklahoma 73116-9092
April 17, 2009
Dear Stockholder:
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 20092012 Annual Meeting of Stockholders of The Reserve Petroleum Company on Tuesday, May 19, 2009,22, 2012, at 3:00 p.m. local time, in Oklahoma City, Oklahoma. Information about the Annual Meeting is presented in the following pages.
The Annual Meeting will begin with a discussion and vote on the matters set forth in the accompanying Notice of 20092012 Annual Meeting of Stockholders and Proxy Statement, followed by a discussion on any other business matters that are properly brought before the Annual Meeting.
Your vote is very important. We encourage you to read the Proxy Statement and vote your shares as soon as possible. Whether or not you plan to attend, you can be sure your shares are represented at the Annual Meeting by promptly completing, signing, dating and returning your Proxy Card in the enclosed envelope.
This Proxy Statement and the Company’s 2011 Annual Report on Form 10-K are also available on the websitehttps://materials.proxyvote.com/761102 and on the Company’s websitehttp://www.reserve-petro.com.
If you will need special assistance at the Annual Meeting because of a disability, please contact James L. Tyler, 2nd Vice President, at (405) 848-7551.
Thank you for your continued support of The Reserve Petroleum Company. We look forward to seeing you on May 19th.
Sincerely,
/s/ Mason McLain
Mason McLain
Chairman of the Board and
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If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”). If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary authority under NYSE rules to vote your shares for the ratification of HoganTaylor LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the election of Directors or the amendment of the Certificate of Incorporation without instructions from you, in which case, a broker non-vote will occur and your shares will not be voted on the election of Directors or the amendment of the Certificate of Incorporation.Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares. |
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THE RESERVE PETROLEUM COMPANY
6801 N. Broadway Ext., Suite 300
Oklahoma City, Oklahoma 73116-9092
To The Stockholders:
The 20092012 Annual Meeting of Stockholders of The Reserve Petroleum Company (the “Company”) will be held on Tuesday, May 19, 2009,22, 2012, at 3:00 p.m. local time, at the offices of the Company at 6801 N. Broadway Ext,Ext., Suite 300, Oklahoma City, Oklahoma for the following purposes:
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| 3. | To ratify the selection of HoganTaylor LLP as the Company’s independent registered public accountants for 2012. |
| 4. | To transact such other business as may properly be brought before the Annual Meeting or any adjournment thereof. |
The Board of Directors has fixed the close of business on April 13, 20092012, as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting of Stockholders.
STOCKHOLDERS ARE URGED TO VOTE, SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE
.It is| By Order of the Board of Directors, | |
| /s/ Mason McLain | |
| Mason McLain | |
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PROXY STATEMENTGENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the “Board”) of The Reserve Petroleum Company (“Company”(the “Company”, “we”, “our” or “us”) for the 20092012 Annual Meeting of Stockholders (the “Annual Meeting”) to be held at the principal executive offices of the Company, 6801 N. Broadway Ext,Ext., Suite 300, Oklahoma City, Oklahoma 73116-9092,73116-9037, on Tuesday, May 19, 2009,22, 2012, at 3:00 p.m. local time, or any adjournment thereof. This Proxy Statement and Proxy Card are first being sent to the stockholders on or about April 17, 2009.20, 2012. The proxy will be voted at the Annual Meeting if the signer of the Proxy Card was a stockholder of record on April 13, 20092012 (the “Record Date”).
The Company will bear the costs of solicitation, which are estimated to be approximately $31,750,$36,500, of which amount approximately $22,500$23,500 has been spent to date. Solicitation of proxies may be made by Broadridge, personal interview, mail telephone or telegramtelephone by Directors, officers, and regular employees of the Company. Copies of proxy material and of the Company’s 20082011 Annual Report on Form 10-K may also be supplied to holders of record, as well as to brokers, dealers, banks and voting trustees or their nominees, for the purpose of soliciting proxies from the beneficial owners, and the Company will reimburse suchthose holders for their reasonable forwarding expenses.
Voting rights are vested exclusively in the holders of the Company’s common stock, par value $.50$0.50 per share, with each share entitled to one (1) vote on each matter coming before the Annual Meeting. Only stockholders of record at the close of business on the Record Date will be entitled to receive notice of and to vote at the Annual Meeting. On the Record Date, there were 162,148.64160,956.64 shares of common stock of the Company outstanding and entitled to be voted.
The presence, in person or by proxy, of the holders of a majority of the outstanding shares of common stock of the Company entitled to vote is necessary to constitute a quorum at the Annual Meeting. The shares represented by any and all proxies received by the Company will be counted towards a quorum, notwithstanding that any such proxies contain thereon an abstention or a broker non-vote. Notwithstanding the Record Date, specified above, the Company’s stock transfer books will not be closed and shares may be transferred subsequent to the Record Date. However, all votes must be cast in the names of the stockholders of record on the Record Date.
All votes will be tabulated by the Inspector of Election appointed for the Annual Meeting, who will separately tabulate affirmative votes for, votes against, abstentions and broker non-votes. The electionapproval of the nominees to the Boardeach proposal described in this Proxy Statement requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting and entitled to vote, provided a quorum is present. Proxies specifying “withheld authority to vote” or “abstain” will not be counted as votes cast, but will have the same effect as a vote “against” the nominees,a proposal, while a broker non-vote will have no effect.
If sufficient shares are not present to provide a quorum on May 19th,22nd, the Annual Meeting, after the lapse of at least half an hour, will be adjourned by those present or represented and entitled to vote. Those stockholders entitled to receive notice of and to vote at the Annual Meeting will be sent written notice of an adjournment meeting to be held with a quorum of those present in person or by proxy at such meeting. Under the Restated Bylaws of the Company, any number of stockholders, in person or by proxy, will constitute a quorum at the adjournment meeting.
A list of the stockholders entitled to vote at the Annual Meeting will be available for inspection during ordinary business hours at the offices of the Company for a period of ten (10) days preceding the Annual Meeting and at the Annual Meeting for purposes relating to the Annual Meeting.
You can ensure that your shares are voted at the Annual Meeting by submitting your instructions by completing, signing, dating and returning the enclosed Proxy Card in the envelope provided. Submitting your instructions by Proxy Card will not affect your right to attend the Annual Meeting and vote. A stockholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy or by notifying James L. Tyler, the Inspector of Election, in writing of such revocation.
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A stockholder of record on the Record Date may vote in one of the following ways:
| by internet @ www.proxyvote.com | ||
| • | by phone @ 1-800-690-6903 | |
| • | by completing and mailing the Proxy Card; or |
| • | by written ballot at the Annual Meeting. |
Your shares will be voted as you indicate on your Proxy Card. If you return your Proxy Card, but you do not indicate your voting preferences, the proxies will vote your shares FOR the nominees for Directors, FOR amending the Company’s Certificate of Incorporation to reduce the authorized shares of common stock from 400,000 shares to 200,000 shares, FOR the ratification of the selection of HoganTaylor as independent registered public accountants for 2012, and in their discretion for such other matters as may come before the Annual Meeting.
If your shares are held in a brokerage account in your broker’s name (this is called street name), you should follow the voting directions provided by your broker or nominee. You may complete and mail a voting instruction card to your broker or nominee. Your shares should be voted by your broker or nominee as you have directed.
We will pass out written ballots to anyone who wants to vote at the Annual Meeting.
For additional information concerning the manner of proxy solicitation and voting, please see “Additional Information” beginning on page 1213 of this Proxy Statement.
Proposal 1: To Elect Nine Directors
Directors and Director Nominees
The Company elects all Directors of the Board each year. Because we are a very small company with only eight employees, we try to keep the process of operating the Company as uncomplicated as possible. At the same time, we make every effort to comply with all of the Securities and Exchange Commission (“SEC”) rules and regulations required of all public companies that are smaller reporting companies, as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”). We have been in business since 1932 and try to operate the Company today using the same principles as when the Company was formed. Our operations have progressed as technology has advanced. As indicated later in the Director Compensation section of this Proxy Statement, the Company’s Directors’ fees are nominal, and we have no stock incentive based compensation for the Directors, executive officers or employees. Accordingly, all existing Directors are re-nominated each year, unless they elect not to serve.
The least senior member of the Board has served eleven years and has agreed to be nominated for a twelfth year. The Company has neither nominated nor elected any Director who was not currently serving on the Board since the Company’s Statement of Governance Principles and Charter of the Nominating Committee were adopted by the Board in 2004. The Statement of Governance Principles was amended as of March 29, 2011. At the time these documents were adopted or amended, as the case may be, all members of the Board met the qualifications set out in those documents and continue to do so.
Each non-employee Director was originally nominated to serve on the Board based on his individual business background. Our current Directors and nominees have a wide variety of business experience including some with petroleum industry experience and some without any petroleum industry experience. Some nominees have large corporate background work experience and some have experience working in or managing smaller companies or their own company. Because of the Company’s practice of re-nominating the current Directors, the primary qualification that led to each nominee being chosen to serve as a director for the coming year is their prior service and experience as a Director.
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In light of the Company’s business and structure, the diversity of the Board is limited to the variety of business experience and backgrounds of the current Director nominees.
The nine (9) persons named below are nominees for election as Directors of the Company to serve until the next annual meeting of stockholders and until their respective successors are elected and qualified. If any nominee is unable to serve, which the Company has no reason to expect, the persons named in the accompanying Proxy Card intend to vote for the balance of those named and, if they deem it advisable, for a substitute nominee.
Each nominee is currently a Director and each has served continuously as a Director since the date of his first election or appointment to the Board. The Board hadhas determined that the following Directors are independent, as independence is defined in Rule 4200(a)(15)5605(a)(2) of the NASDAQ listing standards: Jerry Crow, Marvin E. Harris, William M. (Bill) Smith and Doug Fuller.
The Board recommends a vote FOR each nominee for Director set forth below.
The following information and the information set forth in “Executive Officers” pertains to each person’s (i) age as of April 13, 2009,2012; (ii) principal occupations for at least the past five years,years; and (iii) directorships in other companies.
| Name | Age | Position/Office Held | Position Held Continuously Since | |||
| Mason McLain | May 3, 1955 | |||||
| Robert T. McLain | None | May 2, 1972 | ||||
| Robert L. Savage | None | May 6, 1975 | ||||
| Jerry L. Crow | None | May 4, 1982 | ||||
| Marvin E. Harris, Jr. | None | May 7, 1991 | ||||
| William M. (Bill) Smith | None | May 5, 1998 | ||||
| Doug Fuller | None | May 2, 2000 | ||||
| Cameron R. McLain | Chief Executive Officer/ President/Exploration Manager | May 9, | ||||
| Kyle L. McLain | Executive Vice President/Production Manager | May 12, 1984 | ||||
| 1Member of Executive Committee | ||||||
Executive Officers
The following persons named below are the executive officers of the Company:
| Name | Age | Position/Office Held | ||||
| Mason McLain | May | |||||
| Cameron R. McLain | CEO/President | May | ||||
| Kyle L. McLain | Executive Vice President | May 20, 2008 | ||||
| James L. Tyler | 2nd Vice President, Secretary/Treasurer | January 1, 2004 | ||||
| 1As Chairman, Mason McLain is considered an executive officer of the Company. | ||||||
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Mason McLain, Director and CEO,Chairman, and Robert T. McLain, Director, are brothers. Cameron R. McLain, Director, CEO and President, and Kyle L. McLain, Director and Executive Vice President, are sons of Mason McLain.
Mason McLain,
currently serving asCameron R. McLain
was elected Chief Executive Officer on May 19, 2009, and President of the Company on May 20, 2008. He also serves as Exploration Manager and has served in that capacity continuously since his employment on May 9, 1982. Mr. McLain devotes substantially all of his time to Company affairs; however, he devotes a part of his time and efforts to the activities of affiliated organizations.Kyle McLain
was elected Executive Vice President on May 20, 2008. He also serves as Production Manager and has served in that capacity continuously since his employment on May 12, 1984.Robert T. McLain
served as 1stVice President of the Company from May 4, 1976, until he retired May 20, 2008. Prior to that date, he was Secretary-Treasurer of the Company fromRobert L. Savage
is President of Leonard Securities, Inc., aJerry L. Crow
was employed by the Company from AprilMarvin E. Harris, Jr.
is a Principal Analyst with Southwest Research Institute. He was formerly President of Tetron Software, a computer software company, which he formed on January 3, 1994. Until that date, he had been employed as President ofWilliam M. (Bill) Smith
is the owner of W.M. Smith Energy, LLC, a geological consulting company, which he formed January 1, 2008.| 4 |
Doug Fuller
is the President and Chief Operating Officer of Quail Creek Bank where he has been employed since April 20, 2009. He was previously employed as Membership Director with Leadership Oklahoma from May 2007 until April 2009. Before that, Mr. Fuller had been in banking sinceJames L. Tyler
was employed by the Company on August 1, 2003, and was elected 2nd Vice President and Secretary-Treasurer, effective January 1, 2004, to replace Jerry L. Crow. Mr. Tyler devotes substantially all of his time to the affairs of the Company, although he devotes a part of his time and efforts to the activities ofInvolvement in Certain Legal Proceedings
On August 16, 2005, Robert L. Savage executed NASD Letter of Acceptance, Waiver and Consent No. E052004004203 (the “AWC”) for the purpose of settling alleged violations of NASD Conduct Rules by Mr. Savage and by Leonard Securities, Inc. (“Leonard Securities”), of which he is President. Without admitting or denying the allegations or findings, Mr. Savage and Leonard Securities accepted and consented to the entry of the following findings by the NASD: (i) that during the period on or about April 11, 2002, through on or about January 9, 2003, Leonard Securities, acting through its president, Mr. Savage, failed to establish, maintain and enforce a system of supervision reasonably designed to ensure compliance with NASD Conduct Rule 2310; (ii) that Leonard Securities had no system, other than review of daily order tickets and monthly customer statements, designed to detect mutual fund switching and short-trading of mutual funds; (iii) that reviews of daily order tickets were inadequate because mutual fund sale and purchase transactions were often entered on different days; (iv) that reviews of monthly customer statements were inadequate because the statements did not disclose commission charges or the mutual fund purchase date; and (v) that such acts, practices and conduct constitute separate and distinct violations of NASD Conduct Rules 3010(a) and 2110 by Leonard Securities and Mr. Savage. The NASD imposed the following sanctions: (a) a monetary fine in the amount of $10,000 was assessed against Mr. Savage and Leonard Securities, jointly and severally; (b) a 10 business-day suspension of Mr. Savage from association with any NASD member in any principal capacity was imposed; and (c) Leonard Securities and Mr. Savage, jointly and severally, were required to pay restitution in the total amount of $14,259.00, which represented the excess commissions paid by the customers of Leonard Securities in the purchase of mutual funds, plus accrued interest. Mr. Savage and Leonard Securities have fully complied with the terms and conditions of the AWC. As set forth in the AWC, Mr. Savage has not previously been the subject of a formal disciplinary action by any regulatory body.
Certain Relationships and Related Transactions
The Company is affiliated by common management and ownership with Mesquite Minerals, Inc., (“Mesquite”), Mid-American Oil Company (“Mid-American”), Lochbuie Limited Partnership (“LLTD”) and Lochbuie Holding Company (“LHC”). The Company also owns interests in certain producing and non-producing oil and gas properties as tenants in common with Mesquite, Mid-American and LLTD. Mason McLain, a Director and officerformer CEO of the Company, is a director of Mesquite and Mid-American. Jerry Crow and Robert T. McLain, Directors of the Company, are directors of Mesquite and Mid-American. Kyle McLain and Cameron R. McLain are sons of Mason McLain, who is aowns more than 5% owner of the Company, and are Directors and officers of the Company. Both are directors and officers of Mesquite and Mid-American. Mason McLain and Robert T. McLain, who are brothers, each own an approximate 32% limited partner interest in LLTD and a 33.33% ownership in LHC,LHC. Mason McLain is president of LHC, the general partner of LLTD. Robert T. McLain is not an employee of any of the above entities and devotes only a small amount of time conducting their business.
The above named officers and Directors, as a group, beneficially own approximately 30%29% of the common stock of the Company, approximately 32%33% of the common stock of Mesquite and approximately 17%19% of the common stock of Mid-American. TheseEach of these three corporations each havehas only one class of stock outstanding. Item 8, “Notes to Financial Statements,” Note 12 to the Company’s Financial Statements contained in Item 8, “Financial Statements and Supplementary Data” of the Company’s Form 10-K for the fiscal year ended December 31, 20082011, includes additional disclosures regarding these relationships. See “Additional Information”.
Robert L. Savage, a Director, is also the President of Leonard Securities, Inc. (“LSI”). LSI manages the Company’s portfolio of “Trading Securities”Securities,” and this asset was listed in the Company’s December 31, 20082011, balance sheet at $218,228,$398,964, which represents the year-end market price of the securities in the portfolio. The $218,228$398,964 represents securities with a cost of $311,034$449,894, less a market write-downadjustment of $92,806.($50,930). LSI earned $7,614$7,615 in broker commissions and fees on the securities bought and sold in 2008.2011. Realized gains (net of losses) on the securities sold totaled $51,333$80,949 in 2008.2011.
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Security Ownership of Certain Beneficial Owners
The following table sets forth information regarding the only persons known by the Company to be beneficial owners of more than 5% of the Company’s common stock as of April 13, 2009:
Name and Address of Beneficial Owner | Amount & Nature of Beneficial Ownership | Percent of Class (3) | ||||||
| Mason McLain (1) (2) | 15,970 | (4) | 9.85 | |||||
| 6801 N. Broadway, Suite 300 | ||||||||
| Oklahoma City, OK 73116-9092 | ||||||||
| Robert T. McLain (1) (2) | 12,149 | (5) | 7.49 | |||||
| 6403 N. Grand, #203 | ||||||||
| Oklahoma City OK 73116 | ||||||||
| Norma Moe (1) (2) | 11,949 | (6) | 7.37 | |||||
| 3100 Brush Creek Road | ||||||||
| Oklahoma City OK 73120 | ||||||||
| Name and Address of Beneficial Owner | Amount & Nature of Beneficial Ownership | Percent of Class3 | ||
| Mason McLain1,2 | 12,8984 | 8.01 | ||
| 6801 Broadway Ext., Suite 300 | ||||
| Oklahoma City, OK 73116-9037 | ||||
| Robert T. McLain1,2 | 12,1495 | 7.55 | ||
| 6403 N.W. Grand Blvd., Suite 200 | ||||
| Oklahoma City, OK 73116-6503 | ||||
| Norma Moe1,2 | 11,9496 | 7.42 | ||
| 3100 Brush Creek Road | ||||
| Oklahoma City, OK 73120-1854 |
| 1 | Mason McLain, Robert T. McLain and Norma Moe are siblings. |
| Lochbuie Holding Company (“LHC”) is an “S” Corporation and owns 2,352 shares of common stock. Each sibling owns one-third of LHC. |
| Calculations of percent of class are based on the number of shares of common stock outstanding as of April 13, |
| 5 | 8,032 owned directly; 3,333 owned by wife; 784 shares owned indirectly by LHC. |
| 6 | 11,165 owned directly; 784 shares owned indirectly by LHC. |
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Security Ownership of Management
The following table provides information regarding the beneficial ownership of the Company’s common stock by each Named Executive Officer listed in the 2011 Summary Compensation Table on page 10 and each of our Directors, as well as the number of shares beneficially owned by all of our Directors and executive officers as a group as of April 13, 2012. As of April 13, 2012, there were 160,956.64 shares of our common stock outstanding. Unless otherwise indicated by footnote, individuals have sole voting and investment power.
| Name | Title of Class | Amount & Nature of Beneficial Ownership | Percent of Class | ||||
| Mason McLain | Common | 12,8981 | 8.01 | ||||
| Robert T. McLain | Common | 12,1492 | 7.55 | ||||
| Robert L. Savage | Common | 1,269 | Owned Directly | .79 | |||
| Jerry L. Crow | Common | 5,379 | Owned Directly | 3.34 | |||
| Cameron R. McLain | Common | 7,809 | Owned Directly | 4.85 | |||
| Kyle L. McLain | Common | 7,809 | Owned Directly | 4.85 | |||
| James L. Tyler | Common | — | — | ||||
| All Directors and Executive Officers as a Group (10 persons) | 47,313 | 29.39 | |||||
| 1 | 12,114 owned directly; 784 shares owned indirectly by LHC. |
| 2 | 8,032 owned directly; 3,333 owned by wife; 784 shares owned indirectly by LHC. |
| Name | Title of Class | Amount & Nature of Beneficial Ownership | Percent of Class | ||||||||||
| Mason McLain | Common | 15,970 | (1) | 9.85 | |||||||||
| Robert T. McLain | Common | 12,149 | (2) | 7.49 | |||||||||
| Robert L. Savage | Common | 1,269 | Owned Directly | .78 | |||||||||
| Jerry L. Crow | Common | 5,379 | Owned Directly | 3.32 | |||||||||
| Cameron R. McLain | Common | 6,785 | Owned Directly | 4.18 | |||||||||
| Kyle L. McLain | Common | 6,785 | Owned Directly | 4.18 | |||||||||
| All Directors | 48,337 | 29.80 | |||||||||||
| All Directors and Executive Officers as a Group (10 persons) | 48,337 | 29.80 | |||||||||||
Board Leadership Structure
The Company chose to separate the Chief Executive Officer and Board Chairman positions in May 2009. This was done at the request of Mason McLain, the Chairman and Chief Executive Officer at that time. His decision was primarily due to his age, and his desire to become less involved in the day to day Company operations.
Board of Directors Role in Risk Oversight
Due to the relatively small size of the Company and the limited number of Board meetings held annually, the Board has delegated its risk oversight function to the Company’s four executive officers. Three of the four executive officers are also Directors. The non-employee Directors feel that since these officers supervise the day-to-day risk management of the Company, they are best equipped and the most logical choice for the risk oversight function. In addition, these officers have the overall responsibility to assess and manage the Company’s exposure to all risks, including credit, liquidity and operational risks.
Meetings
The Board held three meetings during the Company’s fiscal year ended December 31, 2008.2011. All Directors were present at all meetings, except on May 20, 2008,March 29, 2011, when William M. (Bill) SmithRobert T. McLain was absent. It is the Board’s policy that Directors should attend the Company’s annual meetingAnnual Meeting of stockholders.Stockholders. Last year, all Directors except William M. (Bill) Smith attended the annual meetingAnnual Meeting of stockholders.Stockholders.
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Committees
In General
.The Company does not have standing audit and compensation committees of the Board or committees performing similar functions. The Company is a small business issuer whose securities are not quoted on NASDAQ or listed on any exchange. The Company’s stock is traded by private transactions or over the counter. Over the counter bid information is quoted in the Pink Sheet Electronics Quotation Service in the Pink Sheets OTC Market Report, and in the OTC Bulletin Board under the symbolAudit Committee
.The Company does not have a separately-designated standing Audit Committee. The entire Board acts as the Company’s Audit Committee. The Board has determined that Mr. Crow is an “audit committee financial expert” as that term is defined in Item 407(d)(5)(ii) of Regulation S-K.Nominating Committee
.The BoardThe Board has designated a Nominating Committee, which consists of Mason McLain, Doug Fuller and Bill Smith. Both, Mr. Fuller and Mr. Smith, are “independent” as defined in Rule 4200(a)(15) of the NASDAQ listing standards. The Nominating Committee makes recommendations to the Board regarding individuals for nomination as Director and, in addition, may consider other matters relating to corporate governance. The Nominating Committee met once in March 20092012 and recommended that the current Directors be nominated to serve another one yearone-year term on the Board. In addition, they reviewed the Company’s Statement of Governance Principles and decided no changes were currently needed.
The Nominating Committee evaluates qualified nominees for Director using the same process regardless of whether the nominee is recommended by an officer, Director or stockholder.
Director Compensation
All Directors, whether employees or non-employees,not, are compensated on a per meeting basis, andbut only for those Board meetings attended. The amount of compensation is set by a vote of the Directors at each Board meeting. In the year ended December 31, 2008, the2011, Directors were compensated in the amount of $1,000 for attending each of the March and May meetings attended.and $1,500 for attending the November meeting. All committee meetings are held just prior to the Board meetings or by telephone conference and Directors or officers of the Company who are alsoconference. Directors receive no additional compensation for committee meetings.
The Company provides no stock or stock option awards compensation, non-equity incentive compensation or deferred compensation to any of our Directors.
The following table provides information relating to total compensation amounts paid to non-employee Directors:
2011 Director Compensation Table
| Name | Year | Fees Earned or Paid in Cash (1) | Total | ||||||||
| William M. (Bill) Smith | 2008 | $ | 2,000 | $ | 2,000 | ||||||
| Each other director (2) | 2008 | $ | 3,000 | $ | 3,000 | ||||||
| Name | Fees1 | Total | ||||||
| Robert T. McLain | $ | 2,500 | $ | 2,500 | ||||
| Each other Director2 | $ | 3,500 | $ | 3,500 | ||||
| 1 | Amounts represent fees for attending Board meetings during the year |
| 2 | Mason McLain, Cameron McLain, Kyle McLain, Marvin E. Harris, Robert Savage, Jerry Crow, William M. (Bill) Smith and Doug Fuller. |
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Overview
As indicated earlier, the Company does not have a standing compensation committee of the Board or a committee performing a similar function. We are a smaller reporting company whose securities are not quoted on NASDAQ or listed on any exchange. The Company has a total of only eight employees, four of whom are classified as executive officers. Non-employee Directors’ compensation was discussed in the previous section.
Compensation Philosophy and Objectives
Because we are so small, our compensation philosophy and objectives are to provide compensation that is fair and reasonable for all employees at a competitive level that will allow us to attract and retain qualified personnel necessary to operate the Company at the most efficient level possible. At the same time, we strive to comply with all the operational and financial rules and regulations required of any public company, and specifically, those relating to the oil and gas exploration and production (E&P)(“E&P”) industry. In addition, we try to maintain compensation at a level that is competitive with other companies in this industry. Our philosophy and objectives for compensation of executive officers are no different from the other employees.
Compensation levels for all employees, including executive officers, are reviewed annually in early November by theour Chairman, our Chief Executive Officer President and our Executive Vice President. This review process includes reviews of salary and wage surveys, primarily for the oil and gas E&P industry, and informal performance evaluations provided by supervisors. Compensation levels for the next fiscal year are determined during this review process, and presented to the entire Board for approval at its meeting on the third Tuesday in November each year.
Elements of Compensation
Elements of our executive compensation and benefits package are as follows:
| • | a base |
| • | a bonus equal to one, two or three month’s base salary, paid in early December each |
| • | Company-sponsored employee benefits, such as life and health insurance benefits and a qualified 401(k) savings |
These elements of compensation are no different than those provided to all of our employees.
The Company provides no incentive bonus compensation, stock or stock option awards compensation, non-equity incentive compensation or deferred compensation to the executive officers or to any of our other employees.
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2011 Summary Compensation Table
The following table sets forth summary information regardingsummarizes the compensation paid to theour principal executive officer and our three most highly compensated executive officers other than our principal executive officer (collectively, our “Named Executive Officers”) during the two other highest paid executive officers.
Name and Principal Position | Year | Salary (1) | Bonus | All Other Compensation | Total | |||||||||||||||||
| Mason McLain | 2008 | $ | 79,800 | $ | 19,950 | $ | 8,985 | (2) | $ | 108,735 | ||||||||||||
| Chief Executive Officer | 2007 | $ | 71,904 | $ | 11,984 | $ | 8,033 | (2) | $ | 91,921 | ||||||||||||
| Cameron R. McLain | 2008 | $ | 109,200 | $ | 27,300 | $ | 11,190 | (3) | $ | 147,690 | ||||||||||||
| President | 2007 | $ | 98,868 | $ | 16,478 | $ | 9,921 | (3) | $ | 125,267 | ||||||||||||
| Kyle McLain | 2008 | $ | 109,200 | $ | 27,300 | $ | 11,190 | (3) | $ | 147,690 | ||||||||||||
| Executive Vice President | 2007 | $ | 98,868 | $ | 16,478 | $ | 9,921 | (3) | $ | 125,267 | ||||||||||||
| Name and Principal Position | Year | Salary1 | Bonus | All Other Compensation | Total | |||||||||||||||
| Cameron R. McLain | 2011 | $ | 132,300 | $ | 11,025 | $ | 8,600 | 2 | $ | 151,925 | ||||||||||
| CEO/President | 2010 | $ | 126,000 | $ | 10,500 | $ | 8,190 | 2 | $ | 144,690 | ||||||||||
| Kyle McLain | 2011 | $ | 132,300 | $ | 11,025 | $ | 8,600 | 2 | $ | 151,925 | ||||||||||
| Executive Vice President | 2010 | $ | 126,000 | $ | 10,500 | $ | 8,190 | 2 | $ | 144,690 | ||||||||||
| Mason McLain | 2011 | $ | 97,020 | $ | 8,085 | $ | 6,306 | 2 | $ | 111,411 | ||||||||||
| Chairman4 | 2010 | $ | 92,400 | $ | 7,700 | $ | 6,006 | 2 | $ | 106,106 | ||||||||||
| James L. Tyler | 2011 | $ | 92,400 | $ | 7,700 | $ | 9,506 | 3 | $ | 109,606 | ||||||||||
| Secretary/Treasurer | 2010 | $ | 87,360 | $ | 7,280 | $ | 8,405 | 3 | $ | 103,045 | ||||||||||
| 1 | Includes amounts earned but deferred at the election of each officer pursuant to our 401(k) employee savings plan. |
| 2 | Amount reflects matching contributions made by the Company under our 401(k) employee savings | |
| 3 | Includes | |
| 4 | Mason McLain retired as our CEO on May 19, 2009, but is still considered an executive officer. |
The Company has adopted a Code of Ethics for Senior Officers (the “Code of Ethics”) that applies to itsour principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions meeting the criteria set forth in Item 406 of SEC Regulation S-K. The Company will provide to any person, without charge, upon written request addressed to the Company’s Secretary, a copy of the Code of Ethics. This document can also be viewed at the SECSEC’s website as Exhibit 14 to the Company’s 2005 Form 10-KSB. See “Additional Information”.Information.”
| Proposal 2: | To Amend the Company’s Certificate of Incorporation to Reduce the Authorized Shares of Common Stock from 400,000 Shares to 200,000 Shares |
Background of Proposal
The Company’s management and Board of Directors are committed to reducing costs and expenses in any area where we exercise such control. While franchise taxes are not typically an expense we have much ability to control, we have noted an exception for the franchise taxes for Delaware, our state of incorporation.
The Company was originally incorporated in Delaware in 1932 and the authorized shares of common stock were set at 800,000. Since then, the authorized shares were reduced by amending Article 4 of the Company’s Certificate of Incorporation with the last reduction to 400,000 shares occurring on May 22, 1979.
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Delaware uses our authorized shares as the basis for calculation of the annual franchise tax we are required to pay. In recent years, their rates have continued to increase and the annual franchise taxes paid to Delaware have increased accordingly. By reducing the Company’s authorized shares, we can reduce our annual Delaware franchise tax expense.
General Effect
On April 13, 2012, there were 160,956.64 shares of common stock outstanding. Stockholder approval of an amendment to reduce the Company’s authorized shares of common stock from 400,000 to 200,000 will have no effect on the outstanding shares of common stock; it will have no effect on the earnings per share calculation; and it will have no effect on the market price per share of the Company’s common stock. The Board has approved the amendment to reduce the Company’s authorized shares of common stock from 400,000 to 200,000.
Text of Amendment
If this proposal is approved by the Stockholders, the Certificate of Incorporation will be amended by changing Article FOUR so that, as amended, it shall be and read as follows:
FOUR: The total number of shares of stock which the corporation is authorized to issue is two hundred thousand (200,000) and the par value of each of such shares is Fifty Cents ($0.50).
Vote Required
Section 242 of the General Corporation Law of the State of Delaware requires that a reduction in the number of shares of authorized capital stock and the amendment of the Certificate of Incorporation of the Company to effectuate such reduction be approved by a majority vote of the stockholders of the Company entitled to vote.
Your Board of Directors recommends a vote FOR the following proposal:
RESOLVED that the Company’s Certificate of Incorporation be amended to reduce the authorized shares of common stock from 400,000 shares to 200,000 shares.
As required by Securities and Exchange CommissionSEC Regulation S-K, Item 407(d)(3)(i), the Board has:
| 1. | Reviewed and discussed the audited financial statements of the Company for the year ended December 31, |
| 2. | Discussed with |
| 3. | Received the written disclosures and the letter from |
Based on the above noted review and discussions referred to above, the Board approved the inclusion of the Company’s audited financial statements, for and as of the fiscal year ended December 31, 2008,2011, in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008,2011, for filing with the Securities and Exchange Commission.
The Members of the Board are Mason McLain, Robert T. McLain, Robert L. Savage, Jerry L. Crow, Marvin E. Harris, Jr., William M. Smith, Doug Fuller, Cameron McLain and Kyle McLain.
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Section 16(a) of the Securities Exchange Act of 1934 requires executive officers, directors and persons beneficially owning more than 10% of the Company’s stock to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange CommissionSEC and with the Company. Based solely on a review of the Forms 3 and 4 and any amendments thereto furnished to the Company and written representations from the executive officers and Directors, the Company believes that all of these persons complied with their Section 16(a) filing obligations.
INDEPENDENT PUBLIC ACCOUNTANTS
| Proposal 3: | To Ratify the Selection of HoganTaylor LLP as the Company’s Independent Registered Public Accountants for 2012 |
In General
While we retain the services of other accounting firms from time to time, HoganTaylor LLP is our principal accountant Murrell, Hall, McIntosh & Co., PLLP, merged with Eide Bailly, LLP effective August 1, 2008. Murrell, Hall, McIntosh & Co., PLLP hadand served as the Company’sour independent accountant for the years ended December 31, 2005, 20062010 and 2007.
The executive officers will recommendrecommended to the Board that it approve Eide Bailly,HoganTaylor LLP as the Company’s independent accountant. Eide Bailly,registered public accountants for 2012. The Board has approved the selection of HoganTaylor LLP. HoganTaylor LLP served in that capacity for the yearyears ended December 31, 2008,2010 and 2011, as discussed above.
Representatives of Eide Bailly,HoganTaylor LLP are not expected to be at the Annual Meeting. However, if questions arise which require their comments, arrangements have been made to solicit their response.
The aggregate fees billed by HoganTaylor in 2011 and 2010 for professionalthese various services rendered forwere as follows:
| Description of Professional Service | Amount Billed | |||||||
| 2011 | 2010 | |||||||
| Audit Fees are fees for (i) the audit of our annual financial statements and the review of financial statements included in our quarterly reports on Form 10-Q, and (ii) for services that are provided by the independent registered public accountant in connection with statutory and regulatory filings. | $ | 65,180 | $ | 63,000 | ||||
| Audit-Related Feesare fees reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” | $ | 650 | — | |||||
| Tax Fees are fees for compliance, tax advice, and tax planning. | — | — | ||||||
| All Other Fees are fees for any service not included in the first three categories. | — | — | ||||||
Your Board of Directors recommends a vote FOR the auditfollowing proposal:
RESOLVED that the selection of HoganTaylor LLP, as the Company’s annual financial statementsIndependent Registered Public Accountants for the fiscal year ended December 31, 2008 and the reviews of the financial statements included in the Company’s Form 10-Qs for the year totaled $54,157. Of this amount, Murrell, Hall, McIntosh & Co., PLLP billed $10,050 for their review of the financial statements included in our Form 10-Qs for the quarters ended March 31, 2008 and June 30, 2008. The remaining $44,107 was billed by Eide Bailly, LLP for the services rendered subsequent to the merger discussed above. Out of pocket and administrative costs of $1,787 are included in the amount billed by Eide Bailly, LLP.Fiscal 2012, is hereby ratified.
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Communications Betweenbetween Stockholders and the Board
The Board has designated Mr. Harris to be the independent Director to receive communications from stockholders seeking to communicate directly with the Company’s independent Directors. Anyone who has a concern about the Company’s conduct, or about the Company’s accounting, internal accounting controls or auditing matters, may communicate that concern directly to the Company’s Secretary.Secretary, James L. Tyler, at The Reserve Petroleum Company, 6801 Broadway Ext., Suite 300, Oklahoma City, Oklahoma 73116-9037. Those communications may be confidential or anonymous. All such concerns will be forwarded to Mr. Harris for review. The Board is committed to good governance practices.
Deadline for Stockholders for Inclusion in Next Year’s Proxy Statement
Stockholder proposals intended to be presented at the 20102013 Annual Meeting of Stockholders, which is scheduled for May 18, 2010,21, 2013, and included in the Company’s proxy statement and form of proxy relating to that meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 must be received in writing by the Company at the Company’s principal executive offices by Friday, December 18, 2009.21, 2012. Proposals should be addressed to James L. Tyler, Secretary, The Reserve Petroleum Company, 6801 N. Broadway Ext,Ext., Suite 300, Oklahoma City, Oklahoma 73116-9092.
Other Stockholder Proposals for Presentation at Next Year’s Annual Meeting
For any stockholder proposal that is not submitted to the Company for inclusion in next year’sour 2013 proxy statement, but is instead sought to be presented by the stockholder directly at the 20102013 Annual Meeting, Rule 14a-4(c) under the Securities Exchange Act of 1934 permits management to vote proxies in its discretion if the Company:Company (1) receives written notice of the proposal before the close of business on Thursday,Wednesday, March 4, 2010,6, 2013, and advises stockholders in the 20102013 Proxy Statement about the nature of the matter and how management intends to vote on the matter,matter; or (2) does not receive written notice of the proposal before the close of business on Thursday,Wednesday, March 4, 2010.6, 2013. Notices of intention to present proposals at the 20102013 Annual Meeting should be addressed to James L. Tyler, Secretary, The Reserve Petroleum Company, 6801 N. Broadway Ext,Ext., Suite 300, Oklahoma City, Oklahoma 73116-9092.
Voting Securities
Stockholders of record at the close of business on April 13, 2009,2012, will be eligible to vote at the Annual Meeting. The voting securities of the Company consist of its $0.50 par value common stock, of which 162,148.64160,956.64 shares were outstanding on April 13, 2009.2012. Each share outstanding on the Record Date will be entitled to one vote. Treasury shares are not voted. Individual votes of stockholders are kept private, except as appropriate to meet legal requirements. Access to proxies and other individual stockholder voting records is limited to the Inspector of Election and certain employees of the Company and its agents, who must acknowledge in writing their responsibility to comply with this policy of confidentiality.
Vote Required for Approval
The electionapproval of a nominee to the Boardeach proposal described in this Proxy Statement requires the affirmative vote of a majority of the shares of common stock represented at the Annual Meeting in personand entitled to vote, provided a quorum is present. Proxies specifying “withheld authority to vote” or by proxy. All other matters also require the affirmative vote of a majority of the shares of common stock voted at the Annual Meeting in person or by proxy. Abstentions, if any,“abstain” will not be counted as votes cast. Therefore, theycast, but will have the same effect as a vote “against” a proposal, while a broker non-vote will have no effect oneffect.
Broker Non-Vote
In General. If you are a beneficial owner whose shares are held of record by a broker, you must instruct the outcome of the other mattersbroker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on atany proposal on which the Annual Meeting. A broker non-vote occurs when a nominee holding shares for a beneficial holder does not have discretionary voting power andauthority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).
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If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary authority under NYSE rules to vote your shares for the ratification of HoganTaylor LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on the beneficial owner. Broker non-voteselection of Directors or the amendment of the Certificate of Incorporation without instructions from you, in which case, a broker non-vote will occur and your shares will not be treated as shares present and entitledvoted on the election of Directors or the amendment of the Certificate of Incorporation.Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote on a voting matter and will have no effect on the outcome of the vote.
Manner for Voting Proxies
The shares represented, by all valid proxies received by mail, will be voted in the manner specified. Where specific choices are not indicated, the shares represented by all valid proxies received will be voted for the nominees for Director named in this Proxy Statement. Should any matter not described above be properly presented at the Annual Meeting, the person or persons named in the Proxy Card will vote in accordance with their judgment.
Other Matters to be Presented
The Board knows of no other matters, which may be presented at the Annual Meeting. If any other matters properly come before the Annual Meeting, including any adjournment or adjournments thereof, proxies received in response to this solicitation will be voted upon such matters in the discretion of the person or persons named in the Proxy Card.
Electronic Access to Proxy Statement and Annual Report
A copy of the Company’s 20082011 Annual Report on Form 10-K will be furnished without charge to stockholders beneficially or of record at the close of business on April 13, 2009,2012, on request to James L. Tyler, Secretary, at (405) 848-7551, Ext. 303. ThisBoth the Proxy Statement and the Company’s 20082011 Annual Report on Form 10-K are also available on the websitehttp:https://materials.proxyvote.com/761102.
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| THE RESERVE PETROLEUM COMPANY JAMES TYLER 6801 BROADWAY EXT., SUITE 300 OKLAHOMA CITY, OKLAHOMA 73116-9092 | VOTE BY INTERNET Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. VOTE | |||
Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES.
| For All | Withhold All | For All Except | To withhold authority to vote for any individual nominee(s), mark “For All Except” write the number(s) of the nominee(s) on the line below. | ||
| The Board of Directors recommends you vote FOR the following: | |||||
| 1. Election of Directors Nominees | £ | £ | £ |
| 01 Mason McLain | 02 Cameron R. McLain | 03 Kyle McLain | 04 Robert T. McLain | 05 Jerry L. Crow |
| 06 Marvin E. Harris, Jr. | 07 William M. (Bill) Smith | 08 Doug Fuller | 09 Robert L. Savage |
| The Board of Directors recommends you vote FOR proposals 2 and 3. | For | Against | Abstain | |||
| 2. | To amend the Company's Certificate of Incorporation to reduce the authorized shares of common stock from 400,000 shares to 200,000 shares. | £ | £ | £ | ||
| 3. | To ratify of the selection of HoganTaylor LLP as the Company's independent registered public accountants for 2012 | £ | £ | £ | ||
| NOTE:Such other business as may properly come before the meeting or any adjournment thereof. | ||||||
| For address change/comments, mark here. (see reverse for instructions) | £ | |||
| Signature [PLEASE SIGN WITHIN BOX] | Signature (Joint Owners) | Date |
Important Notice Regarding the Availability of Proxy Card promptly inMaterials for the enclosed prepaid envelope to save the Company additional mailing expense. Executors, administrators, trustees, guardians and others signing in a representative capacity please give their full titles. When shares Annual Meeting:The Form 10-K, Notice & Proxy Statement is/are held by joint tenants both should sign. If a corporation, please sign full corporate nameavailable at www.proxyvote.com.
THE RESERVE PETROLEUM COMPANY PROXY FOR ANNUAL
MEETING OF STOCKHOLDERS
(This proxy is solicited by the President or other authorized officer. If a partnership, please sign in partnership name by authorized person. Must arrive in this office by May 18, 2009Board of Directors)
The undersigned stockholder of The Reserve Petroleum Company hereby appoints Cameron R. McLain and Kyle McLain each of them, with full power of substitution, proxies to vote the shares of stock which the undersigned could vote if personally present at the Annual Meeting of Stockholders of The Reserve Petroleum Company, to be counted.held at the Company's corporate offices at 6801 Broadway Extension, Suite 300, Oklahoma City, OK 73116, May 22, 2012 at 3:00 p.m. local time, or any adjournment thereof.
| Address change/comments: |
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side