UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement
|_| CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14A-6(E)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-12to ss.240.14a-12
MEXCO ENERGY CORPORATION
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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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, 200413, 2005
TO THE STOCKHOLDERS:
Notice is hereby given that the Annual Meeting of the Stockholders of
MEXCO ENERGY CORPORATION ("the Company") will be held at The Petroleum Club of
Midland, 501 West Wall, Midland, Texas 79701, at 2:00 p.m. on September 14, 2004,13,
2005, 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 certifiedregistered public accountants of the Company for the
fiscal year ending March 31, 2005.
4.2006.
3. Considering all other matters as may properly come before the
meeting.
The Board of Directors has fixed the close of business on July 12, 2004,18, 2005,
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 2004.2005.
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.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, 200413, 2005
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, 2004,13, 2005, 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, 2004.20, 2005.
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;2006; and
4.3. 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, 2004,18, 2005, at which time the Company had
outstanding and entitled to vote at the meeting 1,736,0411,733,041 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.
Abstentions and broker non-votes (shares held by brokers or nominees as to
which they have no discretionary power to vote on a particular matter and have
received no instructions from the beneficial owners of such shares or persons
entitled to vote on the matter) will be counted for the purpose of determining
whether a quorum is present. Abstentions are counted in tabulations of votes
cast on proposals submitted to stockholders to determine the total number of
votes cast. Abstentions are not counted as votes for or against any such
proposal. Broker non-votes are not counted as votes cast for purposes of
determining whether a proposal has been approved and will have no effect on the
vote for any matter properly introduced at the Annual Meeting.
2
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, 2004,13, 2005, 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. DuncanJeffry A. Smith
Thomas Graham, Jr. Nicholas C. Taylor
Thomas Graham, Jr.Arden R. Grover Donna Gail Yanko
Arden R. GroverJack D. Ladd
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). Since over 50% of the voting power of the Company is
held by an individual, pursuant to Section 121 of the American Stock Exchange
rules the Company has elected to utilize the exception to the American Stock
Exchange requirement in Section 802 that at least a majority of the directors on
the Board of Directors of each listed Company consist of independent directors
as defined in Section 121A of said rules.
Set forth below are the names, ages and positions of the Company's
Directors and executive officers as of July 12, 2004.2005. The Board of Directors has
determined that each of these three outside directors, namely Messrs. Ladd,
Grover and Smith are independent in accordance with American Stock Exchange
rules and under the Exchange Act.
Director of the
Name Age Position with the Company Company Since
- -------------------------- --- ------------------------- -------------
Thomas R. Craddick 6061 Director 1998
William G. Duncan, Jr. 61 Director 1994
Thomas Graham, Jr. 7071 Director and Chairman of the Board 1997
Director 1990 to 1994
Arden R. Grover 7879 Director 2001
Jack D. Ladd 5455 Director 1998
Jeffry A. Smith 58 Director 2005
Nicholas C. Taylor 6667 President and Director 1983
Donna Gail Yanko 6061 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 1819 sessions of the
Legislature, Representative Craddick has served on various committees and
conferences. For more than the past seveneight 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.
43
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,a 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 "Common Sense on Weapons of Mass Destruction", University of Washington
Press, 2004 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,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 member1998. In September 2004 Mr. Ladd was appointed Director of the compensation committee. ForJohn Ben
Shepherd Leadership Institute of the University of Texas. Previously for 25
years, Mr. Ladd has
beenwas 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 2004 to serve as Chairman thereof, and in 2003, the
Select Committee on Education of the State of Texas.
JEFFRY A. SMITH* was appointed to the Board of Directors of the Company in
March 2005, to succeed William G. Duncan who resigned due to increased business
and personal commitments all unrelated to the Company. For the past
approximately 7 years, Mr. Smith has been a geological consultant for several
major and independent oil companies. Previously, he had served as Vice President
of Exploration for two independent oil companies. He served as an exploration
geologist for Mobil Oil Corporation, Midwest Oil Corporation and Burma Oil and
Gas Corporation in the early years of his career. Mr. Smith is a certified
geologist of the Texas Board of Professional Geoscientists. He is a member of
AAPG, PBS-SEPM and Sipes and his publications include: "Development in West
Texas and Eastern New Mexico in 1975: AAPG Bull, V. 60, No. 8" and "Introductory
Paper to 1977 Gas Field Symposium - WTGS Publisher".
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
exploration and 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. McComicMCCOMIC 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.Exchange rules.
4
MEETINGS AND COMMITTEES OF DIRECTORS
During fiscal year ended March 31, 2004, eleven2005, The Board of Directors held five
meetings. All of the Directors attended these meetings, except that two members
of the Board of Directors were held which all of the respective members attended except two
members were absent from two meetings each.meetings.
Audit Committee. The Audit Committee is a standing committee of the Board
of Directors and currently consists of Messrs. Ladd, Grover Ladd and Duncan,Smith, all of
whom are independent, non-employee directors.directors and "independent", as defined in Section 121 A
of the American Stock Exchange rules and the Exchange Act. The Board of
Directors has determined that Mr. Duncan,Ladd, who currently servingserves as the Chairman of
the Audit Committee, has been namedis an "audit committee financial expert" (as that term is
defined under the Audit Committee Financial Expertapplicable SEC rules and regulations) based on athe Board's
qualitative assessment of Mr. Duncan'sLadd'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 the Company's independent public accountants; and to review non-audit
services provided by the independent public accountants. The Audit Committee
held fourthree meetings during fiscal year ended March 31, 2004.2005. All members attended these meetings.
For additional information, see "Report of the
Audit Committee".Committee attended these meetings, except that Mr. Duncan was absent from
one meeting. The Audit Committee operates under a written charter adopted and
approved by the Board of Directors in fiscal 2004, a copy of which may be
accessed on the internet at www.sec.gov. The report of the Audit Committee for
fiscal year 2005 is included in this proxy statement below.
Compensation Committee. The Compensation Committee currently consists of
Messrs. Duncan,Grover, Chairman, Ladd, and Taylor,Smith, all of whom are non-employee
directors except for Mr. Taylor.and "independent" as defined in Section 121 A of the American Stock
Exchange rules and the Exchange Act. The primary function of the Compensation
Committee is to determine compensation for the officers of the Company that is
competitive to enableand enables the Company to motivate and retain the talent needed to
lead and grow the Company's business. The Compensation 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 forone
meeting after 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
o2005. All other compensationmembers of the
Compensation Committee attended such meetings. The report of the Compensation
Committee for fiscal year 2005 is comprisedincluded in this proxy statement below.
The Compensation Committee currently operates under a written charter
adopted and approved by the Board of director fees. ThereDirectors as of June 15, 2005, a copy of
which is attached hereto as Exhibit A.
Nominating Committee. The Nominating Committee currently consists of
Messrs. Grover, Chairman, Ladd and Smith, all of whom 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"independent" as defined in Section 121 A of the Company for such period consisted of director's
fees.
EMPLOYEE INCENTIVE STOCK OPTION PLAN
- ------------------------------------American Stock Exchange
rules and the Exchange Act. 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 duringNominating Committee held one meeting after the
fiscal year ended March 31, 2004, and unexercised options held2005, at March 31, 2004 by eachwhich all members 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)Nominating
Committee were present. 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 policyprimary function of the Company.
Accordingly, no awards or payoutsNominating Committee is to
determine the slate of Director nominees for election to the Company's Board of
Directors. The Nominating Committee considers candidates recommended by security
holders, directors, officers and outside sources and considers criteria such as
business experience, ethical standards and personal qualifications in evaluating
all such nominees. Stockholders who wish to have been made. The Company has no retirement
or pension plan excepttheir nominees 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 Grantedelection 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 considered by the Nominating Committee may submit such
nomination to the Secretary of the Company for receipt not less than 80 days
prior to the date of the next Annual Meeting of stockholders and include (i) the
name and address of the stockholder making the nomination, (ii) information
regarding such nominee as would be required to be included in the proxy
statement, (iii) 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, LLCrepresentation of the stockholder, and the Companystockholder's
intent to appear in person or by proxy at the coursemeeting to propose such
nomination, and (iv) the written consent of the Exploration Agreement.
During the year ending March 31, 2004,nominee to serve as a member ofdirector
if so elected.
The Nominating Committee currently operates under a written charter
adopted and approved by the Board of Directors andas of June 15, 2005, 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 sharescopy 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 inattached hereto as 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.
BOARDB.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
To the Stockholders of Mexco Energy Corporation:
The Company's Compensation Committee makes recommendations regarding
compensation of the Company's executive officers, including the CEO, subject to
approval of the entire Board of Directors.
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.
5
Executive compensation for all executive officers, including the CEO, is
based on the performance against a combination of financial and non-financial
measures. In addition to business results, employees are expected to uphold a
commitment to integrity, maximizingmaximize the development of each individual, and
continually improvingcontinue to improve the environmental quality of its
services andthe Company's 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
July 12, 2005 Compensation Committee
Arden R. Grover
Jack D. Ladd
Jeffry A. Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee was formed as of June 15, 2005 and Messrs.
Ladd, Grover and Smith were appointed members thereof. No member of the
Compensation Committee is an officer or employee of the Company. None of the
Company's executive officers served on the board of directors or the
compensation committee of any other entity, for which any officers of such other
entity served either on our Board of Directors or the Compensation Committee.
The Company's Compensation Committee makes recommendations regarding
compensationcompensations 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. UponThe Audit Committee is satisfied with the adequacy of the
charter based upon its evaluation of the charter's adequacy in 2004, the Audit Committee is satisfied.
In addition to written consent, thecharter during fiscal 2005. The Audit
Committee met fivethree times during fiscal 2004.2005. The current 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-auditon-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 $60,151 during the Company's 2005 fiscal year and $40,935 during
the Company's 2004 fiscal year and $26,080 during
the Company's 2003 fiscal year. FeesThere were no fees for audit related services
total $300 and
$1,225 for fiscal yearsyear ending March 31, 20042005 and $300 for fiscal year ending March 31,
2003, respectively.2004. 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
20042005 be included in the Company's Annual Report on Form 10-K.
July 12, 20042005 Audit Committee
William G. DuncanJack D. Ladd
Arden R. Grover
Jack D. Ladd
9Jeffry A. Smith
6
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, 2005.
SUMMARY COMPENSATION TABLE
Securities All
Name and Underlying Other
Principal Position Year Salary Bonus Options Compensation
- --------------------------- ---- ----------- ---------- ---------- ------------
Nicholas C. Taylor 2005 $ - $ - - $ 500
President & CEO 2004 $ - $ - - $ 1,100
2003 $ - $ - - $ 1,100
Donna Gail Yanko 2005 $ 20,400 $ 2,500 - $ -
Vice President & 2004 $ 18,750 $ 2,500 5,000 $ -
Secretary 2003 $ 10,500 $ 4,448 - $ -
Tamala L. McComic 2005 $ 85,475* $ 10,000 - $ -
Vice President, 2004 $ 75,400 $ 7,500 20,000 $ -
Treasurer & Asst Sec. 2003 $ 62,400 $ 8,896 10,000 $ -
Thomas Graham, Jr. 2005 $ 24,000 $ - 30,000 $ -
Chairman 2004 $ 24,000 $ - - $ -
2003 $ 24,000 $ - - $ -
Thomas R. Craddick 2005 $ 1,200 $ - - $ -
Director 2004 $ 1,200 $ - - $ -
2003 $ 1,200 $ - 10,000 $ -
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. Commencing July 1, 2005
directors fees will be paid at the rate of $1,500 per director
quarterly.
* Includes $4,500 in accrued vacation not taken and sold back to the
Company.
Employee Incentive Stock Option Plans
The Company adopted an employee incentive stock plan effective September
14, 2004 supplementing the prior plan adopted September 15, 1997. Under the 1997
plan, 350,000 shares were available for distribution. Awards, granted at the
discretion of the compensation committee of the Board, included stock options
and restricted stock. Stock options were incentive stock options or
non-qualified stock options. The exercise price of each option was not to 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 was to be granted
with a condition to attain a specified goal. The purchase price was to be at
least $5.00 per share of restricted stock. The awards of restricted stock were
to be accepted within sixty days and vest as determined by agreement. Holders of
restricted stock were to have all rights of a shareholder of the Company. At
March 31, 2005, no restricted stock had been granted under either plan.
The Mexco Energy Corporation 2004 Incentive Stock 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 following table sets forth certain information with respect to the exercise
of options to purchase Common Stock during the fiscal year ended March 31, 2005,
and unexercised options held at March 31, 2005 by each of the named executive
officers.
7
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 2005
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, 2005 March 31, 2005
On Value ----------------------------- -----------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
Donna Gail Yanko 0 $0 41,250 3,750 $ 74,750 $ 9,750
Tamala L. McComic 0 $0 17,500 22,500 $ 70,500 $ 73,500
Thomas Graham, Jr. 0 $0 40,000 30,000 $ 71,500 $ 62,300
Thomas R. Craddick 0 $0 25,000 5,000 $ 67,500 $ 23,000
(1) The closing price per share on March 31, 2005, was $8.60 as reported by
the American Stock Exchange.
Defined Benefit Plans and Other Arrangements. Long-term incentive
compensation for senior executive officers is not included in the Company
policy. Accordingly, no awards or payouts have been made. The Company has no
retirement or pension plan except for its 1997 and 2004 Incentive Stock Plans.
These plans are described above.
OPTION GRANTS IN LAST FISCAL YEAR TABLE
Number of Grants
Securities Percentage of After 10 Years
Underlying Total Options Exercise Stock Price Appreciation
Options Granted to Price Expiration ----------------------------
Granted (1) Employees (per Share) Date 5% per Year 10% per year
----------- ------------- ----------- ------------- ----------- ------------
Thomas Graham, Jr. 20,000 66.67% $ 6.70 07/02/2014 $ 84,272 $213,561
Thomas Graham, Jr. 10,000 33.33% $ 6.17 09/14/2009 $ 38,803 $ 98,334
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2004, the Company with a team of Russian and U.S. experts began a
preliminary study for exploration and development of oil and natural gas
reserves in Russia. In connection therewith the Company organized OBTX, LLC, a
Delaware limited liability company, in which Mexco owns a 90% interest with the
remaining 10% interest split equally among three individuals, one of whom is
Arden Grover, a director of the Company. OBTX, LLC, plans to participate in any
Russian ventures entered into and own a 50% interest. Mr. Grover serves as a
member of the board of directors of both OBTX, LLC and its 50% owned Russian
subsidiary GazTex, LLC. Since inception of this venture Mr. Grover has invested
$13,226 as his share of 3 1/2% ownership of OBTX, LLC.
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, 19992000 and ending March 31, 2004.2005. 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]
[The line graph depicted in the printed material is represented by the table on
the following page.]
8
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 - --------------------------------------------------------------------------------2005
---- ---- ---- ---- ---- ----
MEXCO .............. $100 $70 $64 $60 $74 $91
- --------------------------------------------------------------------------------$ 92 $ 86 $106 $129 $159
S&P 500 ............ $100 $116 $90 $89 $66 $88
- --------------------------------------------------------------------------------$ 77 $ 77 $ 57 $ 75 $ 79
PEER GROUP ......... $100 $136 $174 $168 $165$128 $124 $122 $127 $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, 2004,2005, 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
Number of Shares Percent
of Common Stock of
Beneficially Owned (1) Class
---------------------- -----
BENEFICIAL OWNERS OF MORE THAN 5% OF COMMON STOCK
Howard E. Cox, Jr., Box 2217, 800 Winter St., #300,
Waltham, MA 02451 213,400 12.31
SECURITY OWNERSHIP OF MANAGEMENT
Thomas R. Craddick 33,000 1.87
Tamala L. McComic 29,380 1.67
Thomas Graham, Jr. 130,000 (3) 7.31
Arden R. Grover (4) 27,500 1.58
Jack D. Ladd (4) 24,675 1.41
Jeffry A. Smith (4) 5,800 0.33
Nicholas C. Taylor 888,811 50.99
Donna Gail Yanko 74,112 (2) 4.13
Officers and directors as a group
(8 persons) 1,213,278 62.60
- ---------------
(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,July
12, 2005, pursuant to options to purchase such Common Stock (Mr. Craddick,
25,000;27,500; Ms. McComic, 17,500;27,500; Mr. Duncan, 10,000;Smith, 2,500; Mr. Graham, 37,500;45,000; Mr.
Grover, 5,000;7,500; Mr. Ladd, 17,500;22,500; Mr. Taylor, 10,000 and Ms. Yanko,
38,750)42,500).
(2) Of these shares, Ms. Yanko's spouse owns 944 shares and the right to
acquire 17,50020,000 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.
FEES TO INDEPENDENT REGISTERED ACCOUNTANTS
Audit Fees. The aggregate fees billed for the fiscal years 2004 and 2005
for professional services rendered by the principal independent accountant,
Grant Thornton LLP, for the audit of the Company's annual financial statements
and review of the Company's quarterly reports on Form 10-Q are $40,935 and
$60,151, respectively.
Audit Related Fees. There were no fees billed for each of the last two
fiscal years for assurance and related services by the principal independent
accountant, Grant Thornton LLP, that are reasonably related to the performance
of the audit or review of the Company's financial statements and are not
reported under the caption "Audit Fees" above.
9
Tax Fees. There were no fees billed for the fiscal years 2004 and 2005 for
professional services rendered by the principal independent accountant, Grant
Thornton LLP, for tax compliance, tax advice and tax planning.
All Other Fees. There were no other fees billed in each of the last two
fiscal years for products or services provided by the principal independent
accountant, Grant Thornton, LLP, other than those reported under the captions
"Audit Fees" above.
The Audit Committee's policy on pre-approval of audit and audit related
fees requires the Chairman of the Audit Committee to sign all engagement letters
of the principal independent accountant prior to commencement of any audit or
audit related services, all of which was performed in connection with the lat
two fiscal years of the Company by the principal independent accountants, Grant
Thornton, LLP, full-time, permanent employees.
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIEDREGISTERED PUBLIC ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP for appointment as
independent certifiedregistered public accountants for the Company for the fiscal year
ending March 31, 2005,2006, subject to ratification by the stockholders. Grant
Thornton LLP served as independent certifiedregistered public accountants for the Company
for the fiscal year ended March 31, 2004.2005. 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
STOCKHOLDERS PROPOSALS FOR NEXT ANNUAL MEETING
The next Annual Meeting of the Company's stockholders is scheduled to be
held on September 25, 2005.14, 2006. Appropriate proposals of stockholders intended to be
presented at the 20052006 Annual Meeting must be received by Ms. Donna Gail Yanko,
Secretary, no later than May 17, 2005,March 14, 2006, in order to be included in the
Company's Proxy Statement and form of Proxy relating to such meeting.
In addition, the Company's policy has established advance notice
procedures to shareholders proposals not included in the Company's proxy
statement, to be brought before an Annual Meeting. In general, the Secretary of
the Company must receive notice of any such proposal not less than 80 days prior
to the date of the Annual Meeting at the address of the Company's principal
executive offices above. Such notice must include the information which would be
required to be included in the proxy statement filed pursuant to the rules of
the Securities and Exchange Commission had the proposal been made by the Board
of Directors.
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 TO2006, THROUGH THE SECRETARY, MEXCO ENERGY CORPORATION, P.O. BOX
10502, MIDLAND, TEXAS 79702.PUBLIC REGISTER'S ANNUAL REPORT SERVICE AT
HTTP://WWW.PRARS.COM. 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
1210
EXHIBIT A
MEXCO ENERGY CORPORATION
2004 INCENTIVE STOCK PLAN
1. PURPOSE
This Employee Incentive Stock PlanCOMPENSATION COMMITTEE CHARTER
Purpose
The purpose of the Compensation Committee (the "Plan""Committee") is intended as an incentive
and to encourage stock ownership by certain officers and employeesof the Board
of Directors (the "Board") of Mexco Energy Corporation or(the "Company") is (i) to
review and approve the compensation of its subsidiary companies asthe Company's "Section 16 Officers" (as
hereinafter defined), (ii) to oversee and advise the Board on the adoption of
policies that term is definedgovern the Company's compensation programs, (iii) to administer
the Company's 1997 Incentive Stock Plan, 2004 Incentive Stock Plan and other
equity-based compensation plans, all in Article 3 below (the "Subsidiaries"), so that they may acquire or increase their
proprietary interestaccordance with the terms and conditions
thereof, and (iv) to produce an annual report on executive compensation for
inclusion in the successCompany's proxy statement, in accordance with the rules and
regulations of the Company and Subsidiaries andSecurities Exchange Commission (the "SEC").
Committee Membership
The Committee shall consist of a number of directors fixed from time to
encourage themtime by the Board but not fewer than two. The members of the Committee shall be
appointed annually by the Board in its discretion. The Company's Nominating
Committee shall make recommendations to remainthe Board regarding members to serve on
the Committee. Committee members may be replaced by the Board between annual
appointments in the employBoard's discretion. The Committee shall consist solely of
"independent directors," i.e., those directors who neither are officers or
employees of the Company or its subsidiaries nor have a relationship which, in
the opinion of the Subsidiaries. ItBoard, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director, and who are
otherwise "independent" under the rules of the American Stock Exchange. In
addition, it is further intendedexpected that options issued pursuant to this Planeach member of the Committee shall constitute
"incentive stock options"be (i) a
"non-employee director" within the meaning of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (ii) an
"outside director" within the meaning of Section 422162(m) 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""code").
The Committee shall consist of not
less than three members of the Company's Board of Directors.Structure and Operations
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 selectdesignate one of its members as Chairman
and shall hold meetings at such times and places as it may determine. A majoritymember of the Committee at whichas its chairperson.
In the event of a quorum is present or acts reducedtie vote on any issue, the chairperson's vote shall decide the
issue. The chairperson shall be responsible for scheduling all meetings of the
Committee, determining the agenda for each meeting, presiding over meetings of
the Committee and coordinating reporting to or approved in
writing by athe Board. In the absence of the
chairperson, the majority of the members of the Committee present at a meeting
shall appoint a member to preside at the meeting.
The Committee shall meet in person or telephonically at such times and
with such frequency as it determines to be necessary or appropriate, but no less
than two times a year. Members of the Committee are expected to use all
reasonable efforts to attend each meeting. The Committee may, to the extent
consistent with the maintenance of the confidentiality of compensation
discussions, invite members of management, legal counsel, compensation
consultants or other advisors to attend meetings of the Committee; however, the
Company's Chief Executive Officer ("CEO") may not be present during any
discussions and deliberations of the Committee regarding the CEO's compensation.
The Committee may take action by the unanimous written consent of its members.
Committee Duties and Responsibilities
The Committee shall:
1. Annually review and approve the Company's general compensation philosophy
and oversee the development and implementation of the Company's
compensation programs.
2. Review and approve corporate goals and objectives relevant to the
compensation of the CEO, evaluate the performance of the CEO in light of
those goals and objectives, and have the sole authority to determine the
CEO's compensation level based on this evaluation. In determining the
long-term incentive component of CEO compensation, the Committee shall
consider, among other factors, the Company's performance and relative
stockholder return, the value of similar incentive awards to CEOs at
comparable companies, and the awards given to the CEO in past years.
3. Review and approve the compensation of all other "officers" of the Company
(as defined in Rule 16a-1 promulgated under Section 16 of the Exchange
Act; herein called "Section 16 Officers").
4. Make recommendations to the Board with respect to the Company's incentive
compensation plans and equity-based compensation plans, including the 1997
Incentive Stock Plan and 2004 Incentive Stock Plan.
5. Administer the Company's 1997 Incentive Stock Plan, 2004 Incentive Stock
Plan and any other equity-based compensation plans in accordance with the
terms and conditions thereof, discharge any responsibilities imposed on,
and exercise all rights and powers granted to, the Committee by any of
these plans, and oversee the activities of the individuals and entities
responsible for the day-to-day operation and administration of these
plans.
11
6. Approve issuances under, or any material amendment of, any tax qualified,
non-discriminatory employee benefit plan or parallel nonqualified plan
pursuant to which a director, officer, employee or consultant will acquire
stock or options.
7. Approve issuances under, or any material amendment of, any stock option or
other similar plan pursuant to which a person not previously an employee
or director of the Company, as an inducement material to the individual's
entering into employment with the Company, will acquire stock or options.
8. Consult with management to oversee regulatory compliance with respect to
compensation matters, including overseeing the Company's policies on
structuring compensation programs to preserve tax deductibility, and, as
and when required, establishing performance goals and certifying that
performance goals have been attained for purposes of Section 162(m) of the
Code.
9. Review and approve any employment agreement to be entered into between the
Company and any Section 16 Officer.
10. To the extent not provided for in any employment agreement approved by the
Committee in accordance with the preceding paragraph, review and approve
any severance or similar termination payments proposed to be made to any
current or former Section 16 Officer.
11. Prepare and issue the evaluations and reports required under "Committee
Reports" below.
12. Review from time to time when and as it deems appropriate the compensation
and benefits of non-employee directors, including compensation pursuant to
equity-based plans and approve or recommend to the Board for its action,
any changes in such compensation or benefits.
13. Perform any other duties or responsibilities expressly delegated to the
Committee by the Board from time to time relating to the Company's
compensation programs.
The Committee shall produce the following reports and provide them to the Board.
1. An annual report of the Compensation Committee on executive compensation
for inclusion in the Company's annual proxy statement in accordance with
applicable SEC rules and regulations.
2. An annual performance evaluation of the Committee, which evaluation must
compare the performance of the Committee with the requirements of this
charter. The performance evaluation by the Committee shall be conducted in
such manner as the valid actsCommittee deems appropriate. The report to the Board
may take the form of an oral report by the chairperson of the Committee. No director while aCommittee or
any other member of the Committee designated by the Committee to make this
report.
3. A summary of the actions taken at each Committee meeting, which shall be
eligiblepresented to receivethe Board at the next Board meeting. The summary to the Board
may take the form of an option underoral report by the Plan.chairperson of the Committee or
any other member of the Committee designated by the Committee.
Resources and Authority of the Committee
The Committee shall from timehave the resources and authority appropriate to
time atdischarge its discretion make recommendationsduties and responsibilities, including the authority to select,
retain, terminate, and approve the fees and other retention terms of special
counsel, compensation consultants or other experts or consultants, as it deems
appropriate, without seeking approval of the Board or management. With respect
to any compensation consultants retained to assist in the evaluation of
director, CEO or executive officer compensation, this authority shall be vested
solely in the Committee.
As adopted by the Board of Directors with respect to the
employees who shall be granted options and the amountas of stock to be optioned to
each. All membersJune 15, 2005.
12
EXHIBIT B
MEXCO ENERGY CORPORATION
NOMINATING COMMITTEE CHARTER
Purpose
The purpose of the Compensation 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(the "Committee") of the Board
of Directors or(the "Board") of Mexco Energy Corporation (the "Company") is to (i)
identify individuals qualified to become Board members; (ii) recommend to the
Board a slate of director nominees to be elected by the stockholders at the next
annual meeting of stockholders and, when appropriate, director appointees to
take office between annual meetings; and (iii) recommend to the Board membership
on standing Board committees.
Committee Membership
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)consist of the Company or its Subsidiaries existinga number of directors fixed 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 lessfewer 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).two. 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.
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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
indemnifiedappointed annually by the Company against the reasonable expenses, including attorneys'
fees actually and necessarily incurredBoard 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 AWARDSdiscretion. The Committee may award toshall consist
solely of "independent directors," i.e., those directors who neither are
officers directors andor 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 assignablesubsidiaries 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 forhave 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,which, in the opinion of the Board, of Directors,
would interfere with theirthe exercise of
independent judgment in carrying out the responsibilities of a director, and who
are otherwise "independent" under the rules of the American Stock Exchange.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson.
In the event of a committee
membertie vote on any issue, the chairperson's vote shall decide the
issue. The chairperson shall be responsible for scheduling all meetings of the
Committee, determining the agenda for each meeting, presiding over meetings of
the Committee and are, or will shortly become, financially literate.coordinating reporting to the Board. In addition,the absence of the
chairperson, the majority of the members of the AuditCommittee present at a meeting
shall appoint a member to preside at the meeting.
Committee Structure and Operations
The Board shall designate one member of the Committee as its chairperson.
In the event of a tie vote on any issue, the chairperson's vote shall decide the
issue. The chairperson shall be responsible for scheduling all meetings of the
Committee, determining the agenda for each meeting, presiding over meetings of
the Committee and coordinating reporting to the Board. In the absence of the
chairperson, the majority of the members of the Committee present at a meeting
shall appoint a member to preside at the meeting.
The Committee shall understand financial statements.
OBJECTIVE OF THE AUDIT COMMITTEE
- --------------------------------meet in person or telephonically at such times and
with such frequency as it determines to be necessary or appropriate, but no less
than one time per year. Members of the Committee are expected to use all
reasonable efforts to attend each meeting. The AuditCommittee may invite members of
management, legal counsel or other advisors to attend meetings of the Committee.
The Committee may take action by the unanimous written consent of its members.
Committee Duties and Responsibilities
The Committee shall:
1. Search for, identify, evaluate the qualifications of and recommend to the
Board the slate of qualified director nominees to be elected by the
stockholders in connection with each annual meeting, and any directors to
be elected by the Board to fill vacancies or newly created directorships
between annual meetings. As part of its process, the Committee shall
assistconsider and evaluate nominees proposed by stockholders.
2. In assessing the qualifications of prospective nominees to the Board,
of Directorsconsider each nominee's personal and professional integrity, experience,
skills, ability and willingness to devote the time and effort necessary to
be an effective board member, and commitment to acting in fulfilling its
responsibility to the shareholders, potential shareholders, and the investment
community relating to corporate accounting, reporting practicesbest
interests of the Company and its stockholders. The Committee also shall
give consideration to the qualityBoard's having an appropriate mix of backgrounds
and integrityskills, qualifications that the committee believes must be met by
prospective nominees to the Board, qualities or skills that the Committee
believes are necessary for one or more of the financial reportsCompany's directors to
possess and standards for the overall structure and composition of the
Company.
SPECIFIC RESPONSIBILITIES OF THE AUDIT COMMITTEE
- ------------------------------------------------Company's Board.
3. Recommend committee assignments for directors to the Board as openings
occur on committees of the Board, or as rotations of committee assignments
are deemed advisable by the Board upon recommendation from the Committee.
The Committee shall recommend committee assignments in accordance with the
membership requirements specified in the Charter of each committee, and
with due consideration given to each committee's annual assessment of its
composition, performance and effectiveness and the desires and skills of
individual directors.
4. Develop and make recommendations to the Board for approval standards and
processes for determining the independence of Board members that meet the
rules and requirements of the American Stock Exchange and applicable laws
and regulations. In fulfillingaddition, in accordance with such processes and using
such standards, the Committee shall conduct a preliminary review of the
independence of each Board member and provide its objective,findings and make
recommendations to the Auditfull Board regarding the independence of each Board
member.
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5. Report regularly to the Board and recommend to the Board any improvements
to this Charter deemed necessary or desirable by the Committee.
6. Fulfill such other duties and responsibilities as are consistent with the
purposes of the Committee enumerated in this Charter or as shall be
delegated to it by the Board from time to time.
Delegation to Subcommittee
The Committee may, in its discretion, delegate all or a portion of its
duties and responsibilities to a subcommittee of the Committee consisting of one
or more members.
Committee Reports
The Committee shall produce a summary of the actions taken at each
Committee meting, which shall be presented to the Board at the next succeeding
Board meeting. The summary to the Board may take the form of an oral report by
the chairperson of the Committee or any other member of the Committee designated
by the Committee.
Resources and Authority of the Committee
The Committee shall have the responsibility with respect to:
The Company's Risksresources 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 systemauthority appropriate 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 ofdischarge its duties and responsibilities, including the authority to select,
retain, outside counsel for this purpose if, in its judgment, that is
appropriate;
B-1
The Hiringterminate, 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 independenceretention terms of special
counsel or other experts or consultants, as it deems appropriate, without
seeking approval of the independent accountants priorBoard or management. With respect to engagement, annually discuss withconsultants or
search firms used to identify director candidates, this authority shall be
vested solely in the independent accountants their independence
annually based upon the written disclosures and the letter from the independent
accountants requiredCommittee.
As adopted 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 independenceas 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.
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June 15, 2005.
14