NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
JUNE 15, 2004
AND PROXY STATEMENT
THE BEARD COMPANY
THE BEARD COMPANY
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Tuesday, June 15, 2004
TO THE STOCKHOLDERS OF THE BEARD COMPANY:
The Beard Company will hold its Annual Meeting of Stockholders at the
Hilton Inn Northwest, located at 2945 Northwest Expressway, Oklahoma City,
Oklahoma 73112 on Tuesday, June 15, 2004 at 9:00 a.m. local time. We are holding
the meeting for the following purposes:
(1) To approve an amendment to the Company's Certificate of Incorporation
to increase the number of shares of common stock authorized to be
issued by the Company from 7,500,000 to 15,000,000.
(2) To approve an amendment to the Company's Certificate of Incorporation
to reduce the par value of the authorized common stock by one-half and
to effect a two-for-one split of the common stock.
(3) To elect two members of the Board of Directors for three (3) year
terms.
(4) To approve the adoption of The Beard Company 2003-2 Deferred Stock
Compensation Plan, as amended.
(5) To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Holders of record of The Beard Company's common and preferred stock at the
close of business on April 14, 2004, are entitled to vote at the meeting.
In addition to the proxy statement and proxy card, a copy of The Beard
Company's annual report on Form 10-K, which is not part of the proxy soliciting
material, is enclosed.
It is important that your shares be represented and voted at the meeting.
You can vote your shares by completing and returning a proxy card. You can
revoke a proxy at any time prior to its exercise.
By Order of the Board of Directors
Rebecca G. Witcher
Secretary
Oklahoma City, Oklahoma
April 29, 2004
THE BEARD COMPANY
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
PROXY STATEMENT
We are providing these proxy materials in connection with the solicitation
by the Board of Directors of The Beard Company (the "Company") of proxies to be
voted at the Company's Annual Meeting of Stockholders, to be held on June 15,
2004, and at any meeting following postponement or adjournment of the annual
meeting.
You are cordially invited to attend the annual meeting which will begin at
9:00 a.m. local time. The meeting will be held at the Hilton Inn Northwest, 2945
Northwest Expressway, Oklahoma City, Oklahoma 73112.
We are first mailing this proxy statement, the proxy card and voting
instructions on April 29, 2004, to stockholders of record at the close of
business on April 14, 2004, the record date for the meeting.
You can revoke your proxy at any time before it is voted at the meeting by
timely delivery of a properly executed, later-dated proxy or by voting in person
at the meeting. Management urges you, even if you presently plan to attend the
meeting in person, to execute the enclosed proxy and mail it as indicated
immediately.
All shares entitled to vote and represented by properly completed proxies
received prior to the meeting and not revoked will be voted at the meeting in
accordance with your instructions. If you return a signed proxy card without
indicating how your shares should be voted on a matter and do not revoke your
proxy, the shares represented by your proxy will be voted FOR the election of
the nominees for Director named below. To the extent contrary specifications are
not given, your proxy will be voted FOR the approval of Proposal Nos. 1, 2 and 4
described below.
If any other matters are properly presented at the annual meeting for
consideration at the meeting or any postponement or adjournment thereof, the
individuals named as proxies will vote the proxies in their discretion in the
manner they believe to be in the best interest of the Company. At the date this
proxy statement went to press we did not know of any other matters that are to
be presented at the annual meeting other than the four Proposals set forth
below.
The accompanying form of proxy has been prepared at the direction of the
Company, of which you are a stockholder, and is sent to you at the request of
the Board of Directors. The proxies named herein have been designated by your
Board of Directors.
The Company will pay the expenses of the preparation of the proxy materials
and the solicitation by the Board of Directors of proxies. Proxies may be
solicited on behalf of the Company in person or by telephone by directors,
officers or employees of the Company, who will receive no additional
compensation for soliciting. We will reimburse brokerage firms and other
custodians, nominees and fiduciaries for their expenses incurred in sending
proxies and proxy materials to beneficial owners of the Company's stock.
THE COMPANY'S ANNUAL REPORT ON SECURITIES AND EXCHANGE COMMISSION FORM 10-K
(THE "FORM 10-K") INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2003, IS INCLUDED HEREWITH.
GOVERNANCE OF THE COMPANY
Pursuant to the Oklahoma General Corporation Law and the Company's by-laws,
the Company's business, property and affairs are managed by or under the
direction of the Board of Directors. Members of the Board are kept informed of
the Company's business through discussions with the Chief Executive Officer and
other officers, by reviewing materials provided to them and by participating in
meetings of the Board and its committees. We currently have five members of the
Board.
The Board has three standing committees:
o The Audit Committee, the members of which are: Ford C. Price
(Chairman), Allan R. Hallock and Harlon E. Martin, Jr.;
o The Compensation Committee, the members of which are: Allan R. Hallock
(Chairman), Harlon E. Martin, Jr. and Ford C. Price; and
o The Nominating/Corporate Governance Committee, the members of which
are: Harlon E. Martin, Jr. (Chairman), Allan R. Hallock and Ford C.
Price.
The Board has determined that all of the directors other than Messrs. Beard
and Mee, including those who serve on the above committees, are "independent"
for purposes of Section 10A(m)(3) of the Securities Exchange Act of 1934. The
Board based these determinations primarily on a review of the responses of the
directors and executive officers to questions regarding employment and
compensation history, affiliations and family and other relationships and on
discussions with the directors.
The Board has adopted a charter for the Audit Committee and for the
Compensation Committee. The Nominating/Corporate Governance Committee is newly
elected in 2004 and no charter has yet been adopted for it. However, the
committee intends to adopt a charter prior to year-end 2004. The Board has also
adopted a Code of Conduct that applies to all of our employees, officers and
directors. You can find links to these materials on our website at:
http://www.beardco.com/governance.
During 2003 the Board met seven times and the committees held a total of
eight meetings. All of the directors attended more than 75% of the total number
of meetings of the Board of Directors and the Board committees of which they
were a member during 2003. At least quarterly, the non-management directors meet
in private session without members of management. These sessions are presided
over by Mr. Price, Chairman of the Audit Committee.
Audit Committee
The Audit Committee focuses its efforts on the following three areas:
o The adequacy of the Company's internal controls and financial
reporting process and the integrity of the Company's financial
statements;
o The independence and performance of the Company's independent
auditors; and
o The Company's Compliance with legal and regulatory authority.
The committee meets periodically with management to consider the adequacy
of the Company's internal controls and the financial reporting process. It also
discusses these matters with the Company's independent auditors and with
appropriate Company financial personnel. The committee reviews our financial
statements and discusses them with management and the independent auditors
before those financial statements are filed with the Securities and Exchange
Commission. The committee met seven times in 2003.
The committee regularly meets privately with the independent auditors, has
the sole authority to retain and dismiss the independent auditors and
periodically reviews their performance and independence from management. The
independent auditors have unrestricted access and report directly to the
committee.
Audit Committee Financial Expert. The Board has determined that a member of
the committee, Mr. Martin, is an "audit committee financial expert," as that
term is defined in Item 401(h) of Regulation S-K, and "independent" for purposes
of Section10A(m)(3) of the Securities Exchange Act of 1934.
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee (the "Committee") with
respect to the Company's audited financial statements for the year ended
December 31, 2003.
The Committee is comprised of the three independent directors listed below
and operates under a written charter adopted by the Board on June 14, 2000 and
amended on May 23, 2003. The Charter, as amended, was attached as Exhibit "B" to
the Company's proxy statement in connection with its 2003 Annual Meeting of
Stockholders. In its corporate oversight role, the Committee reviews the
Company's financial reporting process on behalf of the Board. Management has the
primary responsibility for the financial statements and the reporting process,
including the system of internal controls.
The Committee held seven meetings during 2003. The meetings were designed
to facilitate open communication between the Committee, management and the
Company's independent public accountants, Cole & Reed, P.C. ("C&R"). At such
meetings the Committee reviewed and discussed with C&R and management the
Company's audited consolidated financial statements and, when applicable, its
unaudited interim financial statements.
The Committee approves, in advance, all auditing services and permitted
non-audit services to be performed for the Company by its independent auditor,
subject to the de minimus exceptions for permitted non-audit services described
in Section 10A(i)(1)(B) of the Exchange Act which are approved by the Committee
prior to the completion of the audit. The Committee has delegated authority to
the Committee Chairman, when appropriate, to grant advance approvals of audit
and permitted non-audit services, with the proviso that such decisions be
presented to the full Committee at its next scheduled meeting.
The Committee discussed with C&R the matters required to be discussed by
Statement of Auditing Standards No. 61, Communication with Audit Committees. C&R
also provided to the Committee the written disclosures and the letter required
by Independence Standards Board No. 1, Independence Discussions with Audit
Committees, and the Committee has discussed with C&R its independence from the
Company.
Based on the review and discussions above, we recommended to the Board that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 2003.
All of the members of the Audit Committee are independent under the
definitions of the rules as defined in Rule 4200(a)(15) of the NASD's listing
standards.
The Committee has considered the services rendered by the Company's
principal accountant for the most recent fiscal year as described above and has
concluded that the provision of such services is compatible with maintaining the
principal accountant's independence.
By the Audit Committee:
Ford C. Price, Chairman
Allan R. Hallock
Harlon E. Martin, Jr.
Audit Fees
The fees billed by C&R for the indicated services for fiscal years 2003 and
2002 were as follows:
Fiscal Year 2003 Fiscal Year 2002
---------------- ----------------
Audit fees............. $42,000(A) $42,000(B)
Audit-related fees(C).. 6,110 6,500
Tax fees............... 1,680 2,300
All other fees......... -- --
- ---------------
(A) Includes $11,000 for services rendered in 2003 and $31,000 for
services rendered in 2004.
(B) Includes $9,000 for services rendered in 2002 and $33,000 for services
rendered in 2003.
(C) For audit services related to the Company's 401(k) plan.
Under its charter, the Audit Committee must pre-approve all auditing
services and permitted non-audit services to be performed for the Company by its
independent auditors, subject to the de minimus exceptions for permitted
non-audit services. Each year, the independent auditor's retention to audit our
financial statements, including the associated fee, is approved by the committee
before the filing of the preceding year's annual report on Form 10-K. The
committee has delegated to the Chairman of the committee the authority to
evaluate and approve engagements for additional services in the event that a
need arises for pre-approval between committee meetings. If the Chairman so
approves any such engagements, he will report that approval to the full
committee at the next committee meeting.
Since the May 6, 2003 effective date of the Securities and Exchange
Commission rules stating that an auditor is not independent of an audit client
if the services it provides to the client are not appropriately approved, each
new engagement was approved in advance by the Audit Committee except for two
engagements for tax services which made use of the de minimus exception to
pre-approval contained in the Commission's rules.
Following is a break-out of the percentage of fees that were pre-approved
by the committee for the periods indicated:
Fiscal Year 2003 Fiscal Year 2002
---------------- ----------------
Audit fees................ 100% 100%
Audit-related fees........ 100% 0%
Tax fees.................. 0% 0%
Appointment of Auditors for 2004
The Audit Committee has reappointed Cole & Reed, P.C. as the independent
accountants to audit and report on the consolidated financial statements of the
Company for 2004.
Representatives of Cole & Reed, P.C. will be present at the meeting. They
will be given an opportunity to make a statement if they desire to do so, and
they will be available to respond to appropriate questions.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee is a new committee elected in
February of 2004. The Company's by-laws provide that nomination of election to
the Board of Directors may be made by the Board of Directors or by any
stockholder. The two nominees for director this year are sitting directors who
were nominated by the Board since the Nominating/Corporate Governance Committee
had not yet been formed.
The Nominating/Corporate Committee has not yet adopted a charter but
intends to do so prior to year-end 2004. Because of this fact the
Nominating/Corporate Committee does not have a policy with regard to the
consideration of any director candidates recommended by the Company's
stockholders. Further, the Nominating/Corporate Committee has yet to develop a
process for identifying and evaluating nominees for director and has not set any
specific, minimum qualifications that the Nominating/Corporate Committee
believes a nominee for director must meet. The Nominating/Corporate Committee
does not pay a fee to any third party to identify or evaluate or assist in
identifying or evaluating potential director nominees.
The Nominating/Corporate Committee has met one time since its inception.
Compensation Committee
The principal functions and requirements of the Compensation Committee are
as follows:
o Reviews the objectives, structure, cost and administration of the
Company's major compensation and benefit policies and programs.
o Reviews and makes recommendations concerning remuneration arrangements
for senior management, including the specific relationship of
corporate performance to executive compensation.
o Reviews the Company's performance versus the CEO's compensation and
establishes measures of the Company's performance upon which the CEO's
compensation is based.
o Administers the Company's compensation, benefit and incentive plans.
The committee met one time in 2003.
We have adopted The Beard Company Code of Ethics for our employees,
officers and directors. Our Code of Ethics is publicly available on our website
at http://www.beardco.com. If we make any substantive amendments to our Code of
Ethics or grant any waiver, including any implicit waiver, from a provision of
this Code to our executive officers, we will disclose the nature of such
amendment or waiver on our website.
Compensation of Outside Directors
Messrs. Hallock, Martin and Price received $8,250 each of deferred fees
under the Company's Deferred Stock Compensation Plans (the "Plans") as
compensation for services rendered in 2003. (See: "EXECUTIVE COMPENSATION -
Deferred Stock Compensation Plans" for additional details). Under the Plans, the
electing officers and directors could defer all or a portion of their fees and
compensation until termination of service or termination of the Plans, at which
time the accounts are settled by distribution of a number of shares of the
Company's common stock equal to the number of Units credited under the Plans. A
Unit is equal to the amount deferred divided by the fair market value of a share
of common stock on the date of deferral. In 2003 the non-management directors
each received $1,500 per quarter for their services, and also received the
following fees for directors' meetings which they attended: annual and 1-1/2 day
meetings -- $750; regular meeting -- $500; telephone meeting -- $100 to $300
depending upon the length of the meeting. Messrs. Hallock, Martin and Price
received $2,250 each for such attendance in 2003. Messrs. Hallock, Martin and
Price also receive a small year-end bonus depending upon their length of service
as directors of the Company and Beard Oil Company ("Beard Oil"). Such bonus
amounted to $750 each for Messrs. Hallock and Price and $300 for Mr. Martin in
2003. All of the directors deferred their quarterly fees, attendance fees and
year-end bonuses pursuant to the Plans. The Company also provides life, health
and accident insurance benefits for its non-management directors who are not
otherwise covered and the value of these benefits is included in the above
compensation amounts. Messrs. Hallock, Price and Martin received $4,478, $453
and $202, respectively, of such compensation during the year. None of the
directors received additional compensation in 2003 for their committee
participation. Outside directors also receive reimbursement of out-of-pocket
expenses incurred in connection with attendance at meetings.
On January 31, 2003, we terminated the Deferred Stock Compensation Plan and
distributed 350,000 shares of common stock to the five participants, including
the three outside directors. Messrs. Hallock, Martin and Price received 33,218,
27,756 and 34,197 shares, respectively, of the distribution. The 2003 Deferred
Stock Compensation Plan was adopted on such date; on September 30, 2003, this
plan was also terminated with 150,000 shares distributed to its five
participants. Messrs. Hallock, Martin and Price received 6,851, 6,837 and 6,853
shares, respectively, of the distribution.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee in 2003 were Allan R. Hallock,
Harlon E. Martin, Jr., and Ford C. Price. None of the members have ever been an
officer or employee of the Company or any of its subsidiaries, and no
"compensation committee interlocks" existed during 2003.
Stockholder Communications with Directors
The Company's stockholders who want to communicate with the Board or any
individual director directly can write to: The Beard Company Board
Administration c/o Ford C. Price P.O. Box 20267 Oklahoma City, OK 73156
Your letter should indicate that you are a stockholder of the Company. The
Audit Committee will review each letter to the directors to determine the
appropriate action to take with respect to each letter. Depending on the subject
matter, the Audit Committee will:
o Forward the communication to the director or directors to whom it is
addressed;
o Forward the communication to management, for example where it is a
request for information about the Company or it is a stock-related
matter; or
o Not forward the communication if it is primarily commercial in nature
or if it relates to an improper or irrelevant topic.
At each Board meeting, the Audit Committee will present a summary of all
communications received since the last meeting that were not forwarded and make
those communications available to the directors on request.
Director Attendance at Annual Meetings
The Company's annual stockholders' meetings do not usually fall in
conjunction with our regularly scheduled quarterly Board meetings. We encourage
our outside directors to attend the stockholders' meetings even if they do not
fall on the date of a Board meeting, but do not reimburse for attendance unless
it is in conjunction with a Board meeting. In 2003 all three of our outside
directors attended our annual stockholders' meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent
(10%) of a registered class of the Company's equity securities (collectively
"reporting persons"), to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Reporting persons are required by
the SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file.
To the Company's knowledge, based solely on a review of Forms 3, 4 and 5
furnished to the Company and information received from each reporting person
which includes written representations that no reports were required during the
fiscal year ended December 31, 2003, all Section 16(a) filing requirements
applicable to its reporting persons were complied with, except as follows: Mr.
Price inadvertently failed to timely file a Form 4 reflecting the transfer of
shares from direct ownership to his trust on August 12, 2003. A Form 4
reflecting the transfer was filed on September 5, 2003.
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION
TO INCREASE AUTHORIZED
SHARES OF COMMON STOCK
(Proposal No. 1)
The Board of Directors of the Company, at a meeting duly held, unanimously
voted to recommend to the Company's stockholders that the Company's Certificate
of Incorporation be amended to increase the authorized common stock from
7,500,000 shares to 15,000,000 shares. This amendment to the Certificate of
Incorporation is being proposed to facilitate the stock split described in
Proposal No. 2 below. The recommendation of the Board of Directors to the
stockholders is to vote for the amendment of the Certificate of Incorporation to
increase the authorized common stock from 7,500,000 shares to 15,000,000 shares.
The Board felt it would be prudent to seek an increase in the number of shares
of authorized common stock to ensure that sufficient shares would be available
for future use after effecting the stock split discussed in Proposal No. 2
below. The Company will not implement Proposal No. 1 unless both it and Proposal
No. 2 are approved by the stockholders.
Effective Date of the Amendments to the Certificate of Incorporation
The amendments to the Company's Certificate of Incorporation proposed by
Proposal No. 1 and Proposal No. 2 described below will be contained on the same
Amendment to Certificate of Incorporation which is attached hereto as Exhibit A.
The amendments to the Certificate of Incorporation shall not be effective until
the close of business on the date the amendment is filed with the Secretary of
State of the State of Oklahoma.
PROPOSED AMENDMENT TO
CERTIFICATE OF INCORPORATION
AND
TWO-FOR-ONE STOCK SPLIT
(Proposal No. 2)
The Board of Directors of the Company, at a meeting duly held, unanimously
voted to recommend to the Company's stockholders that the Company's Certificate
of Incorporation be amended to facilitate a two-for-one stock split of the
Company's common stock. The split would be effected through amendments to the
Company's Certificate of Incorporation and the issuance of one additional share
for each share of common stock outstanding, and each share held as a treasury
share. The amendments and the stock split shall be effective at the close of
business on the date the amendment to the Company's Certificate of Incorporation
is filed with the Secretary of State of the State of Oklahoma (the "Effective
Date").
The Company is currently authorized to issue 7,500,000 shares of common
stock. As of the record date for the Annual Meeting, 2,328,845 shares of common
stock were issued and outstanding, and no shares were held as treasury shares.
As of such date the Company also had 727,246* shares of common stock reserved
for issuance (i) upon exercise of outstanding options and warrants, (ii) upon
conversion of outstanding preferred stock and (iii) equal to the number of
shares credited to the participants' Stock Unit Accounts in the Company's 2003-2
Deferred Stock Compensation Plan (the "2003-2 DSC Plan"). (*Does not include
93,750 additional shares available for grant under the Company's 1993 Stock
Option Plan, or the additional 185,883 shares not yet accrued in the 2003-2 DSC
Plan, assuming stockholders approve Proposal No. 4 authorizing 400,000 shares
for issuance under such plan).
The recommendation of the Board of Directors to the stockholders is to vote
for the amendments to effect the two-for-one stock split. The Company will not
implement Proposal No. 2 unless both it and Proposal No. 1 are approved by the
stockholders.
Based on the common stock issued and outstanding as of April 14, 2004, the
proposed two-for-one stock split will result in 2,328,845 additional shares of
common stock being issued. Taking into consideration the approval and
implementation of Proposal No. 1 described above, this will leave 9,615,064
shares of the then total authorized 15,000,000 shares of common stock available
for such use as the Board of Directors may direct, after the reservation of
727,246 shares of common stock discussed above. While the Board of Directors has
no present plans for the issuance of additional shares of common stock, shares
issued in future acquisitions or in connection with the grant of future stock
options, the issuance of future warrants or the issuance of additional shares
under the 2003-2 DSC Plan are possible utilizations.
Effect of the Proposed Stock Split
As a result of the proposed stock split, each holder of common stock on the
Effective Date shall receive one additional share of common stock for each one
share of such common stock held by such holder on the Effective Date. Currently
issued and outstanding stock certificates shall be deemed to also represent the
new shares to be issued in the stock split. Holders of the Company's stock
certificates who wish to receive new stock certificates reflecting the stock
split should surrender their stock certificates to the Company's transfer agent,
UMB Bank, N.A., at which point the transfer agent will cancel the surrendered
certificates and issue the surrendering stockholders a new certificate
reflecting the number of shares that the surrendering stockholder owns after the
stock split. After the stock split, 727,246 shares of common stock will be
reserved to cover outstanding stock options and warrants, for issuance pursuant
to Deferred Stock Compensation Plans and for conversion rights of the issued and
outstanding preferred stock.
The increase in the number of shares of common stock outstanding will cause
their par value to decrease from $.001333 per share to $.0006665 per share. The
per share book value will be reduced by 50% and, correspondingly, earnings
(loss) per share will be reduced. Stockholder equity will be unchanged.
Reasons for the Stock Split
The Board of Directors believes that increasing the number of shares of
common stock held by stockholders would be beneficial in narrowing the spread
between the bid and asked prices of the Company's common stock, thus improving
the liquidity of such shares.
Change Resulting from the Amendment to the Certificate of Incorporation
The only changes in the Certificate of Incorporation which will result from
the proposed stock split will be to decrease the par value of the authorized
common stock from $.001333 per share to $.0006665 per share. Additionally, as
described above, Proposal No. 1 will increase the authorized common stock of the
Company from 7,500,000 shares to 15,000,000 shares. All other provisions,
including all rights, privileges and characteristics of the common stock will
remain unchanged. A copy of the Amended Certificate of Incorporation reflecting
the changes from both Proposal No. 1 and Proposal No. 2 is attached hereto as
Exhibit A.
Effective Date of the Proposed Stock Split and the Amendment to the Certificate
of Incorporation
If approved by the stockholders at the Annual Meeting, the proposed stock
split and the amendment to the Company's Certificate of Incorporation shall not
be effective until the close of business on the date the amendment is filed with
the Secretary of State of the State of Oklahoma. The Company's Board of
Directors may, in its sole discretion, abandon the proposed stock split and the
amendment to the Certificate of Incorporation at any time prior to the filing of
the amendment to the Certificate of Incorporation with the Secretary of State of
the State of Oklahoma if it determines that such abandonment is in the best
interest of the Company.
The Company will issue a press release and give notice to the National
Association of Securities Dealers, Inc. ("NASD") at least 10 days prior to the
filing of the amendment to the Company's Certificate of Incorporation with the
Secretary of State of the State of Oklahoma, which will make effective both the
amendment and the stock split. If the Board of Directors of the Company makes a
decision to abandon the proposed stock split and amendment to the Company's
Certificate of Incorporation, the Company will issue a press release at such
time indicating its decision. (ACCORDINGLY, STOCKHOLDERS SHOULD NOT SURRENDER
ANY STOCK CERTIFICATES TO THE TRANSFER AGENT UNTIL YOU HAVE BEEN NOTIFIED THAT
THE PROPOSED AMENDMENTS AND STOCK SPLIT HAVE BEEN MADE EFFECTIVE).
ELECTION OF DIRECTORS
(Proposal No. 3)
The Company's Certificate of Incorporation (the "Certificate") provides for
a Board of Directors of not more than nine nor less than three directors,
including one director elected by the preferred stockholders, as determined from
time to time by the Board. The Certificate also provides that the portion of the
Board of Directors which is elected by the Beard common stockholders shall be
divided into three classes as nearly equal in number as possible, with the term
of office of one class expiring each year.
At the meeting, two directors are to be elected by the common stockholders
for a three-year term expiring at the date of the Annual Meeting of Stockholders
in 2007. The terms of Messrs. Harlon E. Martin, Jr. and Herb Mee, Jr. expire
this year, and they will be the two nominees for terms expiring in 2007. The
Beard preferred stockholders filled the directorship vacancy which they were
entitled to fill in February 1994 by the election of Michael E. Carr, who
resigned effective February 1, 2002. To date the sole remaining preferred
stockholder has not elected to fill such vacancy.
The persons named in the proxy card will vote such proxy for the election
of the above-named nominees, unless you indicate that your vote should be
withheld. Each nominee has served continuously as director of the Company or of
its predecessors since first elected. Messrs. Martin and Mee have each indicated
to the Company that he will serve if elected. We do not anticipate that either
nominee will be unable to stand for election, but if that happens, the resulting
vacancy will be filled at such time as the Board finds a suitable candidate. The
election of directors at this meeting will be by plurality vote. The directors
elected at the Annual Meeting will serve for three-year terms and until their
respective successors are elected and qualified, in accordance with the
provisions of the Certificate and the Company's By-Laws.
Certain information with respect to the nominees for Director and three
Directors whose terms do not expire this year is as follows:
Nominees for Election for a Term of Three Years Expiring in 2007:
Nominee (age), year first became a Director of The Beard Company or Beard Oil
Company:
Harlon E. Martin, Jr. (56), 1997
Harlon E. Martin, Jr. was elected a director of the Company in October
1997. Mr. Martin has served as the principal of H. E. Martin & Company, a
Houston investment banking firm, since its founding in 1990. He was a co-founder
of GTM Securities Corp. in 1985 and served as a principal of such firm until
1989. H. E. Martin & Company is not a parent, subsidiary, or other affiliate of
the Company.
Herb Mee, Jr. (75), 1974
Herb Mee, Jr. has served as the Company's President since 1989 and as its
Chief Financial Officer since 1993. He has served as President of Beard Oil, the
predecessor to the Company, since 1973 and as its Chief Financial Officer since
1993. He has also served as a director of the Company and Beard Oil since their
incorporation. Mr. Mee served as President of Woods Corporation, a New York
Stock Exchange diversified holding company, from 1968 to 1972 and as its Chief
Executive Officer from 1970 to 1972.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NOMINEES.
Director to Continue in Office with Term Expiring in 2005:
W. M. Beard (75), 1974
W.M. Beard has served the Company as its Chairman of the Board and Chief
Executive Officer since 1992. He previously served as the Company's President
and Chief Executive Officer from the Company's incorporation in 1974 until 1985.
He has served Beard Oil as its Chairman of the Board and Chief Executive Officer
since 1969. He has also served as a director of the Company and Beard Oil since
their incorporation. Mr. Beard has been actively involved since 1952 in all
management phases of the Company and Beard Oil from their inception, and as a
partner of their predecessor company.
Directors to Continue in Office with Terms Expiring in 2006:
Allan R. Hallock (74), 1986
Allan R. Hallock was elected a director of the Company in 1993. He served
as a director of Beard Oil from 1986 until 1993. Mr. Hallock is currently an
independent consulting geologist. He served as Vice President and Exploration
Manager of Gemini Corporation from 1970 until 1986.
Ford C. Price (66), 1987
Ford C. Price was elected a director of the Company in 1993. He served as a
director of Beard Oil from 1987 until 1993. From 1961 until 1986 Mr. Price
served in various capacities with The Economy Company, a privately-held
schoolbook publishing company, last serving as its Chairman of the Board and
Chief Executive Officer. Mr. Price is a private investor.
There is no family relationship between any of the directors or executive
officers of the Company.
VOTING SECURITIES OUTSTANDING
As of April 14, 2004, 2,328,845 shares of common stock and 27,838 shares of
preferred stock of the Company had been issued and were outstanding. Each share
of common stock is entitled to one vote on all matters presented at the meeting.
Each share of preferred stock was convertible into 4.79367522 (133,446) shares
on the record date, and (iii) is entitled to one vote for each full share of
common stock into which it was convertible. Accordingly, a total of 2,462,291
votes are entitled to be cast at the meeting, and the holder of the preferred
stock is entitled to cast 14.92% of such votes. Only holders of common stock and
preferred stock of record at the close of business on April 14, 2004, will be
entitled to vote at the meeting
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table on the next page sets forth information, as of April 14,
2004, with respect to the beneficial ownership of shares of the Company by each
person who is known to the Company to be the owner of five percent of the
outstanding stock of the Company, by each Director or nominee for Director, by
each of the executive officers named in the Compensation Table contained at page
10 hereof, and by all Directors and executive officers as a group. Unless
otherwise noted, the person named has sole voting and investment power over the
shares reflected opposite his name.
Total Shares
Options, Beneficially
Warrants and Owned Percent of
Outstanding Benefit Assuming Shares
Shares Plan Shares Exercise of Percent of Entitled
Beneficially Exercisable Column (B) Beneficial to Vote at the
Name Owned Within 60 Days Shares Ownership<F11> Meeting<F12>
- ---- ----- -------------- ------ -------------- ------------
(A) (B) (C)
--- --- ---
John Hancock Financial Services,
Inc.("Hancock")......................... 367,476 <F1> None 367,476 <F1> 12.02% 14.92%
57th Floor
200 Clarendon Street
Boston, Massachusetts 02117
The William M. Beard and Lu Beard
1988 Charitable Unitrust ("Unitrust")... 241,979 <F2> 22,500 <F2> 264,479 <F2> 8.65% 9.83%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
The Beard Group 401(k) Trust
c/o InvesTrust, N.A. ("InvesTrust"),
Trustee................................. 188,010 <F3> None 188,010 <F3> 6.15% 7.64%
5101 N. Classen, Suite 620
Oklahoma City, OK 73118
W. M. Beard............................. 995,604 <F4> 160,620 <F4> 1,156,224 <F4> 37.83% 40.43%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Lu Beard................................ 243,238 <F5> 22,500 <F5> 265,738 <F5> 8.70% 9.88%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Herb Mee, Jr............................ 372,806 <F6> 78,976 <F6> 451,782 <F6> 14.78% 15.14%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Allan R. Hallock........................ 61,562 <F7> 50,627 <F7> 112,189 <F7> 3.67% 2.50%
Ford C. Price........................... 61,150 <F8> 11,876 <F8> 73,027 <F8> 2.39% 2.48%
Harlon E. Martin, Jr.................... 35,343 <F9> 11,014 <F9> 46,357 <F9> 1.52% 1.44%
All directors and executive officers
as a group (8 in number)........... 1,405,364<F10> 321,238<F10> 1,726,602<F10> 56.50%<F10> 57.08%
- ---------------
<FN>
<F1>
Includes 234,030 common shares and 27,838 preferred shares which were convertible into 133,446 common shares on April 14,
2004. All shares are owned directly and are held by Hancock on behalf of itself and affiliated entities.
<F2>
Includes 241,979 shares owned directly and 22,500 shares subject to presently exercisable warrants held by the Unitrust, of
which Mr. Beard and his wife, Lu Beard, serve as co-trustees and share voting and investment power.
<F3>
Represents shares owned by The Beard Group 401(k) Trust (the "401(k) Trust"). Shares held by the 401(k) Trust are owned by
the participating employees, each of whom has sole voting and investment power over the shares held in his or her account.
Investrust has the sole discretion to vote shares for which it has received no directions from the participants. Includes
43,444 and 118,588 shares held for the accounts of Messrs. Beard and Mee, respectively.
<F4>
Includes 537,960 shares owned directly by Mr. Beard as to which he has sole voting and investment power; 241,979 shares
owned directly and 22,500 shares subject to presently exercisable warrants held by the Unitrust as described in footnote
(2) above; 36,214 shares held by the William M. Beard Irrevocable Trust "A," 51,324 shares held by the William M. Beard
Irrevocable Trust "B," and 62,661 shares held by the William M. Beard Irrevocable Trust "C" (collectively, the "Beard
Irrevocable Trusts") of which Messrs. Beard and Herb Mee, Jr. are trustees and share voting and investment power; 5,053
shares each held by the John Mason Beard II Trust and by the Joseph G. Beard Trust as to which Mr. Beard is the trustee and
has sole voting and investment power; 1,917 shares held by the Rebecca Banner Beard Lilly Living Trust as to which Mr.
Beard is a co-trustee and shares voting and investment power with his daughter; 43,444 shares held by (the 401(k) Trust for
the account of Mr. Beard as to which he has sole voting and investment power; and 9,999 shares held by B & M Limited, a
general partnership ("B&M"), of which Mr. Beard is a general partner and shares voting and investment power with Mr. Mee.
Also includes 9,375 shares subject to presently exercisable options; 5,000 shares subject to presently exercisable warrants
held by B&M; and 123,745 shares reserved in Mr. Beard's account in the Company's 2003-2 Deferred Stock Compensation Plan
(the "2003-2 DSC Plan") which will be distributed upon his death, disability, retirement or termination or upon Plan
termination. Excludes 1,259 shares owned by his wife as to which Mr. Beard disclaims beneficial ownership.
<F5>
Includes 241,979 shares and 22,500 presently exercisable warrants owned by the Unitrust, of which Mr. and Mrs. Beard serve
as co-trustees and share voting and investment power. Also includes 1,259 shares owned directly by Mrs. Beard as to which
she has sole voting and investment power.
<F6>
Includes 51,364 shares owned directly by Mr. Mee as to which he has sole voting and investment power; 38,056 shares held by
Mr. Mee and Marlene W. Mee, his wife, as joint tenants as to which he shares voting and investment power with Mrs. Mee,
4,600 shares held by Mee Investments, Inc., as to which Mr. Mee has sole voting and investment power; 9,999 shares and
5,000 shares subject to presently exercisable warrants held by B & M as to all of which Mr. Mee shares voting and
investment power with Mr. Beard but as to which Mr. Mee has no present economic interest; and 118,588 shares held by the
401(k) Trust for the account of Mr. Mee as to which he has sole voting and investment power. Also includes 150,199 shares
held by the Beard Irrevocable Trusts as to which Mr. Mee is a co-trustee and shares voting and investment power with Mr.
Beard but as to which Mr. Mee has no pecuniary interest and disclaims beneficial ownership. Also includes 18,371 shares
subject to presently exercisable options and 55,605 shares reserved in Mr. Mee's account in the 2003-2 DSC Plan which will
be distributed upon his death, disability, retirement or termination or upon Plan termination. Excludes 33 shares owned by
Mrs. Mee, as to which Mr. Mee disclaims beneficial ownership.
<F7>
Includes 59,687 shares and 38,750 shares subject to presently exercisable warrants held by the Allan R. Hallock Trust as to
which Mr. Hallock shares voting and investment powers with his wife; 1,875 shares held by an IRA for the benefit of Mr.
Hallock as to which he has sole voting and investment power; and 11,877 shares reserved in Mr. Hallock's account in the
2003-2 DSC Plan which will be distributed upon his death, disability, retirement or termination or upon Plan termination.
<F8>
Includes 6,853 shares held directly by Mr. Price as to which he has sole voting and investment power; 51,848 shares held by
the FCP Trust as to which Mr. Price has shared voting and investment power; 2,449 shares held by an IRA for the benefit of
Mr. Price as to which he has sole voting and investment power; and 11,876 shares reserved in Mr. Price's account in the
2003-2 DSC Plan which will be distributed upon his death, disability, retirement or termination or upon Plan termination.
<F9>
Includes 35,343 shares held directly by Mr. Martin as to which he has sole voting and investment power, and 11,014 shares
reserved in Mr. Martin's account in the 2003 DSC-2 Plan which will be distributed upon his death, disability, retirement or
termination or upon Plan termination.
<F10>
Includes 1,106,667 shares as to which directors and executive officers have sole voting and investment power and 619,935
shares as to which they share voting and investment power with others. Shares reflect the applicable ownership of Column
(C) shares.
<F11>
In addition to the Company's outstanding common and preferred stock, there were 40,871 presently exercisable options,
338,812 presently outstanding warrants, and a total of 214,117 shares reserved in the Participants' accounts in the
Company's 2003-2 DSC Plan that were deemed to be exercisable as of April 14, 2004, for a total of 3,056,091 shares deemed
to be outstanding on such date. Percentages represent the percent of Column (C) Shares.
<F12>
Percentages represent the percent of Column (A) Shares.
</FN>
STOCK PERFORMANCE
The following performance graph compares the Company's cumulative total
stockholder return on its common stock against the cumulative total return of
the NASDAQ Market Index and the SIC Code Index of the Bituminous Coal, Surface
Mining Industry compiled by Media General Financial Services for the period from
December 31, 1998 through December 31, 2003. The performance graph assumes that
the value of the investment in the Company's stock and each index was $100 on
December 31, 1998, and that any dividends were reinvested. The Company has never
paid dividends on its common stock.
------------- ------------- ------------- ------------- ------------- -------------
December December December December December December
1998 1999 2000 2001 2002 2003
------------- ------------- ------------- ------------- ------------- -------------
The Beard Company 100.00 57.69 10.77 21.54 7.08 7.69
------------- ------------- ------------- ------------- ------------- -------------
Bituminous Coal, Surface
Mining Industry Index 100.00 71.39 136.23 156.39 153.58 261.32
------------- ------------- ------------- ------------- ------------- -------------
NASDAQ Market Index 100.00 176.37 110.86 88.37 61.64 92.68
------------- ------------- ------------- ------------- ------------- -------------
The Industry Index chosen consists of the following companies: Arch Coal,
Inc., Consol Energy, Inc., Headwaters Inc., Heartland Oil & Gas Corp., Peabody
Energy Corp., Westmoreland Coal Co. and Yanzhou Coal Mining Co.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors (the
"Board") establishes the general compensation policies of the Company. The
Committee meets once each year to establish specific compensation levels for the
chairman/chief executive officer ("CEO") and the president/chief financial
officer ("CFO") and to review the executive officers' compensation generally.
(The compensation for executive officers other than the CEO and CFO is actually
determined by the CEO and CFO).
The Committee's goal in setting executive compensation is to motivate,
reward and retain management talent who support the Company's goals of
increasing stockholder value. This goal is to provide competitive levels of
compensation that relate to the Company's long-term performance goals and
objectives and reward outstanding corporate performance. The Committee endeavors
to achieve these objectives through a combination of base salary, cash bonuses
and stock options.
The Committee believes that the total compensation of its CEO, CFO and
other executive officers should be tied to the Company's success in achieving
long-term growth in earnings, cash flow and stock price per share. The Committee
also believes that the total cash compensation of such officers should, to the
extent possible, be similar to the total cash compensation of similarly situated
executives of peer group public companies. To date neither the Company nor the
Committee has been able to establish a peer group which they feel is comparable
enough in size, financial structure and diversity of operations to establish a
valid comparison.
No executive officer's compensation for 2003 exceeded the $1 million
deduction limit under Section 162(m) of the Internal Revenue Code, as amended,
and the same result is anticipated for 2004. The Committee does not anticipate
that any executive officer's compensation would approach the threshold level in
the foreseeable future.
Base Salaries. No salary increases have been granted to the Company's top
two executive officers since September of 1990. Because of the poor financial
results in 2001, 2002 and 2003, no changes in base salary are currently under
consideration for any of the executive officers. Because of the Company's
deteriorating cash position, (i) the CEO elected to defer one-half of his salary
under the Company's Deferred Stock Compensation Plan effective October 16, 2000,
increased such deferral to 85% effective July 16, 2002, and further increased
the deferral to 90% effective January 1, 2003; and (ii) the President elected to
defer 40% of his salary effective February 1, 2003.
Cash Bonuses. All employees and directors of the Company receive a small
year-end bonus depending upon their length of service as employees of the
Company or Beard Oil. Because of the overall financial results, no other cash
bonuses have been paid to executive officers during the last three fiscal years.
The CEO, the CFO and all of the directors elected to defer all of their year-end
bonuses for calendar years 2001, 2002 and 2003.
Beard Group 401(k) Plan. One of the Company's principal benefits has been
its 401(k) Plan, which included a 100% match (up to a cap of 5% of gross salary)
in order to encourage participation. Due to the Company's deteriorating cash
position the Company on July 8, 2002 notified all Participants that it was
suspending the 100% match effective July 16, 2002 until further notice.
One of the investment options available under the Company's 401(k) Plan is
the option for each participant to invest all or part of his investment account
in Company common stock (the "Stock Fund"). The Committee feels that this option
is important because it enables key management members to increase their
ownership in the Company, further aligning their interests with those of the
stockholders. Both the CEO and CFO have the majority of their 401(k) invested in
the Stock Fund.
Stock Options. The Committee desires to reward long-term strategic
management practices and enhancement of stockholder value through the award of
stock options. The Committee believes that stock options encourage increased
performance by the Company's key employees by providing incentive to employees
to elevate the long-term value of the Company's common stock, thus aligning the
interests of the Company's employees with the interests of its stockholders.
Additionally, stock options build stock ownership and provide employees with a
long-term focus. However, because of their conviction that management should not
reap the benefit of a low option grant price until the Company's performance has
achieved a recognizable turnaround, the Committee has not granted any stock
options since April of 1997.
Deferred Stock Compensation Plans. The Company has adopted three Deferred
Stock Compensation Plans (the "DSC Plan(s)") to provide a means to promote
ownership by officers and directors of a greater proprietary interest in the
Company, thereby aligning such interests more closely with the interests of the
stockholders. Such Plans became increasingly important during 2001-2003 as a
mechanism to conserve the Company's cash. The initial DSC Plan was adopted in
1995 and later amended to authorize the issuance of 350,000 shares of common
stock. This Plan was terminated on January 31, 2003, with Messrs. Beard, Mee,
Hallock, Martin and Price receiving 248,997, 5,832, 33,218, 27,756 and 34,197
shares, respectively. The 2003 DSC Plan was adopted by the Board in January
2003, approved by stockholders in July 2003, and authorized the issuance of
150,000 shares of common stock. The 2003 DSC Plan was terminated on September
30, 2003, with Messrs. Beard, Mee, Hallock, Martin and Price receiving 89,836,
39,662, 6,838, 6,824 and 6,840 shares, respectively. The 2003-2 DSC Plan was
adopted by the Board in September 2003, subject to stockholder approval, and
later amended to authorize the issuance of 400,000 shares of common stock.
CEO Compensation
W. M. Beard has been Chairman and CEO of the Company and its predecessors
since 1974. Mr. Beard's 2003 base salary was $132,000, and has not increased
since 1990. He receives, along with all other Beard employees, a small year-end
bonus based on length of service. The 1994 stock option grant of 50,000 shares
to Mr. Beard reflected the Committee's desire to provide significant incentives
which link long-term executive compensation to long-term growth in equity for
all stockholders, as described above. The award also reflected Mr. Beard's
position and level of responsibility within the Company and the importance of
the role he plays in determining the Company's strategic direction. Based on the
Company's profitability, the granting of any additional stock options to Mr.
Beard or other key management members was not considered by the Committee in
2003. A significant portion of the Company's outstanding options were exercised
in 1998, including 75% of his outstanding option by Mr. Beard. The Committee may
consider the awarding of additional options to key management members, including
Mr. Beard, in 2004 and subsequent years. Any such grants will depend upon the
Company's profitability at such time, the outlook for its various businesses and
the Committee's determination of the need to provide additional incentives to
management.
By the Compensation Committee:
Allan R. Hallock, Chairman
Harlon E. Martin, Jr.
Ford C. Price
EXECUTIVE COMPENSATION
Compensation of Executive Officers
The table below sets forth sets forth the compensation paid or accrued
during each of the last three fiscal years by the Company and its subsidiaries
to the Company's Chief Executive Officer and each of the Company's other most
highly compensated executive officers (hereafter referred to as the named
executive officers), whose aggregate salary and bonus exceeded $100,000, for any
of the fiscal years ended December 31, 2003, 2002 and 2001:
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
- ----------------------------------------------- -------------------------------
Common All Other
Name and Stock LTIP Compen-
Principal Salary (A) Bonus (B) Awards(C) Payouts sation (D)
Position Year ($) ($) (#) ($) ($)
-------- ---- --- --- --- --- ---
W. M. Beard 2003 13,200(E) -0-(E) 338,806 121,300(E) -0-
Chairman & CEO 2002 44,275(E) -0-(E) -0- 90,175(E) 1,788(G)
2001 66,000(E) -0-(E) -0- 68,400(E) 3,300(E)
Herb Mee, Jr. 2003 83,600(F) -0-(F) 45,482 49,900(F) -0-
President & CFO 2002 132,000 -0-(F) -0- 1,450(F) 3,505(G)
2001 132,000 -0-(F) -0- 1,400(F) 6,670(F)
- ---------------
<FN>
(A) Amounts shown include cash compensation earned and received by the named
executive officers as well as amounts earned but deferred pursuant to the
Company's 401(k) Plan at the election of those officers. Amounts shown
exclude cash compensation earned but deferred pursuant to the applicable
Deferred Stock Compensation Plans (the "DSC Plans") of the Company.
(B) Bonus for length of service with Beard or Beard Oil.
(C) In 2003 Messrs. Beard and Mee received 248,997 and 5,832 shares of common
stock, respectively, upon termination of the Company's Deferred Stock
Compensation Plan and 89,809 and 39,650 shares of common stock,
respectively, upon termination of the Company's 2003 Deferred Stock
Compensation Plan
(D) Consists of the Company's contribution to the Company's 401(k) Plan.
(E) In 2003 Mr. Beard deferred 90% ($118,800) of his salary during the year and
all ($2,500) of his length of service bonus for the year; in 2002 Mr. Beard
deferred 50% ($35,750) of his salary during the first 6-1/2 months of the
year, 85% ($51,975) of his salary during the last 5-1/2 months of the year
and all ($2,450) of his length of service bonus for the year; in 2001 Mr.
Beard deferred one-half ($66,000) of his salary and all ($2,400) of his
length of service bonus for the year pursuant to the DSC Plans.
(F) In 2003 Mr. Mee deferred 40% ($48,400) of his salary during the last 11
months of the year and all ($1,500) of his length of service bonus for the
year; in 2002 Mr. Mee deferred all ($1,450) of his length of service bonus
for the year; in 2001 Mr. Mee deferred all ($1,400) of his length of
service bonus for the year pursuant to the DSC Plans.
(G) Beginning July 16, 2002, the Company suspended its 100% matching
contribution (up to a cap of 5% of gross salary) under its 401(k) Plan.
Although there is no firm commitment to do so, the Company has indicated
its intention to reinstate the match when future conditions permit.
</FN>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during the Company's last
fiscal year and unexercised options held as of the end of the last fiscal year:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
---- --------------- ------------ ------------- -------------
W. M. Beard -0- $ -0- 9,375/-0- $-0-/-0-
Herb Mee, Jr. -0- $ -0- 18,371/-0- $-0-/-0-
Deferred Stock Compensation Plans
Effective January 31, 2003, the total number of shares that had been
credited to the participants' Stock Unit Accounts in The Beard Company Deferred
Stock Compensation Plan (the "DSC Plan") had reached the maximum number of
shares (350,000) that had been authorized for issuance thereunder and
accordingly the DSC Plan terminated under the terms thereof. 350,000 shares of
the Company's common stock were distributed to the five participants in the DSC
Plan. 295,053 of such shares were issued from treasury shares and 54,947 shares
were issued from authorized but unissued shares.
On September 30, 2003, the total number of shares that had been credited to
the participants' Stock Unit Accounts in The Beard Company 2003 Deferred Stock
Compensation Plan (the "2003-1 Plan") had reached the maximum number of shares
(150,000) that had been authorized for issuance thereunder and accordingly the
2003-1 Plan terminated under the terms thereof. 150,000 shares of the Company's
common stock were distributed to the five participants in the 2003-1 Plan. All
of such shares were issued from authorized but unissued shares.
Upon the recommendation of management, the Board of Directors of the
Company took action as of that same date to adopt The Beard Company 2003-2
Deferred Stock Compensation Plan (the "2003-2 Plan") and to authorize the
issuance of a maximum of 200,000 shares of the Company's common stock that may
be distributed in settlement of Stock Unit Accounts under such Plan. On February
13, 2004 the Board amended the 2003-2 Plan to increase the number of authorized
shares under the Plan to 400,000.
Securities Authorized for Issuance Under Equity Compensation Plans
Plan category Number of securities to Weighted-average Number of securities remaining
be issued upon exercise exercise price of available for future issuance
of outstanding options, outstanding options, under equity compensation
warrants and rights warrants and rights plans (excluding securities
reflected in column (a))
(a) (b) (c)
---------------------------------- ---------------------- --------------------------------
Equity compensation plans 1993 SO Plan - 40,871<F1> $3.16<F1> 93,750
approved by security holders DSC Plan - None<F2> None<F2> None<F2>
2003 DSC Plan - None<F3> None<F3> None<F3>
Equity compensation plans 2003-2 DSC Plan - 214,116<F4> $0.49<F5> 185,884
not approved by security
holders
---------------------------------- ---------------------- --------------------------------
Total All Plans - 254,987 $0.92 279,634
================================== ====================== ================================
- ---------------
<FN>
<F1>
The 1993 Stock Option Plan, as amended, authorized the issuance of 206,250 shares of common stock. Stockholders approved the
initial plan and all subsequent amendments.
<F2>
The Deferred Stock Compensation Plan was terminated effective January 31, 2003, and 350,000 shares of common stock were issued.
Stockholders approved the issuance of 200,000 shares under the Plan, but did not approve an amendment authorizing an additional
150,000 shares.
<F3>
The 2003 Deferred Stock Compensation Plan was terminated effective September 30, 2003 and 150,000 shares (the total number
authorized under the Plan) of common stock were issued.
<F4>
The 2003-2 Deferred Stock Compensation Plan, as amended, which authorizes 400,000 shares to be issued, is proposed to be
approved by the stockholders at the 2004 Annual Stockholders' Meeting.
<F5>
As of March 31, 2004, a total of 214,116.506 Stock Units had been credited to the Participants Stock Unit Accounts based upon
the Participants' deferral of $104,500 of Fees or Compensation.
</FN>
APPROVAL OF ADOPTION OF
THE BEARD COMPANY
2003-2 DEFERRED STOCK COMPENSATION PLAN
(Proposal No. 4)
The 2003-2 Plan, as amended, provides that it will become effective
September 30, 2003 subject to approval of the stockholders of the Company by the
affirmative vote of a majority of shares of the Company present, or represented,
and entitled to vote on the subject matter, at the 2004 Annual Meeting of
Stockholders of the Company at which a quorum is present or by a written consent
of the holders of a majority of the Company's then outstanding shares.
The 2003-2 Plan is intended to advance the interests of the Company and its
stockholders by providing a means to attract and retain highly-qualified persons
to serve as officers and Directors and to promote ownership by officers and
directors of a greater proprietary interest in the Company, thereby aligning
such interests more closely with the interests of stockholders of the Company.
In addition, due to the Company's recent and present need to conserve cash, it
has been a valuable tool in reducing the Company's cash outflow.
A copy of the 2003-2 Plan, as amended, is attached to this Proxy Statement
as Exhibit B and the description contained herein is qualified in its entirety
by reference to the complete text thereof. Capitalized terms used below not
otherwise defined herein shall have the meaning ascribed to them in the 2003-2
Plan.
As of April 14, 2004, the compensation and fees which had been credited to
the individual participants' Stock Unit Accounts in the 2003-2 Plan and which
will ultimately be converted into the Company's common stock, totaled
214,116.506.
The 2003-2 Plan enables officers and directors of the Company to defer
compensation and fees in cash and to elect payments of such compensation and
fees in the Company's common stock. All officers and directors are automatically
entitled to participate in the 2003-2 Plan. There are currently eight
individuals eligible for the 2003-2 Plan, including the five current executive
officers (two of whom are also directors - the "Executive Group"), and the three
current outside directors (the "Non-Executive Director Group"). Non-Executive
Directors may elect to defer a minimum of 25% of their compensation and fees or
a greater amount in 25% increments and officers may elect to defer a minimum of
10% of compensation and fees or a greater amount in 5% increments. All
compensation and/or fees deferred under the 2003-2 Plan will be credited to the
individual participant's Stock Unit Account and will then be converted into the
Company's common stock by dividing the amount of compensation and fees deferred
by the fair market value of one share of common stock as of the date the
compensation or fees would have otherwise been paid. Once a person ceases to be
an officer or director, their participation in the 2003-2 Plan automatically
terminates. The 2003-2 Plan complies with the requirements of Rule 16b-3 of the
Exchange Act. Following stockholder approval, a maximum of 400,000 Shares of the
Company's common stock may be issued under the 2003-2 Plan.
NEW PLAN BENEFITS
It is not possible to determine the benefits or amounts that may accrue to
(i) the Executive Group, which consists of W. M. Beard, Chairman and CEO, and
Herb Mee, Jr., President and CFO, or (ii) the Non-Executive Director Group,
consisting of Allan R. Hallock, Harlon E. Martin, Jr. and Ford C. Price, our
three outside directors. No Non-Executive Officers have participated in the
previous DSC Plans, and none are currently participating in the 2003-2 Plan.
If the 2003-2 Plan had been in effect for all of fiscal year 2003, if the
current participants had each participated in such plan for the entire fiscal
year at the rate at which they are currently participating, and if such plan had
terminated at the end of the fiscal year, the following results would have been
achieved:
Number of Units Average Value per
Amount Accrued/ Cost per Share at
Name and Position Deferred ($) Shares Issued<F1>) Unit/Share Year-end<F2>
----------------- ------------ ---------------- ---------- -----------
W. M. Beard, Chairman & CEO $121,300 157,262 $0.77 $0.25
Herb Mee, Jr., President & CFO $54,300 68,673 $0.79 $0.25
Allan R. Hallock, Director $9,000 12,173 $0.74 $0.25
Harlon E. Martin, Jr., Director $8,550 11,310 $0.76 $0.25
Ford C. Price, Director $9,000 12,173 $0.74 $0.25
Executive Group $175,600 225,935 $0.78 $0.25
Non-Executive Director Group $26,550 35,656 $0.74 $0.25
Non-Executive Officer Employee Group
$-0- $-0- $-0- N/A
- ---------------
<FN>
<F1>
Represents the number of Units that would have accrued to the respective participants, and the number of shares
of common stock that would been issued to each upon plan termination.
<F2>
Based upon the sale price of the last shares sold in fiscal year 2003.
</FN>
The Shares received by the participant in lieu of compensation and fees
will be maintained in each participant's Stock Unit Account until (i) the
participant ceases to be an officer or director, for any reason, or (ii)
termination of the 2003-2 Plan upon the earlier of the following events: (a) no
shares remain available under the 2003-2 Plan, (b) September 30, 2013, or (c)
action of the Board of Directors terminating the 2003-2 Plan. Upon any of these
events, the shares of common stock in each participant's Stock Unit Account will
be distributed. The participants will not have stockholder rights with respect
to these shares until this distribution.
The 2003-2 Plan may be amended or terminated without stockholder vote or
consent of the participants, unless required by Federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the shares are listed or quoted. If a vote is required it will be taken at
the next stockholders' meeting after such amendment or modification.
The 2003-2 Plan is administered by the Compensation Committee (the
"Committee"), which is composed of not less than two members of the Board of
Directors. No participant shall make any determination relating solely or
primarily to his or her own shares or Stock Unit Account. The Committee makes
all determinations necessary to administer the 2003-2 Plan, but each participant
solely has the right and authority to make an election to defer compensation and
fees pursuant to the 2003-2 Plan.
Approval of the adoption of the 2003-2 Plan requires the affirmative vote
of a majority of the Company's outstanding common and preferred stock present in
person or represented at the meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE BEARD COMPANY 2003-2 DEFERRED STOCK COMPENSATION PLAN, AS
AMENDED
RELATED PARTY TRANSACTIONS
Unitrust Credit Lines. In April 2000, William M. Beard and Lu Beard, as
trustees of the William M. Beard and Lu Beard 1988 Charitable Unitrust (the
"Trustees") provided a $1,000,000 revolving line of credit to the Company. The
original loan by the Trustees provided for a term of 15 months, 10% interest and
was subject to the terms of a promissory note and a letter loan agreement of
corresponding dates. The line of credit was increased several times, finally
increasing to $3,000,000 in October 2002. The interest rate remained at 10% with
the loan maturing on the earlier of (i) January 3, 2005, or (ii) within ten (10)
days after receipt of the McElmo Dome Settlement. As of December 31, 2003, the
line of credit had been fully utilized.
In November 2002, the Unitrust provided a supplemental $150,000 short-term
line of credit (the "Supplemental Line") maturing on October 31, 2003. The
Supplemental Line was also increased several times, finally increasing to
$375,000 in November of 2003, with the maturity extended to April 30, 2004. As
of December 31, 2003, $348,900 of the Supplemental Line had been utilized. The
Supplemental Line was also at 10% interest and was subject to the terms of a
promissory note and a supplemental letter loan agreement.
In May 2002, the Unitrust also purchased $120,000 of 10% Subordinated Notes
due September 30, 2003 (subsequently extended to March 31, 2005) in connection
with a $1,200,000 private placement of notes (the "2002 Notes") and warrants by
the Company. The Unitrust received warrants to purchase 22,500 shares of common
stock in connection with the offering, with exercise prices ranging from
$0.739868 to $0.75 per share. As a condition of the private placement, a Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement were
recorded against the Company's working and overriding royalty interests in the
McElmo Dome field (the "McElmo Dome Collateral") pursuant to which the Unitrust
was granted a security interest pari passu with the other note holders. The
assets serving as collateral for these debt instruments had a recorded value on
the Company's books of $329,000 as of December 31, 2003.
Borrowings from Other Related Entities. In February of 2003 B&M Limited
("B&M"), a general partnership owned by the Company's Chairman and President,
purchased a $50,000 10% subordinated note in connection with the private
placement of $600,000 of notes (the "2003 Notes") and warrants by the Company.
B&M received warrants to purchase 5,000 shares of common stock at an exercise
price of $0.50 per share in connection with the offering. The 2003 Notes had a
maturity date of April 1, 2004, which automatically extended to January 1, 2005
if they had not been paid by such date. The 2003 Notes purchased by B&M were on
terms less favorable than those of the other purchaser, but were also secured by
the McElmo Dome Collateral described above. In connection with the sale of the
2003 Notes a new Deed of Trust was recorded which established the priorities as
to repayment among the 2002 Noteholders, the 2003 Noteholders and the Unitrust.
Subsequent Events. Upon receipt of the second installment of the McElmo
Dome Settlement on March 26, 2004, the 2002 and 2003 Notes were paid in full.
All accrued interest to such date was paid to the Unitrust, the principal
balance due to the Unitrust was reduced to $2,800,000, both Unitrust lines of
credit were retired, and the $2,800,000 principal balance due to the Unitrust
was reflected in a new 10% note maturing on July 1, 2005. The Unitrust continues
to be secured by the McElmo Dome Collateral.
In November 2003 the Company borrowed $200,000 from a trust for the benefit
of the Chairman's brother. The note, which originally matured on January 18,
2004, was extended to April 30, 2004. The note, which is unsecured, bears
interest at 12% and the note holder will also receive an $8,000 loan fee at the
extended maturity.
VOTE REQUIRED
The holders of shares entitled to cast a majority of the votes, present in
person or by proxy, constitute a quorum for the transaction of business at the
meeting. The affirmative vote of holders of the Company's stock entitled to cast
a majority of the total votes outstanding will be required to approve the
amendments to the Company's Certificate of Incorporation to increase the
authorized common stock and to effect the stock split. The affirmative vote of
holders of the Company's stock entitled to cast a majority of the votes
represented at the meeting will be required to approve the adoption of the
2003-2 Plan, as amended. The election of directors shall be by a plurality of
the vote of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors.
The office of the Company's Secretary appoints an inspector of election to
tabulate all votes and to certify the results of all matters voted upon at the
annual meeting. Neither the corporate law of the State of Oklahoma, the state in
which the Company is incorporated, nor the Company's Certificate of
Incorporation or By-Laws have any specific provisions regarding the treatment of
abstentions and broker non-votes. It is the Company's policy to count
abstentions or broker non-votes for purposes of determining the presence of a
quorum at the meeting; to treat abstentions as votes not cast but treat them as
shares represented at the meeting for determining results or actions requiring
the affirmative vote of a majority of the votes represented at the meeting and
to count abstentions and broker non-votes for the purposes of determining
results of actions requiring approval of a majority of the total votes
outstanding. Abstentions and broker non-votes will have the effect of negative
votes for purposes of approving the amendments to the Company's Certificate of
Incorporation. Neither abstentions nor broker non-votes will be counted in
determining the plurality required for election of Directors.
STOCKHOLDER PROPOSALS
The Board of Directors anticipates that next year's annual meeting will be
held during the first week of June 2005. Any proposals of stockholders intended
to be presented at the 2005 Annual Meeting of Stockholders must be received by
the Company not later than February 6, 2005 in order for the proposals to be
included in the proxy statement and proxy card relating to such meeting. For any
other proposal that a stockholder wishes to have considered at the 2005 annual
meeting, the Company must receive written notice of such proposal not later than
April 4, 2005. Proposals that are not received by this date will be considered
untimely. In addition, proposals must comply with the Company's bylaws and the
rules and regulations of the Securities and Exchange Commission. It is suggested
that proponents submit their proposals by certified mail, return receipt
requested. No stockholder proposals were received for inclusion in this Proxy
Statement.
THE BEARD COMPANY
By Order of the Board of Directors
Rebecca G. Witcher
Secretary
Oklahoma City, Oklahoma
April 29, 2004
Exhibit A
AMENDED
CERTIFICATE OF INCORPORATION
OF
THE BEARD COMPANY
The Beard Company, an Oklahoma corporation (the "Corporation"), hereby
certifies:
1. That, at a duly called and held meeting of the Corporation's board of
directors, resolutions were duly adopted setting forth a proposed amendment to
the Certificate of Incorporation of the Corporation, declaring the amendment
advisable and submitting such amendment to its shareholders for consideration.
2. That, thereafter, shareholders approved the amendment at a duly called
and held meeting of the shareholders of the Corporation.
3. That, the portion of Article Five of the Certificate of Incorporation
that currently reads as follows:
"ARTICLE FIVE
The aggregate number of shares which the Corporation shall have authority
to issue is as follows:
Class Number of Shares Par Value
----- ---------------- ---------
Preferred Stock 5,000,000 $1.00
Common Stock 7,500,000 $.001333"
shall be deleted in its entirety and replaced with the following:
"ARTICLE FIVE
The aggregate number of shares which the Corporation shall have authority
to issue is as follows:
Class Number of Shares Par Value
----- ---------------- ---------
Preferred Stock 5,000,000 $1.00
Common Stock 15,000,000 $.0006665"
4. That the amendment was duly adopted in accordance with the provisions of
Section 77 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed and attested to by duly authorized officers of the Corporation on
_____________, 2004.
______________________________________
Herb Mee, Jr., President
ATTEST:
Rebecca G. Witcher, Secretary
Exhibit B
AMENDMENT NO. ONE
TO
THE BEARD COMPANY
2003-2 DEFERRED STOCK COMPENSATION PLAN
Adopted: September 30, 2003
Amended: February 13, 2004
AMENDMENT NO. ONE
TO
THE BEARD COMPANY
2003-2 DEFERRED STOCK COMPENSATION PLAN
Page
----
ARTICLE I Purpose and Effective Date................................... 1
ARTICLE II Definitions.................................................. 1
ARTICLE III Shares Available Under the Plan.............................. 3
ARTICLE IV Administration............................................... 3
ARTICLE V Eligibility.................................................. 3
ARTICLE VI Deferral Elections In Lieu of Cash Payments.................. 3
ARTICLE VII Settlement of Stock Units.................................... 4
ARTICLE VIII Unfunded Status.............................................. 5
ARTICLE IX Designation of Beneficiary................................... 5
ARTICLE X Adjustment Provisions........................................ 5
ARTICLE XI Compliance with Rule 16b-3................................... 6
ARTICLE XII General Provisions........................................... 6
AMENDMENT NO. ONE
TO
THE BEARD COMPANY
2003-2 DEFERRED STOCK COMPENSATION PLAN
ARTICLE I
PURPOSE AND EFFECTIVE DATE
1.1 Purpose. The Beard Company 2003-2 Deferred Stock Compensation Plan (the
"Plan") is intended to advance the interests of the Company and its shareholders
by providing a means to attract and retain highly-qualified persons to serve as
Officers and Directors and to promote ownership by Officers and Directors of a
greater proprietary interest in the Company, thereby aligning such interests
more closely with the interests of shareholders of the Company.
1.2 Effective Date. This Plan, as amended, shall become effective September
30, 2003 subject to approval of the shareholders of the Company by the
affirmative vote of a majority of shares of the Company present, or represented,
and entitled to vote on the subject matter, at the 2004 Annual Meeting of
Shareholders of the Company at which a quorum is present or by a written consent
of the holders of a majority of the Company's then outstanding shares.
ARTICLE II
DEFINITIONS
The following terms shall be defined as set forth below:
2.1 "Board" means the Board of Directors of the Company.
2.2 "Compensation" means all or part of the cash remuneration payable to an
Officer in his or her capacity as an Officer.
2.3 "Committee" means the Compensation Committee of the Board.
2.4 "Company" means The Beard Company, an Oklahoma corporation, or any
successor thereto.
2.5 "Deferral Date" means the date Fees or Compensation would otherwise
have been paid to the Participant.
2.6 "Director" means any individual who is a member of the Board.
2.7 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act include rules thereunder and
successor provisions and rules thereto.
2.8 "Fair Market Value" means the "Market Price" as defined in the
Certificate of Designations for the Company's outstanding Series A Convertible
Preferred Stock (the "Certificate"); provided, however, that in the event that
Fair Market Value is less than the "Conversion Price" as defined in the
Certificate, then the Fair Market Value shall be the average of (i) the last
sale of such security on any day there are sales of such securities on the OTC
Bulletin Board(R), or (ii) if there have been no sales on the OTC Bulletin
Board(R) on any day, the best asked price at the end of such day, in each such
case averaged over a period of 21 days consisting of the day as of which "Market
Price" is being determined and the 20 consecutive business days prior to such
day.
2.9 "Fees" means all or part of any retainer and/or fees payable to a
Director in his or her capacity as a Director.
2.10 "Officer" means any person so designated by the Board.
2.11 "Participant" means a Director or Officer who defers Fees or
Compensation under Article VI of this Plan.
2.12 "Reconciliation Events" means certain events which cause the amount of
Fees or Compensation actually paid during a period to differ from the amount of
Fees credited pursuant to Section 6.4, including, but not limited to, the
following: an increase or decrease in Fees paid, additional meetings held,
missed attendance at certain meetings, newly elected directors and Terminations
of Service.
2.13 "Secretary" means the Corporate Secretary or any Assistant Corporate
Secretary of The Beard Company.
2.14 "Shares" means shares of the common stock of The Beard Company, par
value $.001333 per share, or of any successor corporation or other legal entity
adopting this Plan.
2.15 "Stock Units" means the credits to a Participant's Stock Unit Account
under Article VI of this Plan, each of which represents the right to receive one
Share upon settlement of the Stock Unit Account.
2.16 "Stock Unit Account" means the bookkeeping account established by the
Company pursuant to Section 6.4.
2.17 "Termination Date" means the date the Plan terminates pursuant to
Section 12.8.
2.18 "Termination of Service" means termination of service as a Director or
Officer in any of the following circumstances:
(a) Where the Participant voluntarily resigns or retires;
(b) Where a Director is not re-elected (or elected in the case of an
appointed Director) to the Board by the shareholders, or an Officer is not
re-elected as an Officer by the Board; or
(c) Where the Participant dies.
ARTICLE III
SHARES AVAILABLE UNDER THE PLAN
Subject to adjustment as provided in Article X, the maximum number of
Shares that may be distributed in settlement of Stock Unit Accounts under this
Plan shall not exceed 400,000. Such Shares may include authorized but unissued
Shares or treasury Shares.
ARTICLE IV
ADMINISTRATION
4.1 This Plan shall be administered by the Board's Compensation Committee,
or such other committee or individual as may be designated by the Board.
Notwithstanding the foregoing, no Director who is a Participant under this Plan
shall participate in any determination relating solely or primarily to his or
her own Shares, Stock Units or Stock Unit Account.
4.2 It shall be the duty of the Committee to administer this Plan in
accordance with its provisions and to make such recommendations of amendments or
otherwise as it deems necessary or appropriate.
4.3 The Committee shall have the authority to make all determinations it
deems necessary or advisable for administering this Plan, subject to the
limitations in Section 4.1 and other explicit provisions of this Plan.
ARTICLE V
ELIGIBILITY
Each Director and Officer of the Company shall be eligible to defer Fees
and Compensation under Article VI of this Plan.
ARTICLE VI
DEFERRAL ELECTIONS IN LIEU OF CASH PAYMENTS
6.1 General Rule. Each Director or Officer may, in lieu of receipt of Fees
or Compensation, defer such Fees or Compensation in accordance with this Article
VI.
6.2 Timing of Election. Each eligible Director or Officer who wishes to
defer Fees or Compensation under this Plan must make an irrevocable written
election at least six (6) months prior to the beginning of the date on which the
Fees or Compensation would otherwise be paid; provided, however, that with
respect to any election made by a newly-elected or appointed Director or Officer
("New Participant Elections"), the Company shall hold such deferred Fees or
Compensation (without interest) and credit them pursuant to Section 6.4 on or as
of the date which follows by six months such deferral election. An election by a
Director or an Officer previously in effect September 30, 2003 shall be deemed
to be continuing and therefore applicable to Fees or Compensation to be paid in
periods unless the Director or Officer revokes or changes such election by
filing a new election form thirty (30) days prior to the next payment date for
Fees or Compensation.
6.3 Form of Election. An election shall be made in a manner satisfactory to
the Secretary. Generally, an election shall be made by completing and filing the
specified election form with the Secretary of the Company within the period
described in Section 6.2. At minimum, the form shall require the Director or
Officer to specify the following:
(a) a percentage (for Directors in 25% increments, and for Officers
not less than 10% and in 5% increments thereafter), not to exceed an
aggregate of 100% of the Fees or Compensation to be deferred under this
Plan; and
(b) the manner of settlement in accordance with Section 7.2.
6.4 Establishment of Stock Unit Account. The Company will establish a Stock
Unit Account for each Participant. All Fees or Compensation deferred pursuant to
this Article VI shall be credited to the Participant's Stock Unit Account as of
the Deferral Date and converted to Stock Units as follows: The number of Stock
Units shall equal the deferred Fees or Compensation divided by the Fair Market
Value of a Share on the Deferral Date, with fractional units calculated to three
(3) decimal places.
6.5 Credit of Dividend Equivalents. As of each dividend payment date with
respect to Shares, each Participant shall have credited to his or her Stock Unit
Account an additional number of Stock Units equal to: the per-share cash
dividend payable with respect to a Share on such dividend payment date
multiplied by the number of Stock Units held in the Stock Unit Account as of the
close of business on the record date for such dividend divided by the Fair
Market Value of a Share on such dividend payment date. If dividends are paid on
Shares in a form other than cash, then such dividends shall be notionally
converted to cash, if their value is readily determinable, and credited in a
manner consistent with the foregoing and, if their value is not readily
determinable, shall be credited "in kind" to the Participant's Stock Unit
Account.
6.6 Reconciliations. The Company shall record all Reconciliation Events
and, as soon as reasonably practicable after the end of each calendar quarter or
after a Termination of Service, make appropriate adjustments to each
Participant's Stock Unit Account to reflect such Reconciliation Events;
provided, however, the Fair Market Value used to determine such adjustments
shall be the same Fair Market Value used to determine the number of Stock Units
credited to such Participant's Stock Unit Account.
ARTICLE VII
SETTLEMENT OF STOCK UNITS
7.1 Settlement of Account. The Company will settle a Participant's Stock
Unit Account in the manner described in Section 7.2 as soon as administratively
feasible following the earlier of (i) notification of such Participant's
Termination of Service or (ii) the Termination Date.
7.2 Payment Options. An election filed under Article VI shall specify
whether the Participant's Stock Unit Account is to be settled by delivering to
the Participant (or his or her beneficiary) the number of Shares equal to the
number of whole Stock Units then credited to the Participant's Stock Unit
Accounts, in (a) a lump sum, or (b) substantially equal annual installments over
a period not to exceed ten (10) years. If, upon lump sum distribution or final
distribution of an installment, less than one whole Stock Unit is credited to a
Participant's Stock Unit Account, cash will be paid in lieu of fractional shares
on the date of such distribution.
7.3 Continuation of Dividend Equivalents. If payment of Stock Units is
deferred and paid in installments, the Participant's Stock Unit Account shall
continue to be credited with dividend equivalents as provided in Section 6.5.
7.4 In Kind Dividends. If any "in kind" dividends were credited to the
Participant's Stock Unit Account under Section 6.5, such dividends shall be
payable to the Participant in full on the date of the first distribution of
Shares under Section 7.2.
ARTICLE VIII
UNFUNDED STATUS
The interest of each Participant in any Fees or Compensation deferred under
this Plan (and any Stock Units or Stock Unit Account relating thereto) shall be
that of a general creditor of the Company. Stock Unit Accounts, and Stock Units
(and, if any, "in kind" dividends) credited thereto, shall at all times be
maintained by the Company as bookkeeping entries evidencing unfunded and
unsecured general obligations of the Company.
ARTICLE IX
DESIGNATION OF BENEFICIARY
Each Participant may designate, on a form provided by the Committee, one or
more beneficiaries to receive the Shares described in Section 7.2 in the event
of such Participant's death. The Company may rely upon the beneficiary
designation last filed with the Committee, provided that such form was executed
by the Participant or his or her legal representative and filed with the
Committee prior to the Participant's death.
ARTICLE X
ADJUSTMENT PROVISIONS
In the event any recapitalization, reorganization, merger, consolidation,
spin-off, combination, repurchase, exchange of shares or other securities of the
Company, stock split or reverse split, or similar corporate transaction or event
affects Shares such that an adjustment is determined by the Board or Committee
to be appropriate to prevent dilution or enlargement of Participants' rights
under this Plan, then the Board or Committee will, in a manner that is
proportionate to the change to the Shares and is otherwise equitable, adjust the
number or kind of Shares to be delivered upon settlement of Stock Unit Accounts
under Article VII.
ARTICLE XI
COMPLIANCE WITH RULE 16b-3
Subject to Section 6.2, it is the intent of the Company that this Plan
comply in all respects with applicable provisions of Rule 16b-3 under the
Exchange Act in connection with the deferral of Fees and Compensation.
ARTICLE XII
GENERAL PROVISIONS
12.1 No Right to Continue as an Officer or Director. Nothing contained in
this Plan will confer upon any Participant any right to continue to serve as an
Officer or Director.
12.2 No Shareholder Rights Conferred. Nothing contained in this Plan will
confer upon any Participant any rights of a shareholder of the Company unless
and until Shares are in fact issued or transferred to such Participant in
accordance with Article VII.
12.3 Change to the Plan. The Board may amend, alter, suspend, discontinue,
extend, or terminate the Plan without the consent of shareholders or
Participants, except that any such action will be subject to the approval of the
Company's shareholders at the next annual meeting of shareholders having a
record date after the date such action was taken if such stockholder approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Shares may then be listed or
quoted, or if the Board determines in its discretion to seek such shareholder
approval; provided, however, that, without the consent of an affected
Participant, no such action may materially impair the rights of such Participant
with respect to any Stock Units credited to his or her Stock Unit Account.
12.4 Consideration; Agreements. The consideration for Shares issued or
delivered in lieu of payment of Fees or Compensation will be the service of the
Officer or Director during the period to which the Fees or Compensation paid in
the form of Shares related.
12.5 Compliance with Laws and Obligations. The Company will not be
obligated to issue or deliver Shares in connection with this Plan in a
transaction subject to the registration requirements of the Securities Act of
1933, as amended, or any other federal or state securities law, any requirement
under any listing agreement between the Company and any national securities
exchange or automated quotation system or any other laws, regulations, or
contractual obligations of the Company, until the Company is satisfied that such
laws, regulations, and other obligations of the Company have been complied with
in full. Certificates representing Shares delivered under the Plan will be
subject to such stop-transfer orders and other restrictions as may be applicable
under such laws, regulations, and other obligations of the Company, including
any requirement that a legend or legends be placed thereon.
12.6 Limitations on Transferability. Stock Units and any other right under
the Plan that may constitute a "derivative security" as generally defined in
Rule 16a-1(c) under the Exchange Act will not be transferable by a Participant
except by will or the laws of descent and distribution (or to a designated
beneficiary in the event of a Participant's death); provided, however, that such
rights may be transferred to one or more trusts or other beneficiaries during
the lifetime of the Participant in connection with the Participant's estate
planning, but only if and to the extent then permitted under Rule 16b-3 and
consistent with the registration of the offer and sale of Shares on Form S-8 or
a successor registration form of the Securities and Exchange Commission. Stock
Units and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to the claims of
creditors.
12.7 Governing Law. The validity, construction, and effect of the Plan and
any agreement hereunder will be determined in accordance with the laws of the
State of Oklahoma, without giving effect to principles of conflicts of laws, and
applicable federal law.
12.8 Plan Termination. Unless earlier terminated by action of the Board or
Executive Committee of the Board, the Plan will remain in effect until the
earlier of (i) such time as no Shares remain available for delivery under the
Plan and the Company has no further rights or obligations under the Plan or (ii)
September 30, 2013.
PROXY
THE BEARD COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS MEETING ON JUNE 15, 2004
The undersigned stockholder of The Beard Company, an Oklahoma corporation,
hereby appoints W. M. Beard and Herb Mee, Jr. or either of them, with full power
of substitution, as true and lawful agents and proxies to represent the
undersigned and vote all shares of stock of The Beard Company owned by the
undersigned in all matters coming before the 2004 Annual Meeting of Stockholders
(or any adjournment thereof) of The Beard Company to be held at the Hilton Inn
Northwest, located at 2945 N. W. Expressway, Oklahoma City, Oklahoma 73112, on
Tuesday, June 15, 2004 at 9:00 a.m. local time. The Board of Directors
recommends a vote "FOR" the following matters, all as more specifically set
forth in the Proxy Statement:
1. Approval to amend the Certificate of Incorporation of The Beard Company to
increase the authorized common stock. A copy of the proposed Amended
Certificate of Incorporation is attached to the accompanying Proxy
Statement as Exhibit A.
FOR AGAINST ABSTAIN
2. Approval to amend the Certificate of Incorporation of The Beard Company to
reduce the par value of the authorized common stock by one-half and to
effect a two-for-one split of the common stock.
FOR AGAINST ABSTAIN
3. Election of Directors.
FOR the nominees listed below
Harlon E. Martin, Jr. - three year term expiring in 2007
Herb Mee, Jr. - three year term expiring in 2007
WITHHOLD AUTHORITY to vote for the nominees listed below:
------------------------------ -------------------------------
4. Approval of Adoption of The Beard Company 2003-2 Deferred Stock
Compensation Plan, as amended, a copy of which is attached to the
accompanying Proxy Statement as Exhibit B.
FOR AGAINST ABSTAIN
5. In their discretion, the Proxies are authorized to vote with respect to any
other matters that may come before the Meeting or any adjournment thereof,
including matters incident to its conduct.
I/WE RESERVE THE RIGHT TO REVOKE THE PROXY AT ANY TIME BEFORE THE EXERCISE
THEREOF. WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
SPECIFIED ABOVE BY THE STOCKHOLDER. TO THE EXTENT CONTRARY SPECIFICATIONS
ARE NOT GIVEN, THIS PROXY WILL BE VOTED "FOR" ITEMS 1, 2 AND 4 AND "FOR"
THE ELECTION OF THE DIRECTORS NOMINATED.
Dated_________________________________________, 2004
---------------------------------------------------
(Signature)
---------------------------------------------------
(Signature if held jointly)
Please sign exactly as your name appears on your
stock certificate indicating your official position
or representative capacity, if applicable; if
shares are held jointly, each owner should sign.
IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY
BEFORE THE DATE OF THE ANNUAL MEETING IN THE
ENCLOSED ENVELOPE.