SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to
Section 240.14a-11(c) or Section 240.14a-12
The Beard Company
(Name of Registrant as Specified in its Charter)
_______________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
Title of each class of securities to which transaction applies:
_________________________________________________
Aggregate number of securities to which transaction applies:
_________________________________________________
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
_________________________________________________
Proposed maximum aggregate value of transaction:
_________________________________________________
Total fee paid: ________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount previously paid:________________
Form, Schedule or Registration Statement No.:__________________
Filing Party:_________________________________
Date Filed:_______________________________
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
JUNE 9, 2005
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
Thursday, June 9, 2005
TO THE STOCKHOLDERS OF THE BEARD COMPANY:
We will hold our Annual Meeting of Stockholders at the Waterford Marriott
Hotel, located at 6300 Waterford Boulevard, Oklahoma City, Oklahoma 73118 on
Thursday, June 9, 2005 at 9:00 a.m. local time. We are holding the meeting for
the following purposes:
(1) To elect one member of the Board of Directors for a three (3) year term.
(2) Ratification of the appointment of Cole & Reed, P.C. as our independent
auditors for fiscal year 2005.
(3) To transact such other business as may properly come before the meeting or
any postponement or adjournment thereof.
Holders of record of our common and preferred stock at the close of
business on April 8, 2005, are entitled to vote at the meeting.
In addition to the proxy statement and proxy card, a copy of our 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. VOTH
Rebecca G. Voth
Secretary
Oklahoma City, Oklahoma
April 29, 2005
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 of proxies to be voted at our
Annual Meeting of Stockholders, to be held on June 9, 2005, and at any meeting
following postponement or adjournment of the annual meeting. Unless the context
requires otherwise, all references to "we" and "us" and "our" refer to The Beard
Company.
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 Waterford Marriott Hotel,
6300 Waterford Boulevard, Oklahoma City, Oklahoma 73118.
We are first mailing this proxy statement, the proxy card and voting
instructions on April 29, 2005, to stockholders of record at the close of
business on April 8, 2005, 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 nominee for Director named below (Proposal No. 1). To the extent contrary
specifications are not given, your proxy will be voted FOR the approval of
Proposal No. 2 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 our best interest. 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 two Proposals set forth below.
The accompanying form of proxy has been prepared at our direction 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.
We 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
our behalf in person or by telephone by our directors, officers or employees,
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
our stock.
OUR 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, 2004, IS INCLUDED HEREWITH.
GOVERNANCE OF THE COMPANY
Pursuant to the Oklahoma General Corporation Law and our by-laws, our
business, property and affairs are managed by or under the direction of the
Board of Directors. Members of the Board are kept informed of our 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: W.M.
Beard, Allan R. Hallock, Harlon E. Martin, Jr., Herb Mee, Jr. and Ford C. Price.
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) and Rule 10A-3(b) 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 each of the three standing committees.
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 2004 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 2004. 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 our internal controls and financial reporting process
and the integrity of our financial statements;
o The independence and performance of our independent auditor; and
o Our compliance with legal and regulatory authority.
The committee meets periodically with management to consider the adequacy
of our internal controls and the financial reporting process. It also discusses
these matters with our independent auditors and with our appropriate 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 six
times in 2004.
The committee regularly meets privately with the independent auditor, 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 our audited financial statements for the year ended December 31,
2004.
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
our proxy statement in connection with our 2003 Annual Meeting of Stockholders.
In its corporate oversight role, the Committee reviews our 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 six meetings during 2004. The meetings were designed to
facilitate open communication between the Committee, management and our
independent public accountants, Cole & Reed, P.C. ("C&R"). At such meetings the
Committee reviewed and discussed with C&R and management our audited
consolidated financial statements and, when applicable, our unaudited interim
financial statements.
The Committee approves, in advance, all auditing services and permitted
non-audit services to be performed for us by our 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
our audited financial statements be included in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission for the year ended December
31, 2004.
Although we are not listed on the Nasdaq Stock Market, all of the members
of the Audit Committee are independent as defined in Rule 4200(a)(15) of the
NASD's listing standards.
The Committee has considered the services rendered by our 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 2004 and
2003 were as follows:
Fiscal Year 2004 Fiscal Year 2003
---------------- ----------------
Audit fees.............. $42,000(A) $42,000(B)
Audit-related fees(C)... 6,500 6,110
Tax fees................ 1,000 1,680
All other fees.......... -- --
____________________
(A) Includes $12,000 for services rendered in 2004 and $30,000 for services
rendered in 2005.
(B) Includes $11,000 for services rendered in 2003 and $31,000 for services
rendered in 2004.
(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 us by our
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.
The rules of the Securities and Exchange Commission state that an auditor
is not independent of an audit client if the services it provides to the client
are not appropriately approved. During 2004 each new engagement was approved in
advance by the Audit Committee except for a few instances where guidance was
requested for tax services regarding specific issues 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 required to be
pre-approved by the committee that were pre-approved by the committee for the
periods indicated:
Fiscal Year 2004 Fiscal Year 2003
---------------- ----------------
Audit fees............... 100% 100%
Audit-related fees....... 100% 100%
Tax fees................. 100% 100%
All other fees........... -- --
Appointment of Auditors for 2005
The Audit Committee has reappointed Cole & Reed, P.C. as the independent
accountants to audit and report on our consolidated financial statements for
2005.
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 principal responsibilities of the Nominating/Corporate Governance
Committee are as follows:
o Developing and recommending criteria for evaluating and selecting
candidates for election or re-election to the Board, and assisting the
Board in identifying and attracting qualified director candidates;
o Selecting and making recommendations to the Board on the director
nominees for the next annual meeting of stockholders, and recommending
individuals to fill vacancies when they occur;
o Determining Board committee structure and membership;
o Reviewing at least annually the adequacy of our corporate governance
principles and practices, and recommending any proposed changes to the
Board for approval;
o Reviewing any issues regarding the independence of directors or
involving potential conflicts of interest, evaluating any change to
the status of individual directors and making recommendations
regarding the propriety of continued service; and
o Developing and implementing an annual procedure for evaluating the
Board's performance.
The Committee has adopted a Nominating/Corporate Governance Committee
charter. 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
Committee will consider nominees recommended by our shareholders if such
recommendations are made in writing to the Committee and delivered not less than
120 days before any meeting at which any directors are to be elected.
Nominations must include the full name of the proposed nominee, a brief
description of the proposed nominee's business experience for at least the
previous five years, and a representation that the nominating shareholder is the
beneficial record owner of our common stock. Such submission must be accompanied
by the written consent of the proposed nominee to be named as a nominee and to
serve as a director, if elected. If the shareholder complies with these
procedures, the shareholder's nominees will receive the same consideration that
nominees developed by the Committee receive. Nominations should be delivered to
the Committee at the following address: Nominating/Corporate Governance
Committee, Attention: Harlon E. Martin, Jr., c/o The Beard Company, 5600 N. May
Avenue, Suite 320, Oklahoma City, OK 73112.
Currently, we do not employ or pay a fee to any third party to identify or
evaluate, or assist in identifying or evaluating, potential director nominees.
The nominee for director this year is a sitting director who was nominated
by the Committee. Shareholders did not recommend any nominees for director at
the 2005 Annual Stockholders Meeting.
The Committee met one time in 2004.
Compensation Committee
The principal functions and requirements of the Compensation Committee are
as follows:
o Reviews the objectives, structure, cost and administration of our
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 our performance versus the CEO's compensation and establishes
measures of the Company's performance upon which the CEO's
compensation is based.
o Administers our compensation, benefit and incentive plans.
The committee met one time in 2004.
Code of Ethics
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/governance. 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 $7,800, $8,300 and $8,300,
respectively, of deferred fees and compensation under our Deferred Stock
Compensation Plan (the "Plan") for services rendered in 2004. (See: "EXECUTIVE
COMPENSATION - Deferred Stock Compensation Plan" for additional details). Under
the Plan, the electing officers and directors could defer all or a portion of
their fees and compensation until termination of service or termination of the
Plan, at which time the accounts are settled by distribution of a number of
shares of our common stock equal to the number of Units credited under the Plan.
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 2004 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. Martin and Price received
$2,300 each for such attendance in 2004, and Mr. Hallock received $1,800.
Messrs. Hallock, Martin and Price also receive a small year-end bonus depending
upon their length of service as directors of us and Beard Oil Company ("Beard
Oil"). Such bonus amounted to $800 each for Messrs. Hallock and Price and $350
for Mr. Martin in 2004. All of the directors deferred their quarterly fees,
attendance fees and year-end bonuses pursuant to the Plan. We also provided
life, health and accident insurance benefits for our 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 $4,165,
$655 and $352, respectively, of such compensation during the year. None of the
directors received additional compensation in 2004 for their committee
participation. Outside directors also receive reimbursement of out-of-pocket
expenses incurred in connection with attendance at meetings.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee in 2004 were Allan R. Hallock,
Harlon E. Martin, Jr., and Ford C. Price. None of the members have ever been an
officer or employee of us or any of our subsidiaries, and no "compensation
committee interlocks" existed during 2004.
Stockholder Communications with Directors
Our 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
6608 N. Western #627
Oklahoma City, OK 73116
Your letter should indicate that you are a stockholder. 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
Our 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 2004 one of our outside directors, Mr.
Price, attended our annual stockholders' meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own more than ten percent (10%) of a
registered class of our equity securities (collectively "reporting persons"), to
file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of our common stock and other equity
securities. Reporting persons are required by the SEC regulations to furnish us
with copies of all Section 16(a) forms they file.
To our knowledge, based solely on a review of Forms 3, 4 and 5 furnished to
us and information received from each reporting person which includes written
representations that no reports were required during the fiscal year ended
December 31, 2004, all Section 16(a) filing requirements applicable to its
reporting persons were complied with.
ELECTION OF DIRECTORS
(Proposal No. 1)
Our 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. Our 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 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, one director is to be elected by the common stockholders
for a three-year term expiring at the date of the Annual Meeting of Stockholders
in 2008. The term of Mr. W. M. Beard expires this year, and he will be the
nominee for a term expiring in 2008
The persons named in the proxy card will vote such proxy for the election
of the above-named nominee, unless you indicate that your vote should be
withheld. Such nominee has served continuously as director of the Company or of
its predecessors since first elected. Mr. Beard has indicated to us that he will
serve if elected. We do not anticipate that the 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 a director at this
meeting will be by plurality vote. The director elected at the Annual Meeting
will serve for a three-year term and until his successor is elected and
qualified, in accordance with the provisions of the Certificate and our By-Laws.
Certain information with respect to the nominee for Director and four
Directors whose terms do not expire this year is as follows:
Nominee for Election for a Term of Three Years Expiring in 2008:
Nominee (age), year first became a Director of The Beard Company or Beard Oil
Company:
W. M. Beard (76), 1974
- ----------------------
W.M. Beard has served as our Chairman of the Board and Chief Executive
Officer since 1992. He previously served as our President and Chief Executive
Officer from our 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 us and Beard Oil since their incorporation. Mr. Beard
has been actively involved since 1952 in all management phases of us and Beard
Oil from their inception, and as a partner of their predecessor company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE NOMINEE.
Directors to Continue in Office with Terms Expiring in 2006:
- ------------------------------------------------------------
Allan R. Hallock (75), 1986
- ---------------------------
Allan R. Hallock was elected as our director 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 (67), 1987
- ------------------------
Ford C. Price was elected as our director 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.
Directors to Continue in Office with Terms Expiring in 2007:
- ------------------------------------------------------------
Harlon E. Martin, Jr. (57), 1997
- --------------------------------
Harlon E. Martin, Jr. was elected as our director 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 us.
Herb Mee, Jr. (76), 1974
- ------------------------
Herb Mee, Jr. has served as our President since 1989 and as our Chief
Financial Officer since 1993. He has served as President of Beard Oil, our
predecessor, since 1973 and as its Chief Financial Officer since 1993. He has
also served as a director of us 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.
There is no family relationship between any of our directors or executive
officers.
VOTING SECURITIES OUTSTANDING
As of April 8, 2005, 5,255,315 shares of our common stock and 27,838 shares
of our preferred stock 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 10.31114354 (287,041) 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 5,542,356
votes are entitled to be cast at the meeting, and the holder of the preferred
stock is entitled to cast 13.62% of such votes. Only holders of common stock and
preferred stock of record at the close of business on April 8, 2005, will be
entitled to vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The table below sets forth information, as of April 8, 2005, with respect
to the beneficial ownership of shares of the company by each person who is known
to us to be the owner of five percent of our outstanding stock, by each Director
or nominee for Director, by each of the executive officers named in the
Compensation Table contained at page 17 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.
Options, Total Shares
Warrants and Beneficially
Benefit Owned
Outstanding Plan Shares Assuming Percent of
Shares Exercisable Exercise of Shares
Beneficially Within 60 Column (B) Percent of Entitled
Owned Days Shares Beneficial to Vote at the
Name (A) (B) (C) Ownership Meeting<F15>
---- --- --- --- --------- ------------
John Hancock Financial Services,
Inc.("Hancock")............................ 755,101<F1> None 755,101<F1> 13.62% 13.62%
57th Floor, 200 Clarendon Street
Boston, Massachusetts 02117
7HBF, Ltd. ("7HBF")........................ None 1,755,000<F2> 1,755,000<F2> 25.03% None
2891 Glenda Avenue
Fort Worth, Texas 76117-4391
The William M. Beard and Lu Beard
1988 Charitable Unitrust ("Unitrust")...... 828,958<F3> None 828,958<F3> 13.62% 13.01%
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.................................... 375,282<F4> None 375,282<F4> 6.67% 6.34%
5101 N. Classen, Suite 620
Oklahoma City, OK 73118
Boatright Family, L.L.C.
("Boatright").............................. None 320,000<F5> 320,000<F5> 5.74% None
4932 N. W. 31st Street
Oklahoma City, OK 73122
Allan R. Hallock Trust ("ARH Trust")....... 286,874<F6> 60,000<F6> 346,874<F6> 6.19% 4.92%
#2 Cleek Way
Columbine Valley, CO 80123
W. M. Beard................................ 2,036,994<F7> 454,922<F7> 2,491,916<F7> 32.17% 26.88%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Lu Beard................................... 831,476<F8> None 831,476<F8> 13.66% 13.05%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Herb Mee, Jr. ............................ 740,088<F9> 209,549<F9> 949,636<F9> 15.30% 11.78%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Allan R. Hallock......................... 290,624<F10> 94,259<F10> 384,883<F10> 6.82% 4.98%
Ford C. Price............................ 122,300<F11> 124,894<F11> 247,194<F11> 4.49% 2.16%
Harlon E. Martin, Jr..................... 70,686<F12> 32,732<F12> 103,418<F12> 1.93% 1.26%
All directors and executive officers
as a group (8 in number)............ 3,018,585<F13> 932,605 3,951,190<F14> 42.92%<F13> 35.26%<F14>
____________________
<FN>
<F1>
Includes 468,060 common shares and 27,838 preferred shares which were convertible into 287,041 common shares on April 8,
2005. Hancock owns 100% of our issued and outstanding preferred stock. All shares are owned directly and are held by Hancock
on behalf of itself and affiliated entities.
<F2>
Includes $1,755,000 of 12% Convertible Subordinated Notes due 2010 (the "Notes") presently convertible into 1,755,000 common
shares. The Notes are owned directly by 7HBF and are deemed to be owned indirectly by 7HBF Management Company, Ltd.
("Management") as general partner. Randall W. Harvison and John D. Harvison are managers of Management and may be deemed to
have beneficial ownership of such shares; however, they disclaim any beneficial ownership of such securities.
<F3>
Represents shares owned directly by the Unitrust, of which Mr. Beard and his wife, Lu Beard, serve as co-trustees and share
voting and investment power.
<F4>
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
87,674 and 233,308 shares held for the accounts of Messrs. Beard and Mee, respectively.
<F5>
Represents 320,000 presently exercisable warrants held by Boatright which are exercisable at prices ranging from $0.135 to
$0.242365 per share. Peter Boatright, as Manager, has the sole voting power in the event the warrants should be exercised.
Peter Boatright, Frances Boatright (his wife) and the Boatright Irrevocable Trust are the beneficial owners of the warrants.
Joy Heiman is the Trustee of the Trust.
<F6>
Includes 286,874 shares and $60,000 of Notes presently convertible into 60,000 common shares owned directly by the ARH Trust,
of which Mr. Hallock and his wife, Jane Hallock, serve as co-trustees and share voting and investment power.
<F7>
Includes 775,920 shares owned directly by Mr. Beard as to which he has sole voting and investment power; 828,958 shares owned
directly by the Unitrust as described in footnote (3) above; 72,428 shares held by the William M. Beard Irrevocable Trust
"A," 102,648 shares held by the William M. Beard Irrevocable Trust "B," and 125,322 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; 10,106 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; 3,834 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;
87,674 shares held by (the 401(k) Trust for the account of Mr. Beard as to which he has sole voting and investment power; and
19,998 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 10,000 shares subject to presently exercisable warrants held by B&M, and
444,922 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
2,518 shares owned by his wife as to which Mr. Beard disclaims beneficial ownership.
<F8>
Includes 828,958 shares owned by the Unitrust, of which Mr. and Mrs. Beard serve as co-trustees and share voting and
investment power. Also includes 2,518 shares owned directly by Mrs. Beard as to which she has sole voting and investment
power.
<F9>
Includes 102,728 shares owned directly by Mr. Mee as to which he has sole voting and investment power; 74,456 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, 9,200
shares held by Mee Investments, Inc., as to which Mr. Mee has sole voting and investment power; 19,998 shares and 10,000
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 233,308 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 300,398 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 199,549 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 66 shares owned by Mrs. Mee, as to which Mr. Mee disclaims beneficial ownership.
<F10>
Includes 286,874 shares and $60,000 of Notes presently convertible into 60,000 common shares held by the ARH Trust as to
which Mr. Hallock shares voting and investment powers with his wife; 3,750 shares held by an IRA for the benefit of Mr.
Hallock as to which he has sole voting and investment power; and 34,259 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.
<F11>
Includes 117,402 shares and $90,000 of Notes presently convertible into 90,000 common shares held by the FCP Trust as to
which Mr. Price has shared voting and investment power; 4,898 shares held by an IRA for the benefit of Mr. Price as to which
he has sole voting and investment power; and 34,894 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.
<F12>
Includes 70,686 shares held directly by Mr. Martin as to which he has sole voting and investment power, and 32,732 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.
<F13>
Includes 1,386,665 shares as to which directors and executive officers have sole voting and investment power and 1,631,920
shares as to which they share voting and investment power with others. Shares reflect the applicable ownership of Column (A)
shares. Percentage represents the percent of Column (A) Shares.
<F14>
Includes 2,159,270 shares as to which directors and executive officers have sole voting and investment power and 1,791,920
shares as to which they share voting and investment power with others. Shares reflect the applicable ownership of Column (C)
shares.
<F15>
Percentage represents the percent of Column (C) Shares.
</FN>
STOCK PERFORMANCE
The following performance graph compares our cumulative total stockholder
return on our 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 Core Data, Inc. for the period from December 31, 1999
through December 31, 2004. The performance graph assumes that the value of the
investment in our stock and each index was $100 on December 31, 1999, and that
any dividends were reinvested. We have never paid dividends on our common stock.
December
--------------------------------------------
1999 2000 2001 2002 2003 2004
---- ---- ---- ---- ---- ----
The Beard Company 100.00 18.67 37.33 12.27 13.33 32.00
Bituminous Coal,
Surface Mining
Industry Index 100.00 190.82 219.05 215.11 366.02 561.91
NASDAQ Market Index 100.00 62.85 50.10 34.95 52.55 56.97
The Industry Index chosen consists of the following companies: Arch Coal,
Inc., Consol Energy, Inc., Foundation Coal Holdings, Headwaters Inc., Heartland
Oil & Gas Corp., James River Coal Company, National Coal 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 our general compensation policies. 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 our goals of increasing
stockholder value. This goal is to provide competitive levels of compensation
that relate to our 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 our 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 we nor the Committee
have been able to establish a peer group which we feel is comparable enough in
size, financial structure and diversity of operations to establish a valid
comparison.
No executive officer's compensation for 2004 exceeded the $1 million
deduction limit under Section 162(m) of the Internal Revenue Code, as amended,
and the same result is anticipated for 2005. 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 our top two
executive officers since September of 1990. Despite the fact that we became
profitable in 2004 as a result of the McElmo Dome Settlement, no changes in base
salary are currently under consideration for any of the executive officers
because of our poor operating results in 2002, 2003 and 2004. Because of our
continuing fragile cash position, (i) the CEO has deferred 90% of his salary
since January 1, 2003 and the President has deferred 40% of his salary since
February 1, 2003.
Cash Bonuses. All of our employees and directors receive a small year-end
bonus depending upon their length of service as employees of us 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 2002, 2003 and 2004.
Beard Group 401(k) Plan. One of our principal benefits has been our 401(k)
Plan, which included a 100% match (up to a cap of 5% of gross salary) in order
to encourage participation. Due to our deteriorating cash position we notified
all Participants on July 8, 2002, that we were suspending the 100% match
effective July 16, 2002 until further notice.
One of the investment options available under our 401(k) Plan is the
option for each participant to invest all or part of his investment account in
our common stock (the "Stock Fund"). The Committee feels that this option is
important because it enables key management members to increase their ownership
in us, 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 our key employees by providing incentive to employees to elevate
the long-term value of our common stock, thus aligning the interests of our
employees with the interests of our 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 did not grant any stock options during the five year
period ended December 31, 2004.
Deferred Stock Compensation Plan. On September 30, 2003, we adopted the
2003-2 Deferred Stock Compensation Plan (the "2003-2 Plan") to provide a means
to promote ownership of a greater proprietary interest by our officers and
directors, thereby aligning their interests more closely with the interests of
our stockholders. The 2003-2 Plan and two predecessor plans were extremely
important during 2001-2004 as a mechanism to conserve our cash. The 2003-2 Plan
was adopted by the Board in September 2003, and later amended to authorize the
issuance of 800,000 shares of common stock. As of December 31, 2004, a total of
712,551 Stock Units had been credited to the accounts of Messrs. Beard, Mee,
Hallock, Martin and Price based upon their deferral of $202,150 of Fees and
Compensation during the 15 months the Plan had been in operation.(A)
____________________
(A) All share numbers have been adjusted to reflect the 2-for-1 stock split
which was effected as of the close of business on August 6, 2004.
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 our strategic direction. Based on our
profitability, the granting of any additional stock options to Mr. Beard or
other key management members was not considered by the Committee in 2004. Mr.
Beard exercised 75% of his outstanding option in 1998. He did not elect to
exercise the final 25% because it was "under water" when it expired on October
31, 2004. The Committee may consider the awarding of additional options to key
management members, including Mr. Beard, in 2005 and subsequent years. Any such
grants will depend upon our profitability at such time, the outlook for our
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 we and our
subsidiaries paid or accrued during each of the last three fiscal years to our
Chief Executive Officer and each of our other most highly compensated executive
officers (hereafter referred to as the named executive officers), whose
aggregate salary and bonus exceeded $100,000, for any of the fiscal years ended
December 31, 2004, 2003 and 2002:
SUMMARY COMPENSATION TABLE
Long Term
AnnualCompensation Compensation Awards
- ------------------------------------------------------------ ------------------------------
Common All Other
Stock Compen-
Name and Salary Bonus Awards LTIP sation
Principal <F1> <F2> <F3> Payouts <F4>
Position Year ($) ($) (#) ($) ($)
-------- ---- --- --- --- --- ---
W. M. Beard 2004 13,200<F5> -0-<F5> -0- 121,350<F5> -0-
Chairman & CEO 2003 13,200<F5> -0-<F5> 677,612<F7> 121,300<F5> -0-
2002 44,275<F5> -0-<F5> -0- 90,175<F5> 1,788<F7>
Herb Mee, Jr. 2004 79,200<F6> -0-<F6> -0- 54,350<F6> -0-
President & CFO 2003 83,600<F6> -0-<F6> 90,964<F7> 49,900<F6> -0-
2002 132,000 -0-<F6> -0- 1,450<F6> 3,505<F7>
_____________________
<FN>
<F1>
Amounts shown include cash compensation earned and received by the named executive officers as well as
amounts earned but deferred pursuant to our 401(k) Plan at the election of those officers. Amounts
shown exclude cash compensation earned but deferred pursuant to our applicable DSC Plans.
<F2>
Bonus for length of service with us or Beard Oil.
<F3>
In 2003 Messrs. Beard and Mee received 497,994 and 11,664 shares of common stock, respectively, upon
termination of our DSC Plan and 179,618 and 79,300 shares of common stock, respectively, upon
termination of our 2003 DSC Plan. All share numbers have been adjusted to reflect our 2-for-1 stock
split effected in August of 2004.
<F4>
Consists of our contribution to our 401(k) Plan.
<F5>
In 2004 Mr. Beard deferred 90% ($118,800) of his salary during the year and all ($2,550) of his length
of service bonus for the year; 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.
<F6>
In 2004 Mr. Mee deferred 40% ($52,800) of his salary for the year and all ($1,550) of his length of
service bonus for the year; 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.
<F7>
Beginning July 16, 2002, we suspended our 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, we have indicated our
intention to reinstate the match when future conditions permit.
</FN>
Deferred Stock Compensation Plan
On September 30, 2003, our Board of Directors adopted The Beard Company
2003-2 Deferred Stock Compensation Plan (the "2003-2 Plan") and authorized the
issuance of a maximum of 200,000 shares of our 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 thereunder to 400,000. On June 15, 2004, the stockholders approved the
2003-2 Plan, as amended. As a result of our 2-for-1 stock split effected as of
the close of business on August 6, 2004, the number of authorized shares
increased to 800,000.
Equity Compensation Plan Information
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, warrants outstanding options, under equity compensation plans
and rights<F3> warrants and rights (excluding securities reflected
in column (a))
(a) (b) (c)
----------------------------------- ---------------------- ---------------------------------
Equity compensation plans 1993 SO Plan - 26,250<F1> $2.08<F1> None
approved by security holders 2003-2 DSC Plan - 712,551<F2> $0.36<F2> 87,449<F2>
Equity compensation plans None - None None None
not approved by security
holders
----------------------------------- ---------------------- ---------------------------------
Total All Plans - 738,801 $0.42 87,449
=================================== ====================== =================================
____________________
<FN>
<F1>
The 1993 Stock Option Plan, as amended, authorized the issuance of 275,000 shares of common stock. Stockholders approved the
initial plan and all subsequent amendments. As the result of a subsequent 3-for-4 stock split, 206,250 shares had been
authorized for issuance when the plan terminated on August 26, 2003, and no additional options can be granted thereunder.
<F2>
The 2003-2 Deferred Stock Compensation Plan, as amended, which authorizes 800,000 shares to be issued, was approved by the
stockholders at the 2004 Annual Stockholders' Meeting.
<F3>
As of March 31, 2005, a total of 746,354.637 Stock Units had been credited to the Participants' Stock Unit Accounts based upon
the Participants' deferral of $305,750 of Fees or Compensation.
</FN>
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.
Upon receipt of the second installment of the McElmo Dome Settlement on
March 26, 2004, 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. On June 25,
2004, it was determined that the actual amount of the Unitrust loan was
$2,785,000, and the term was extended to April 1, 2006. The Unitrust is secured
by the McElmo Dome Collateral (see below).
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 our notes (the "2002 Notes")
and warrants. The Unitrust received warrants to purchase 45,000 shares of common
stock in connection with the offering, with exercise prices ranging from
$0.353949 to $0.3570475 per share (as adjusted for anti-dilution and a
subsequent 2-for-1 stock split) Upon receipt of the second installment of the
McElmo Dome Settlement on March 26, 2004, the 2002 Notes were paid in full.
In May 2004 the Unitrust also purchased $500,000 of 10% Participating Notes
due November 30, 2006, in connection with a $1,200,000 private placement of our
notes (the "Participating Notes"). The notes were accompanied by warrants to
purchase 480,000 shares of our common stock at exercise prices ranging from
$0.135 to $0.23 per share (as adjusted for the subsequent 2-for-1 split). The
notes bear interest at an annual rate equal to the Wall Street Journal Prime
Rate plus 4%, with a floor of 10%. We paid interest only until November 30,
2004, and will then amortize the notes with equal payments of principal and
interest over the ensuing eight quarters. The note holders will also
collectively receive at maturity a bonus/production payment equivalent to
approximately $1 per ton for the coal expected to be recovered during the term
of the notes from a coal project described in the offering document. The total
amount for the production payment is expected to equal $568,000. The Unitrust
borrowed the funds for this purchase from an unrelated third party which
received a 15% interest rate on its loan and also received the warrants to
purchase 200,000 shares of our common stock which would otherwise have gone to
the Unitrust in the placement. In order to partially offset the 5% interest
differential between our note and the Unitrust's note, the Unitrust was allowed
to retain its 41.67% share of the production payment. The Unitrust made this
purchase for our benefit since it was felt that such purchase would greatly
facilitate the sale of the remainder of the offering, which was subsequently
fully subscribed. In addition, the Board of Directors authorized us to pay the
6% commission due to the Placement Agent in connection with the sale of the
Unitrust note to the third party since we were ultimately the primary
beneficiary of the transaction. As a further condition of the loan to the third
party, a Deed of Trust, Assignment of Production, Security Agreement and
Financing Statement was recorded against our working and overriding royalty
interests in the McElmo Dome field pursuant to which the Unitrust was granted a
security interest pari passu with the other note holder. The assets serving as
collateral for these debt instruments had a recorded value on our books of
$338,000 as of December 31, 2004.
Borrowings from Other Related Entities. In February of 2003 B&M Limited
("B&M"), a general partnership owned by our Chairman and President, purchased a
$50,000 10% subordinated note in connection with the private placement of
$600,000 of our notes (the "2003 Notes") and warrants. 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. Upon receipt of the second installment of the
McElmo Dome Settlement on March 26, 2004, the 2003 Notes were paid in full.
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 and subsequently to May 31, 2004. The note,
which was unsecured, had an interest rate of 12% and the note holder also
received an $8,000 loan fee at the extended maturity. This note was paid in full
on May 24, 2004.
In connection with the $1,200,000 private placement of Participating Notes
described above, the Allan R. Hallock Trust (the "ARH Trust"), of which our
director, Allan R. Hallock, is a co-Trustee and beneficiary with his wife,
purchased $200,000 of such notes and received warrants to purchase 80,000 shares
of our common stock together with 16.67% of the aforementioned production
payment.
In September of 2004 we commenced the sale of $1,800,000 of 9% convertible
subordinated notes (the "9% Notes") in a private placement. As of December 15,
2004, a total of $255,000 of the offering had been subscribed and closed,
including $60,000 by the ARH Trust and $90,000 by the FCP Trust, of which our
director, Ford C. Price, is a co-Trustee and beneficiary. On December 29, 2004,
a new private placement of our 12% Convertible Subordinated Notes (the "12%
Notes") was commenced. Following Board approval in December of 2004 the 9% Notes
were exchanged for a like amount of 12% Notes and the holders forgave all
accrued interest on the 9% Notes. An additional $1,845,000 of the 12% Notes were
subscribed and closed in January of 2005, bringing the total offering amount to
$2,100,000. We will pay interest only on a semi-annual basis beginning August
15, 2005 until the February 15, 2010 maturity date, at which time we will make a
balloon payment of the outstanding principal balance plus accrued and unpaid
interest. We have granted a security interest in Beard Technologies' equipment
to the holders of the 12% Notes. The security interest will be released in the
event we raise sufficient funds to proceed with a certain coal reclamation
project. The notes are convertible into our common stock at an initial
conversion price of $1.00 per share. We can force conversion of the notes after
February 15, 2007 if the weighted average price of our common stock has been
more than two times the conversion price for more than 60 consecutive days.
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. On June 25, 2004, it
was determined that the actual amount of the Unitrust loan was $2,785,000, and
the term was extended to April 1, 2006. The Unitrust continued to be secured by
the McElmo Dome Collateral.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(Proposal No. 2)
On April 7, 2005 the Audit Committee appointed Cole & Reed, P.C. as
independent accountants to audit and report on our consolidated financial
statements for 2005. Cole & Reed, P.C. has audited and reported on our
consolidated financial statements since 2000. Although not formally required,
stockholders' ratification of such appointment is requested. To the knowledge of
management and the Audit Committee, such accountants do not have any direct, or
material indirect, financial interest in us and our subsidiaries, nor have they
had any connection during the past three (3) years with us or any of our
subsidiaries in the capacity of promoter, underwriter, voting trustee, director,
officer or employee.
Representatives of Cole & Reed, P.C. are expected to be present at the
meeting. They will have the opportunity to make a statement if they so desire
and are expected to be available to respond to appropriate questions.
THE AUDIT COMMITTEE RECOMMENDS A VOTE FOR THE PROPOSAL TO RATIFY THE APPOINTMENT
OF COLE & REED, P.C.
In the event the appointment of Cole & Reed, P.C. should not be ratified by
the stockholders, the Audit Committee will make another appointment, to be
effective at the earliest feasible time.
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 our stock entitled to cast a
majority of the votes represented at the annual meeting will be required for the
approval of the appointment of Cole & Reed, P.C., as our independent auditors
for 2005. 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 our 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
we are incorporated, nor our Certificate of Incorporation or By-Laws have any
specific provisions regarding the treatment of abstentions and broker non-votes.
It is our 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 on actions requiring the affirmative vote of a majority of
the votes represented at the meeting; and to consider neither abstentions nor
broker non-votes 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 2006. Any proposals of stockholders intended
to be presented at the 2006 Annual Meeting of Stockholders must be received by
us not later than December 31, 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 2006 annual
meeting, we must receive written notice of such proposal not later than December
31, 2005. Proposals that are not received by this date will be considered
untimely. In addition, proposals must comply with our 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. VOTH
Rebecca G. Voth
Secretary
Oklahoma City, Oklahoma
April 29, 2005
PROXY
THE BEARD COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS MEETING ON JUNE 9, 2005
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 2005 Annual Meeting of Stockholders
(or any adjournment thereof) of The Beard Company to be held at the Waterford
Marriott Hotel, located at 6300 Waterford Boulevard, Oklahoma City, Oklahoma
73118 on Thursday, June 9, 2005 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. Election of Director. W. M. Beard - three year term expiring in 2008
FOR WITHHOLD AUTHORITY to vote for the nominee listed below:
------------------------------------------------------
2. Ratification of the Appointment of Cole & Reed, P. C. as independent
accountants to audit the Company's consolidated financial statements for
2005.
FOR AGAINST ABSTAIN
3. 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" ITEM 1 AND "FOR" THE ELECTION OF THE
DIRECTOR NOMINATED.
Dated____________________________________, 2005
----------------------------------------------
(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.