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:
[ X ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] 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):
[ ] No fee required.
[ X ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_____________________________________________________________
4) Proposed maximum aggregate value of transaction: $22,114,000
5) Total fee paid: $4,423.
[ ] 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.
1) Amount previously paid: _______________________
2) Form, Schedule or Registration Statement No.: _____________
3) Filing Party: _______________________
4) Date Filed: ___________________.
NOTICE OF
ANNUAL MEETING
OF STOCKHOLDERS
TO BE HELD
AUGUST ____, 1997
AND PROXY STATEMENT
THE BEARD COMPANY
THE BEARD COMPANY
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
July __, 1997
Dear Stockholders:
We invite you to attend the annual meeting of stockholders of The
Beard Company (the "Company") which will be held in Oklahoma City on
Monday, August ___, 1997. The matters to be considered at the meeting are
described in the formal notice and proxy statement on the following pages.
After completing the business of the meeting, including election of
directors, we will discuss the current outlook for the Company. There will
be a period for questions and for discussion with your directors and
officers.
If you plan to be present, please notify the Secretary of the Company
so that the necessary arrangements can be made for your attendance.
Regardless of whether you plan to personally attend, it is important that
your shares be represented at this meeting. Please date, sign and return
your proxy card in the enclosed envelope at your earliest convenience.
W. M. BEARD HERB MEE, JR.
Chairman President
THE BEARD COMPANY
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Monday, August ___, 1997
TO THE STOCKHOLDERS OF THE BEARD COMPANY:
You are hereby notified that the Annual Meeting of Stockholders of The
Beard Company (the "Company") will be held on Monday, August ___, 1997 at
10:00 a.m. in the Board Room of the Liberty Bank and Trust Company of
Oklahoma City, N. A. in the Liberty Tower, 100 North Broadway, Oklahoma
City, Oklahoma, for the purpose of considering and voting upon the
following matters:
(1) To approve the sale of substantially all of the assets of
Carbonic Reserves pursuant to an Asset Purchase Agreement, a copy
of which is attached to the accompanying Proxy Statement as
Exhibit "A".
(2) To approve the Merger of the Company into The NBC Company
pursuant to the Plan and Agreement of Merger and Reorganization,
a copy of which is attached to the accompanying Proxy Statement
as Exhibit "B".
(3) The election of two (2) directors of the Company for three year
terms.
(4) To consider and act upon a proposal to amend The Beard Company
Deferred Stock Compensation Plan (the "Plan") to increase the
number of common shares authorized for issuance thereunder from
50,000 to 100,000. A copy of the Plan is attached to the
accompanying Proxy Statement as Exhibit "D".
(5) The approval of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for fiscal year 1997.
(6) Such other business as may properly come before the meeting or
any adjournment thereof.
The transfer books will not be closed, but only stockholders of record
at the close of business on June 30, 1997 will be entitled to notice of and
to vote at the meeting. A complete list of the stockholders entitled to
vote at the meeting shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for
ten days prior to the meeting, at the offices of the Company, Enterprise
Plaza, Suite 320, 5600 North May Avenue, Oklahoma City, Oklahoma.
You are cordially invited to attend the meeting. Even if you plan to
attend, you are requested to date, sign and return the enclosed proxy at
your earliest convenience in the enclosed envelope. You may revoke your
proxy at any time prior to exercise.
By Order of the Board of Directors
Rebecca G. Witcher
Secretary
Oklahoma City, Oklahoma
Dated July __, 1997
THE BEARD COMPANY
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, Oklahoma 73112
PROXY STATEMENT
This Proxy Statement is furnished to the stockholders of The Beard
Company ("Beard" or the "Company") in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Stockholders to be
held August ___, 1997. It is first being mailed to stockholders on or
about July __, 1997. THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF THE COMPANY.
A person giving the enclosed proxy has the power to revoke it by giving
notice to the Secretary in person, or by written notification actually
received by the Secretary, or by subsequently granting a later dated proxy
relating to the same shares, at any time prior to its being exercised.
The Company will bear the cost of soliciting proxies, including the
charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. It is possible that
further solicitation of proxies will be made by telephone or oral
communication with some stockholders of the Company following the original
solicitation. All such further solicitations will be made by regular
employees of the Company who will not be additionally compensated therefor,
and the cost will be borne by the Company.
VOTING SECURITIES OUTSTANDING
As of June 30, 1997, 2,799,074 shares of common stock and 90,155.86
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 is
entitled to one vote for each full share of common stock into which it
would have been convertible had it been convertible on the record date
(5.129425 shares). Accordingly, a total of 3,261,518 votes are entitled to
be cast at the meeting, and the holders of the preferred stock are entitled
to cast 14.18% of such votes. Only holders of common stock and preferred
stock of record at the close of business on June 30, 1997, will be entitled
to vote at the meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth the name and address of each shareholder
who is known to the Company to own beneficially more than 5% of Beard's
outstanding common stock or preferred stock, the number of shares
beneficially owned by each and the percentage of outstanding common or
preferred stock so owned as of June 30, 1997. Unless otherwise noted, the
person named has sole voting and investment powers over the shares
reflected opposite his name.
Number of Number of Combined
Preferred Common Common and
Shares and Shares and Preferred
Nature of Percent Nature of Percent Voting
Name and Address Ownership of Class Ownership of Class Percentage
- ------------------------------ ---------- -------- ----------- -------- ------------
John Hancock Mutual Life
Insurance Company ("Hancock") 42,427.10 47.06% 312,040(1)(2) 11.15% 16.24%(3)
57th Floor (2)
200 Clarendon Street
Boston, Massachusetts 02117
The Beard Group 401(k) Plan
("Plan")
c/o The Liberty Bank and None 0.00% 330,627(4) 11.81% 10.14%
Trust
Company, Trustee
100 N. Broadway Avenue
Oklahoma City, OK 73102
W. M. Beard None 0.00% 810,229(5) 28.69% 24.65%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Lu Beard None 0.00% 233,998(6) 8.36% 7.17%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
Warren B. Kanders 25,188.76 27.94% 174,274(2) 6.23%(2) 9.30%(3)
2100 South Ocean Boulevard
Suite 302 North
Palm Beach, FL 33480
Herb Mee, Jr. None 0.00% 218,399(7) 7.73% 6.65%
Enterprise Plaza, Suite 320
5600 North May Avenue
Oklahoma City, OK 73112
________
(1) Shares are held by Hancock on behalf of itself and affiliated
entities.
(2) Excludes the Beard preferred shares which will collectively become
convertible into 14.18% of the outstanding common stock (after
conversion) on January 1, 2003 to the extent not previously redeemed
or converted.
(3) The preferred shareholders collectively own 652,084 common shares and
1,114,528 common equivalent shares (34.17%), after giving effect to
the conversion of their 90,155.86 preferred shares.
(4) Shares held by the Plan are owned by the participating employees, each
of whom has sole voting and investment power over the shares held in
his or her account. Includes 97,424.40, 116,951.99 and 27,639.12
shares held for the accounts of Messrs. Beard, Mee and Collen,
respectively, and 1,631.32 shares held for the accounts of other
executive officers.
(5) Includes 368,685 shares owned directly by Mr. Beard as to which he has
sole voting and investment power; 232,319 shares (or 8.30%) owned by
the William M. Beard and Lu Beard 1988 Charitable Unitrust (the "1988
Unitrust"), of which Mr. Beard and his wife, Lu Beard, serve as co-
trustees and share voting and investment power; 16,666 shares each
held by the William M. Beard Irrevocable Trust "A," the William M.
Beard Irrevocable Trust "B," and 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; 6,738 shares each held by the John Mason Beard II
Trust, the Joseph G. Beard Trust and the Rebecca Banner Beard Trust as
to which Mr. Beard is the trustee and has sole voting and investment
power; 3,256 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; 97,424.40 shares held by The Beard
Group 401(k) Trust (the "401(k) Trust") for the account of Mr. Beard
as to which he has sole voting and investment power; and 13,333 shares
held by B & M Limited, a general partnership, of which Mr. Beard is a
general partner and shares voting and investment power with Mr. Mee.
Also includes 25,000 shares subject to presently exercisable options.
Excludes 1,679 shares owned by his wife as to which Mr. Beard
disclaims beneficial ownership. Also excludes 41,228 shares held by
four separate trusts for the benefit of Mr. Beard's children as to
which Mr. Beard disclaims beneficial ownership.
(6) Represents 232,319 shares owned by the 1988 Unitrust, of which Mr.
Beard and Mrs. Beard serve as co-trustees and share voting and
investment power. Also includes 1,679 shares owned directly by Mrs.
Beard as to which she has sole voting and investment power.
(7) Includes 6,450 shares owned directly by Mr. Mee as to which he has
sole voting and investment power; 6,666 shares held by Mee
Investments, Inc., as to which Mr. Mee has sole voting and investment
power; 13,333 shares held by B & M Limited as to which Mr. Mee shares
voting and investment power with Mr. Beard but as to which Mr. Mee has
no present economic interest; and 116,951.99 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 16,666 shares each 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 25,000 shares subject to presently exercisable options.
Excludes 45 shares owned by his wife, Marlene W. Mee, as to which Mr.
Mee disclaims beneficial ownership.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the number
of shares of Beard common stock beneficially owned by each director and
nominee, the Chief Executive Officer ("CEO"), each named executive officer
and by all directors and executive officers as a group and the percentage
of outstanding common stock so owned as of June 30, 1997.
Amount and
Nature of
Beneficial Percent
Name and Address Ownership of Class
- ---------------------------- ----------- -----------
W. M. Beard 810,229(1) 28.69%
Herb Mee, Jr. 218,399(2) 7.73%
Allan R. Hallock 40,458(3) 1.45%
Michael E. Carr 28,643 1.02%
Ford C. Price 13,665(4) ---(8)
W. R. Plugge 2,000 ---(8)
C. H. Collen, Jr<ellipsis> 44,689(5) 1.60%
Marc A. Messner 50,000 1.79%
Philip R. Jamison 1,299(6) ---(7)(8)
All directors and executive
officers as a group (11 in 1,165,291(7) 40.76%
number)
_________
(1) See footnote (5) to table "Security Ownership of Certain Beneficial
Owners."
(2) See footnote (7) to table "Security Ownership of Certain Beneficial
Owners."
(3) Reflects shares owned by A. R. Hallock & Co., a partnership, as to
which Mr. Hallock shares voting and investment power with his wife.
(4) Includes 5,399 shares owned directly by Mr. Price as to which he has
sole voting and investment power, 3,266 shares held by an IRA for the
benefit of Mr. Price as to which he has sole voting and investment
power and 5,000 shares held by the FCP Trust as to which he has shared
voting and investment power.
(5) Includes 17,050 shares owned directly by Mr. Collen as to which he has
sole voting and investment power and 27,639.12 shares held by the
401(k) Trust for the account of Mr. Collen as to which he has sole
voting and investment power.
(6) Represents shares owned for Mr. Jamison's account in the 401(k) Trust;
Mr. Jamison has sole voting and investment power, but only has a 20%
vested interest, as to such shares.
(7) Includes 803,817 shares as to which directors and executive officers
have sole voting and investment power and 344,364 shares as to which
they share voting and investment power with others.
(8) Reflects ownership of less than one (1) percent.
SALE OF SUBSTANTIALLY ALL OF THE ASSETS OF
CARBONIC RESERVES
(Proposal No. 1)
For the reasons herein set forth, the Board of Directors is
recommending that the Company's stockholders adopt and approve an Asset
Purchase Agreement (the "Agreement"), by and among Airgas Carbonic
Reserves, Inc. ("Airgas"), and Carbonic Reserves ("Carbonics"), the Company
and Clifford H. Collen, Jr. ("Collen") (collectively, the "Shareholders"),
pursuant to which Airgas will acquire substantially all of Carbonics'
assets for cash and the assumption of certain liabilities as set forth
below (the "Asset Sale"). In connection with the Asset Sale, Collen will
enter into noncompetition and employment agreements with Airgas. Airgas is
a second tier subsidiary of Airgas, Inc. U.S. Airgas, Inc., a subsidiary
of Airgas, Inc. has agreed to guaranty the obligations of Airgas under the
Agreement.
The following description of the Asset Sale contains, among other
information, summaries of certain provisions of the Agreement, a copy of
which is attached to this Proxy Statement as Exhibit A and incorporated
herein by reference. The Agreement sets forth the representations and
warranties of Carbonics, the Shareholders and Airgas, the description of
the assets to be acquired and the conditions to the consummation of the
Asset Sale, including approval of the Agreement by the shareholders of
Beard. The information in this Proxy Statement with respect to the
Agreement is qualified in its entirety by reference to the complete text of
the Agreement.
The Transaction
In consideration of the Asset Sale, Carbonics will receive cash at
closing in the amount of $18.5 million. In addition, 150 days after the
closing date Carbonics will receive an additional amount equal to the
difference between $1 million and the sum of (i) uncollected accounts
receivable in excess of Carbonics' allowance for bad debts, (ii) the
amount, if any, by which notes payable to third parties which are assumed
by Airgas exceeds the increase in the value of fixed assets between
December 31, 1996 and closing, and (iii) any other indemnity claims that
arise during the 150 day period. Carbonics maintains insurance coverage
for its largest accounts receivable and does not expect any substantial
deductions for uncollected accounts receivable or indemnity claims. Also,
Airgas will assume liabilities of Carbonics for (i) trade accounts payable
and accrued expenses incurred in the ordinary course of business (other
than those specifically excluded), (ii) notes payable to third parties as
reflected on Carbonics' December 31, 1996 balance sheet and those incurred
thereafter in the ordinary course and in a manner consistent with past
practice, and (iii) the obligations of future performance under the
contracts and liabilities being assumed under the Agreement, to the extent
such liabilities have arisen in the ordinary course of Carbonics' business.
Airgas will not assume any liabilities for employee matters, including
payroll taxes; debt or other balances payable to the Shareholders or other
related parties; tax liabilities of Carbonics for the Shareholders; or
environmental liabilities. Carbonics will retain all cash and cash
equivalents; notes receivable from the Company or related parties; and tax
refunds relating to periods prior to the closing date.
The Company owns 85% of the outstanding common stock of Carbonics and
Collen owns 15%. In addition, the Company owns 14,859 shares of Carbonics'
redeemable preferred stock, $1,000 redemption value per share, which
constitutes all of the issued and outstanding preferred stock of Carbonics.
Background of the Asset Sale
In May 1996 Carbonics engaged an investment banking firm to secure
financing to enable Carbonics to pursue the acquisition of, and to provide
additional working capital for, three dry ice companies for approximately
$13 million. The investment banking firm obtained indications of interest
from several entities; however, all of the interested parties wanted to see
executed letters of intent from the target companies prior to making a
final commitment, and were unwilling to provide the financing without the
letters of intent.
Carbonics had preliminary conversations with the potential target
companies, and was actively negotiating for the purchase of two of the
companies when Airgas announced, in October 1996, that it had signed (i) a
letter of intent to acquire Carbonic Industries Corporation ("CIC"), the
fourth largest producer of CO{2} and largest manufacturer of dry ice in the
United States, and (ii) an agreement to acquire Shell Land & Energy
Company's controlling interest in the Northeast Jackson Dome Field, which
is the largest naturally occurring CO{2} field east of the Mississippi.
The consideration for the CIC acquisition was announced as a combination of
common stock and cash. At the time Airgas announced these acquisitions, it
stated its intention to pursue additional acquisitions of CO{2} companies.
Because Airgas is in a financial position to pay higher prices for its
acquisitions, and to offer registered common stock as consideration, and
because Carbonics would be limited to offering a combination of cash,
preferred stock and notes so that it can remain part of Beard's
consolidated tax group and take advantage of Beard's net operating loss
carryforwards, the Airgas announcement put an end, for all practical
purposes, to Carbonics' acquisition strategy.
In April 1997 Airgas continued its strategy by announcing the
acquisition of the assets of American Dry Ice Corp., a distributor of
liquid CO{2}, dry ice and other related products and services. Immediately
thereafter Airgas contacted Carbonics and Beard about purchasing the assets
of Carbonics.
During the same timeframe, Beard was independently contacted by a large
New York Stock Exchange listed industrial gas company, and by a West Coast
venture capital company which had financed a company to build a major
national liquid CO{2} business with plans to acquire existing manufacturers
and distributors of liquid CO{2} and dry ice. Both of these companies
expressed interest in acquiring Carbonics. Following discussions with the
three interested parties, Beard furnished each with a confidential
memorandum in May 1997, and asked for formal proposals by June 6, 1997.
Proposals were received from all three parties in the first two weeks of
June. The offer from Airgas was the highest. On June 20, 1997, Airgas and
the Company executed a letter of intent and began negotiating the terms of
the agreement. On July 7, 1997, Airgas began performing a due diligence
review of Carbonics.
Reasons for the Asset Sale
The terms of the Agreement are the result of arms-length negotiations
between representatives of the Company and Airgas. The Company believes
that consummation of the Asset Sale will allow the Company to sell
Carbonics' assets at a favorable price and reduce its outstanding debt,
redeem a substantial portion of its outstanding preferred stock (see "Pro
Forma Condensed Financial Statements") and provide working capital to
permit the reasonable exploitation of the Company's remaining assets.
Board of Directors Recommendation
In reaching its decision to approve the Agreement and to make its
recommendation, the Board of Directors considered a number of factors,
including, but not limited to, (i) preliminary offers or indications by
third parties, (ii) the Company's present financial condition and its
requirement for working capital to exploit other assets, and (iii) the
terms and conditions set forth in the Agreement. The Company's Board of
Directors believes that the Asset Sale is in the best interests of the
Company and has unanimously approved the Asset Sale. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ASSET SALE.
Property Subject to the Asset Sale
The assets of Carbonics subject to the Asset Sale are all of the
operating assets of Carbonics which are used in the production and
distribution of dry ice including, but not limited to, the following:
(a) the tangible assets of Carbonics, all accounts receivable,
notes receivable, deposits, prepaid expenses, inventories, fixed assets,
real property and intangible properties;
(b) all contract rights, causes of action, claims, refunds and
demands of whatever nature;
(c) all books and records relating to the business of Carbonics
(except minute books and stock record books);
(d) all rights of Carbonics in and to all of seller's trademarks
and trade names, including without limitation, the name "Carbonic
Reserves," and all intellectual property and proprietary information of
Carbonics; and
(e) all of Carbonics' intangibles and goodwill.
Excluded from the Asset Sale are cash and cash equivalents, notes
receivable from the Company and affiliates and tax refunds for periods
prior to closing.
Conduct of Business
The Company has agreed that it will cause Carbonics to, and Carbonics
has agreed that it will, carry on the business of Carbonics in the ordinary
course of business consistent with past practice, use their commercially
reasonable efforts to preserve Carbonics' reputation and the goodwill of
Carbonics' suppliers, customers and others having business relationships
with Carbonics, use their reasonable best efforts to preserve intact
Carbonics' current business organization, keep available the services of
present employees and maintain the assets of Carbonics in good condition
and repair.
Carbonics, the Company and Collen have agreed that, except as
contemplated by the Agreement or disclosed in the schedules to the
Agreement, Carbonics shall not, without the prior written consent of
Airgas:
(a) enter into any material contract other than in the ordinary
course of business;
(b) make any bonus or salary or wage increases nor any
contributions to any profit sharing or pension plan other than in the
ordinary course of business;
(c) reorganize, declare, set aside or pay any dividend or other
distribution in respect to Carbonics' capital stock, or any direct or
indirect redemption, purchase or other acquisition of any such stock;
(d) pay, loan or advance any amount to the Shareholders or any
family member thereof, except payments to the Company for Carbonics' pro
rata share of corporate insurance and employee benefit costs and expenses;
(e) enter into any agreement with the Shareholders or any family
member thereof;
(f) sell or lease any of its assets or properties, tangible or
intangible, except in the ordinary course of business;
(g) grant a security interest or encumber in any manner any of
its assets or properties;
(h) incur any indebtedness for borrowed money except in the
ordinary course of business pursuant to its existing credit agreement;
(i) make any capital expenditures in excess of $50,000.
However, nothing in the Agreement requires Carbonics to reduce
indebtedness for borrowed money owed to third parties other than such
reductions as are required by the instruments evidencing such indebtedness,
with the exception that any proceeds from the sale of fixed assets in the
ordinary course of business shall be applied to reduce such indebtedness
over and above the normal required reductions referred to above.
Conditions to the Asset Sale
In addition to the approval of the Agreement and the Asset Sale by the
Company's stockholders, consummation of the Agreement is conditioned upon,
among other things:
(a) the continuing accuracy, in all material respects, of the
representations and warranties of Carbonics and the Shareholders, and
Airgas contained in the Agreement;
(b) the performance, in all material respects, by Carbonics and
the Shareholders, and Airgas of all covenants contained in the Agreement;
(c) the receipt of all third party consents;
(d) the completion of due diligence by Airgas;
(e) expiration of applicable waiting periods without formal
protest under the Hart-Scott-Rodino Antitrust Improvements Act of 1978, as
amended; and
(f) approval of the Agreement and the Asset Sale by the
respective Board of Directors.
Representations and Warranties
In the Agreement, Carbonics, the Company and Collen have made customary
representations and warranties to Airgas, including, but not limited to,
representations and warranties relating to the organization, good standing
and qualification of Carbonics; authority to enter into the Agreement and
carry out related actions; capitalization; absence of undisclosed
liabilities; title and condition of assets; inventories; accounts
receivable; material contracts and commitments; required consents and
approval; compliance with laws; and patent, employee benefit plans, tax and
environmental matters.
Airgas has also made customary representations and warranties to the
Company and Carbonics, including, but not limited to, representations and
warranties relating to Airgas' organization, authority to enter into the
Agreement and carry out related actions, and required consents and
approvals.
Closing
The transaction is expected to be consummated on August 28, 1997,
subject to the satisfaction or waiver of the conditions set forth under "-
Conditions to the Asset Sale."
Parties Interested in the Asset Sale
Immediately prior to the closing of the Asset Sale, Beard will purchase
all of the capital stock of Carbonics owned by Collen for $900,000.
Immediately after the closing, Carbonics will pay Collen $100,000 for
termination of his employment agreement. Concurrently with the closing,
Airgas will pay Collen $300,000, and agree to pay him an additional
$200,000 in 1998, under a noncompetition agreement to be entered into
between Collen and Airgas.
Regulatory Approvals
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), certain transactions, including the Asset
Sale, may not be consummated unless certain waiting period requirements
have been satisfied. The Company and Airgas filed the notification and
report forms required pursuant to the HSR Act with the Antitrust Division
of the Department of Justice (the "Antitrust Division") and the FTC for
review in connection with the Asset Sale. At any time before or after the
closing, the FTC, the Antitrust Division or others could take action under
the Antitrust laws with respect to the Asset Sale, including seeking to
enjoin the consummation of the Asset Sale or seeking divestiture by Airgas
of all or any part of the assets acquired.
Effects on Listing of Common Stock
Based upon guidelines published in the American Stock Exchange Company
Guide, the Company believes that the listing of the Company's common stock
on the American Stock Exchange will not be affected by the consummation of
the Asset Sale.
Accounting Treatment; Tax Effects
The Asset Sale will be accounted for by the Company as a sale of
assets. See "Pro Forma Condensed Financial Statements" regarding the
accounting effects of consummation of the Asset Sale.
The Asset Sale will be taxable to the Company. It is presently
estimated that the Asset Sale will result in taxable gain to the Company
for federal income tax purposes of approximately $11,800,000; however, the
Company believes that the entire regular federal income tax gain can be
offset by the Company's net operating loss carryforwards. However, the
Company expects that it will incur alternative minimum tax liability as a
result of the Asset Sale. See "Pro Forma Condensed Financial Statements"
and the discussion of the Company's net operating loss under "PROPOSAL TO
REORGANIZE."
The Asset Sale will have no direct federal income tax consequences to
the stockholders of the Company.
Dissenters Rights
The stockholders of the Company will not be entitled to dissenter or
appraisal rights under Oklahoma law in connection with the transaction.
Description of Future Business
Following the sale of substantially all of the assets of Carbonics,
Beard's continuing operations will consist primarily of its environmental
services and resource recovery activities. It will also continue to own a
working and overriding royalty interest in the McElmo Dome Field in
southwest Colorado, and a very small working interest in the Bravo Dome
Field in northeast New Mexico. McElmo Dome and Bravo Dome are believed to
be the two largest producing CO{2} fields in the world. In addition, Beard
will continue to hold (i) a minority interest in a joint venture involved
in the extraction, production and sale of crude iodine; and (ii) scattered
small real estate holdings, interests in two real estate limited
partnerships, and other miscellaneous investments.
Beard anticipates that immediately after the consummation of the Asset
Sale, it will (i) concentrate its efforts on the commercial development of
its Mulled Coal technology which is believed to have significant profit
potential but which is as yet untested on a commercial scale, and (ii)
pursue as the sole U.S. licensee the commercial development of a process
and composition patent which is pending for the remediation of creosote and
PAH contamination. The Company's continuing operations also include its
environmental services activities which are conducted through Whitetail
Services, Inc. and Horizontal Drilling Technologies, Inc. Complete details
concerning these activities and operations are discussed in the Company's
1996 Annual Report on Form 10-K, pages 10-15, which is attached hereto as
Appendix A.
Beard's environmental/resource recovery activities were not profitable
in 1996 or in the first quarter of 1997 (see - "Pro Forma Condensed
Financial Statements"), so it is critical to the Company's future viability
that it achieve a successful turnaround of its environmental/resource
recovery activities or that it supplement these activities with the
acquisition of profitable companies in the future. Management of the
Company has considerable expertise and has demonstrated success in the
environmental field as a result of their activities as the founder,
officers and directors, and as the principal shareholder of USPCI, Inc.
(NYSE) from 1968 until its acquisition by Union Pacific Corporation in
1988.
Vote Required
Under the Oklahoma General Corporation Act (the "Oklahoma Act"), the
Asset Sale may be deemed to constitute the sale of all or substantially all
of the assets of Beard. Accordingly, Beard is requesting shareholder
approval. Pursuant to the Oklahoma Act, the affirmative vote of the
holders of a majority of the outstanding shares of the Company's common
stock and preferred stock (voting on an as if converted basis) is required
for approval of the Agreement and the Asset Sale.
Market Information
Market information is incorporated herein by reference to page 17 of
the Company's Annual Report on Form 10-K (File No. 1-12396).
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial data of Beard as of the dates and for the periods indicated.
This data should be read in conjunction with the consolidated financial
statements and notes thereto incorporated by reference in this Proxy Statement.
(See "Incorporation of Certain Documents by Reference"). See also "Pro Forma
Financial Statements" and "Description of Future Business" regarding the effects
of the Asset Sale if it is consummated. The selected consolidated financial
data as of March 31, 1997 and 1996 and for the three months ended March 31, 1997
and 1996 have been derived from unaudited consolidated financial statements,
which, in the opinion of management, reflect all adjustments consisting only of
normal recurring accruals, necessary for a fair presentation of the results of
Beard as of those dates and for those periods. Interim results are not neces-
sarily indicative of the results which may be expected for any other period or
for the full year.
THREE MONTHS ENDED
ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
OPERATING DATA:
Operating revenues from
continuing operations $ 4,122 $ 3,146 $16,683 $15,012 $14,123 $13,281 $10,849
Interest income 3 2 18 25 20 21 110
Interest expense (88) (46) (259) (166) (116) (92) (210)
Earnings (loss) from
continuing operations (424) 103 (140) (478) 503 (893) (6,622)
Earnings (loss) from
discontinued operations - (8) (175) 75 214 (11,183) (25,871)
Gain on debt restructuring - - - - - 46,928 -
Net earnings (loss) (424) 95 (315) (403) 717 34,852 (32,493)
Earnings (loss) from con-
tinuing operations per share:
(primary EPS) (0.15) 0.03 (0.05) (0.20) 0.17 (0.42) (3.33)
(fully diluted EPS) (0.15) 0.03 (0.05) (0.20) 0.14 (0.41) (3.33)
Net earnings (loss) per share:
(primary EPS) (0.15) 0.03 (0.11) (0.17) 0.25 16.51 (16.34)
(fully diluted EPS) $ (0.15) $ 0.03 $ (0.11) $ (0.17) $ 0.21 $ 15.86 $(16.34)
Weighted average common
and common equivalent
shares outstanding:
Primary 2,799 2,752 2,756 2,662 2,652 2,111 1,989
Fully diluted 2,799 3,219 2,756 2,662 3,117 2,197 1,989
BALANCE SHEET DATA:
Working capital $ 1,381 $ 2,117 $ 1,745 $ 1,989 $ 2,427 $ 1,765 $ 1,830
Properties, net 8,823 7,624 8,699 7,158 6,834 6,312 6,607
Total assets 15,419 15,243 16,473 14,615 13,856 14,966 15,441
Long-term debt (excluding
current maturities) 3,067 1,828 2,911 1,454 982 1,137 947
Redeemable preferred stock 1,200 1,200 1,200 1,200 1,200 1,200 1,200
Common shareholders'
equity (deficit) $ 8,232 $ 8,893 $ 8,656 $ 8,788 $ 9,066 $ 8,407 $(27,743)
PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statements (the "Pro
Forma Financial Statements") of Beard are based upon and should be read in
conjunction with the historical financial statements of Beard which are
included in Beard's Annual Report on Form 10-K for the year ended December 31,
1996 and Form 10-Q for the three months ended March 31, 1997 which are attached
hereto as Appendices "A" and "B," respectively. The Unaudited Pro Forma Con-
densed Balance Sheet is presented as if the sale of substantially all the
assets and certain liabilities related to the dry ice manufacturing and distri-
bution operations of Carbonic Reserves (the "Asset Sale") had occurred on
March 31, 1997. The Unaudited Pro Forma Condensed Statements of Operations for
the year ended December 31, 1996 and three months ended March 31, 1997 give
effect to the Asset Sale as if it had occurred on January 1, 1996 and
January 1, 1997, respectively.
The unaudited pro forma condensed financial statements and the
accompanying notes are intended for informational purposes only, have been
prepared based on estimates and assumptions deemed by Beard to be appropriate,
and are not necessarily indicative of the financial condition or results of
operations had the Asset Sale occurred as of the dates indicated and are not
intended to be indicative of future results of operations.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Balance Sheet
March 31, 1997
(In thousands)
(UNAUDITED)
BEARD BEARD
ASSETS HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
Current assets:
Cash and cash equivalents $ 240 $ 19,500 (a) $ 19,740
Accounts receivable, net 2,396 (1,251) (a) 1,145
Other current assets 1,522 (849) (a) 673
---------- ---------- ----------
Total current assets 4,158 17,400 21,558
Investments and other assets 1,679 (127) (a) 1,552
Property, plant and equipment, net 8,823 (6,521) (a) 2,302
Intangible assets, net 759 (258) (a) 501
---------- ---------- ----------
$ 15,419 $ 10,494 $ 25,913
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable and other liabilities $ 2,001 $ (1,301) (a) $ 2,402
452 (b)
1,250 (c)
Current maturities of long-term debt 776 (252) (a) 524
---------- ---------- ----------
Total current liabilities 2,777 149 2,926
Long-term debt less current maturities 3,067 (1,061) (a) 2,006
Minority interest in consolidated subsidiaries 143 - 143
Redeemable preferred stock 1,200 3,500 (d) 4,700
Total common shareholders' equity 8,232 13,108 (a) 16,138
(452) (b)
(1,250) (c)
(3,500) (d)
---------- ---------- ----------
$ 15,419 $ 10,494 $ 25,913
========== ========== ==========
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Statement of Operations
Three Months Ended March 31, 1997
(In thousands)
(UNAUDITED)
BEARD BEARD
HISTORICAL ADJUSTMENTS (e) PRO FORMA
---------- --------------- ---------
REVENUES:
Carbon dioxide $ 2,918 $ (2,800) $ 118
Environmental/resource recovery 1,169 - 1,169
Other 35 - 35
--------- -------- ---------
4,122 (2,800) 1,322
EXPENSES:
Carbon dioxide 2,053 (2,026) 27
Environmental/resource recovery 995 - 995
Selling, general and administrative 1,031 (518) 513
Depreciation, depletion and amortization 361 (262) 99
Other 7 - 7
--------- -------- ---------
4,447 (2,806) 1,641
OPERATING PROFIT (LOSS):
Carbon dioxide 79 6 85
Environmental/resource recovery (175) - (175)
Other (229) - (229)
--------- -------- ---------
(325) 6 (319)
OTHER INCOME (EXPENSE):
Interest expense (88) 30 (58)
Other (11) (4) (15)
--------- -------- ---------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (424) 32 (392)
INCOME TAXES - - -
--------- -------- ---------
LOSS FROM CONTINUING OPERATIONS $ (424) $ 32 $ (392)
========= ======== =========
LOSS FROM CONTINUING OPERATIONS PER COMMON SHARE $ (0.15) $ (0.14)
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,799,074 2,799,074
========= =========
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
Pro Forma Condensed Statement of Operations
Year Ended December 31, 1996
(In thousands)
(UNAUDITED)
BEARD BEARD
HISTORICAL ADJUSTMENTS (e) PRO FORMA
------------- --------------- ------------
REVENUES:
Carbon dioxide $ 13,608 $ (13,307) $ 301
Environmental/resource recovery 3,009 - 3,009
Other 66 - 66
------------- ------------- ------------
16,683 (13,307) 3,376
EXPENSES:
Carbon dioxide 9,478 (9,381) 97
Environmental/resource recovery 2,642 - 2,642
Selling, general and administrative 4,079 (2,215) 1,864
Depreciation, depletion and amortization 1,309 (1,008) 301
Other 77 - 77
------------- ------------- ------------
17,585 (12,604) 4,981
OPERATING PROFIT (LOSS):
Carbon dioxide 887 (703) 184
Environmental/resource recovery (757) - (757)
Other, principally corporate (1,032) - (1,032)
------------- ------------- ------------
(902) (703) (1,605)
OTHER INCOME (EXPENSE):
Interest expense (259) 118 (141)
Gain on sale of assets 171 (6) 165
Gain on take-or-pay contract settlement 939 (939) -
Other (89) (5) (94)
------------- ------------- ------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (140) (1,535) (1,675)
INCOME TAXES - - -
------------- ------------- ------------
LOSS FROM CONTINUING OPERATIONS $ (140) $ (1,535) $ (1,675)
============= ============= ============
LOSS FROM CONTINUING OPERATIONS
PER COMMON SHARE $ (0.05) $ (0.61)
============= ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,756,094 2,756,094
============= ============
See accompanying notes to unaudited pro forma condensed financial statements.
THE BEARD COMPANY AND SUBSIDIARIES
NOTES TO PRO FORMA
CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Pursuant to the Asset Purchase Agreement (the "Agreement"), Airgas
is purchasing substantially all of the assets (excluding cash and cash
equivalents, notes receivable from Beard or related parties, and deferred tax
assets) of Carbonic Reserves ("Carbonics"), an 85%-owned subsidiary of Beard,
and will assume certain liabilities of Carbonics as stated on its December 31,
1996 financial statements or incurred in the ordinary course of business
thereafter (excluding any tax liabilities, employee related liabilities,
indebtedness to Beard or related parties, or environmental liabilities of
Carbonics).
Accordingly, the following adjustments have been made to Beard's
historical March 31, 1997 balance sheet to reflect the sale of the assets as if
the sale had occurred on March 31, 1997 as follows (in thousands):
Cash Proceeds: $ 19,500
Liabilities to be assumed:
Trade accounts payable 1,301
Current maturities of
long-term debt 252
Long-term debt 1,061
------
Total Sales Price 22,114
Accounts receivable, net (1,251)
Other current assets (849)
Investments and other assets (127)
Property, plant and equipment, net (6,521)
Intangible assets, net (258)
------------
Proceeds greater than costs $ 13,108
============
The Agreement provides that $1 million of the purchase price (the
"Holdback") will be held back for a maximum of 150 days after closing of the
transaction. The Holdback is subject to offset for any accounts receivable
that have not been collected within 120 days of the closing to the extent
such receivables exceed the amount of the allowance for uncollectible
accounts on Carbonics' balance sheet. Beard expects that little, if any, of
such amount will be ultimately held back since Carbonics' collection
experience in recent years has been excellent and since Carbonics also has
most of its larger accounts insured.
(b) For income tax purposes, the consummation of the Asset Sale will
result in taxable income to Beard. The sale of assets to Airgas will result in
a taxable gain equivalent to the difference between the fair market value of
the assets transferred and the tax basis of those assets. In addition, the
assumption by Airgas of certain liabilities will result in taxable income
equivalent to the total liabilities assumed by Airgas. Beard's net operating
loss carryforwards will offset such taxable income. Accordingly, Beard expects
that (i) there will be no regular Federal income tax liability; (ii) there will
be alternative minimum tax liability; and (iii) there will be state income and
sales tax liabilities resulting from the Asset Sale. Pro forma adjustment
(b) reflects estimated state income and sales taxes of approximately $242,000
of Carbonics and Federal alternative minimum tax of Beard of approximately
$210,000 as a result of the Asset Sale.
(c) Reflects the accrual of (i) $1 million to Collen for his 15% common
stock ownership in Carbonics plus bonuses and termination fees due, (ii)
$200,000 to other key employees of Carbonics and (iii) $50,000 to cover costs
related to the Proxy Statement.
(d) Reflects the expected redemption in March of 1998 of approximately
$3,500,000 of Beard mandatorily redeemable preferred stock as a result
of the gain to Beard on the Asset Sale. Assuming a redemption in such amount
there would be 55,156 shares of Beard preferred stock outstanding. The Beard
preferred stock has a redemption value of $9,015,586 and is mandatorily
redeemable from one-third of Beard's consolidated net income. To the
extent not redeemed by December 31, 2002, the Beard preferred stock would be
convertible by the holders thereof into as much as 14.18% of the common
stock of Beard on a fully diluted basis on January 1, 2003. For purposes of
the pro forma presentation the Beard preferred stock has been recorded at the
estimated fair market value at December 31, 1996 plus the estimated redemption
amount of $3,500,000 expected to be paid in March of 1998.
(e) Reflects the elimination of operations of Carbonics for the year
ended December 31, 1996 and for the three months ended March 31, 1997.
(f) The unaudited pro forma condensed balance sheet includes, and the
unaudited pro forma condensed statements of operations exclude the gain
from the Asset Sale, estimated to be $12,656,000, and the accretion in
the carrying value of the Beard mandatorily redeemable preferred stock of
$3,500,000 ($1.27 and $1.25 per share, respectively, increase in the net loss
per share attributable to common shareholders), reflecting the one-third
of consolidated net income that accretes directly to preferred
shareholders, and the one-time charges of $1,250,000 for Collen's 15% common
stock ownership in Carbonics, bonuses, termination fees and transaction costs.
The gain, the dilutive effect of the accretion in the carrying value of the
Beard mandatorily redeemable preferred stock and the one-time charges will be
included in Beard's consolidated financial statements for the year ending
December 31, 1997.
COMPARATIVE PER SHARE DATA
The following table sets forth certain unaudited historical and pro
forma per share financial information as of and for the three months ended
March 31, 1997 and for the fiscal year ended December 31, 1996. The
following information should be read in conjunction with and is qualified
in its entirety by the consolidated financial statements and notes thereto
incorporated by reference in the Proxy Statement (see "Incorporation of
Certain Documents by Reference") and by the pro forma condensed financial
statements and notes thereto set forth under "Pro Forma Condensed Financial
Statements."
MARCH 31, 1997
Book value per common share at period end:
Historical $2.94
Pro forma $5.77
THREE MONTHS YEAR
ENDED ENDED
MARCH 31, 1997 DECEMBER 31, 1996
Loss from continuing operations
per common share:
Historical $(0.15) $(0.05)
Pro forma $(0.14) $(0.61)
The Company has not paid dividends on its Common Stock nor does it
have any plans to do so. See "Dividend Policy."
PROPOSAL TO REORGANIZE
(Proposal No. 2)
For the reasons explained below under the caption "Purposes for the
Merger," the Board of Directors is proposing that the Company merge (the
"Merger") into its newly formed Oklahoma subsidiary, The NBC Company
("NBC"). The details of this change are set out in the Plan and Agreement
of Merger and Reorganization which is attached to this proxy statement as
Exhibit B (the "Merger Agreement"). The Board of Directors has unanimously
approved the Merger, subject to shareholder approval.
NBC will immediately be renamed The Beard Company and continue
conducting business as the successor to the Company. If the Company's
stockholders adopt and approve the Merger, the Merger will take effect on
the date on which a certificate of merger is filed with the Secretary of
State of the State of Oklahoma (the "Effective Date"). This filing is
expected to be made within 48 hours after adoption and approval of the
Merger at the meeting.
The Merger will not result in any change in the number of shares owned
or percentage of ownership of any stockholder of the Company. On the
Effective Date each outstanding share of the Company's Common Stock will be
converted automatically into the right to receive one share of NBC common
stock, par value $0.001 per share ("NBC Common Stock").
Each outstanding certificate representing shares of Company Common
Stock will represent the same number of shares of NBC Common Stock. On and
after the Effective Date the NBC Common Stock will be traded on the AMEX in
full substitution for the shares of Company Common Stock under the same
stock symbol "BOC."
The Merger of the Company will not result in any change in the
business, management, location of the principal executive offices, assets,
liabilities or stockholders' equity of the Company. NBC will possess all
of the assets and be responsible for all of the liabilities of the Company.
The Merger will not change the financial condition of the Company.
The Company is currently governed, and the shareholders rights are
defined, by the laws of the State of Oklahoma, the Board of Directors and
officers, its certificate of incorporation, its Bylaws, and its preferred
stock designation. In addition, the Company has adopted a 401(k) Plan, a
Stock Option Plan, a Phantom Stock Units Plan and a Deferred Stock
Compensation Plan. All of these instruments will be substantially the same
for NBC as they were for the Company.
Specifically, the officers and directors of NBC will be the same
people who currently serve as officers and directors of the Company. The
NBC Bylaws will be the same as the Bylaws of the Company in all respects,
as will the common stock and preferred stock, the 401(k) Plan, the Stock
Option Plan, the Phantom Stock Units Plan and the Deferred Stock
Compensation Plan. The certificate of incorporation for NBC will be
changed to reflect the Section 382 Restrictions discussed below. See
Exhibit C.
Purposes for the Merger
The Board of Directors believes that the best interests of the Company
and its stockholders will be served by attempting to preserve the Company's
available net operating loss carryforwards ("NOLs") as discussed below.
The Merger will impose certain stock transfer restrictions on the Company's
preferred and common stock which are designed to prevent elimination or
limitation on the usage of the NOLs.
Section 382 Stock Transfer Restrictions
At March 31, 1997, Beard and its consolidated subsidiaries had
available federal income tax net NOLs of approximately $66.1 million. The
NOLs, which will expire between 2001 and 2010, can be used by Beard to
offset future taxable income and capital gains and therefore constitute a
valuable asset.
However, the NOLs are valuable only if Beard has substantial taxable
income in years after the Merger. Management believes that it is unlikely
that Beard will be able to realize the full benefit of the NOLs before they
begin to expire in 2001. Even so, Beard desires to retain as much of the
NOLs for future use as possible.
If an "ownership change," as defined in Section 382 of the Code
("Section 382"), occurs, Beard's ability to use its NOLs would be limited
or eliminated. Basically, the amount of NOLs which Beard could use to
offset future taxable income would be limited to an amount determined by
multiplying the fair market value of Beard's outstanding capital stock
immediately before the "ownership change" by the "long-term tax exempt
rate" which is published monthly by the Internal Revenue Service.
Moreover, if a corporation has substantial non-business assets on the date
of an ownership change, the fair market value of its capital stock for this
purpose would be reduced by all or a substantial portion of its non-
business assets.
As discussed below, the Company desires to impose restrictions on the
Beard stock to prevent inadvertent application of Section 382 in the
future. The limitations imposed by Section 382 should have no effect on an
individual shareholder of Beard.
Application of Section 382
The limitations imposed by Section 382 only apply when an "ownership
change" occurs with respect to the stock of a corporation. An "ownership
change" will occur if the ownership of one or more 5% shareholders
(accounting for all shareholders owning less than 5% as a single
shareholder) has increased by more than 50 percentage points over the
lowest percentage of stock owned by such 5% shareholders during the three
year period ending on the date of change. For this purpose, Section 382
generally defines stock to include all issued and outstanding stock, except
certain preferred stock, and all stock that may be acquired pursuant to
warrants, options, rights to purchase stock, rights to convert other
instruments into stock and options or other rights to acquire any such
interests. Ownership of stock is generally attributed to the ultimate
individual beneficial owner.
As a result of a transfer of stock by holders of a portion of the
common stock and the Series A Preferred Stock in January, 1997, the Company
had an ownership change of approximately 27%.
Section 382 Restrictions
If the Merger is approved, the stockholders of Beard will become
stockholders of NBC. In an attempt to preserve the value of the NOLs to
Beard, provisions in the Certificate of Incorporation of NBC restrict the
transfer of shares for 13 years after the Effective Date of the Merger to
any person if that person is, or would thereby become, a holder of 5% or
more of the fair market value of Beard's outstanding capital stock without
the Board of Directors' consent (the "Section 382 Restrictions").
For purposes of the Section 382 Restrictions, the terms "person" and
"transfer" are broadly defined to reach virtually any transaction that
might result in a transfer of any interest in shares of the Beard Common
and Preferred Stock. The calculation of the percentage of capital stock
actually or constructively owned by a transferee will be determined in
accordance with Section 382. The transfer restriction will expire on the
earliest of 13 years after the Effective Date of the Merger, the date on
which Beard no longer has any unutilized NOLs, or the date after which
Section 382 could no longer affect the NOLs. The certificates representing
the Beard Common and Preferred Stock will bear a legend conspicuously
noting the Section 382 Restrictions.
The Section 382 Restrictions operate to make any attempted transfer in
violation thereof ineffective. The purported transferee will not be
recognized by Beard as having an ownership interest, will not have the
right to vote, receive dividends or distributions on liquidation and will
be prevented from realizing any appreciation in the market value of the
stock. The transferor will continue to be treated as the owner of the
Common or Preferred Stock for all purposes. Any purported transferee in
violation of the Section 382 Restrictions may be required by Beard to
deliver any certificate or other evidence of ownership to an agent
designated by Beard for sale of the shares represented thereby. The
proceeds of the sale will be paid to the purported transferee to the extent
of the consideration paid by such person and the balance will be paid to
the transferor, if such person can be identified with reasonable efforts,
or otherwise as provided in Beard's Certificate of Incorporation. If the
purported transferee has resold the shares, Beard may demand, and bring
suit to enforce the collection of, the proceeds for distribution as set
forth above. The Section 382 Restrictions are designed to prevent a
prohibited transferee from receiving or retaining any of the benefits of
ownership.
Under the Section 382 Restrictions, the Board of Directors of Beard is
authorized to establish guidelines as to the application and implementation
of the transfer restrictions. The guidelines will generally conform to the
requirements of Section 382 and may contain various administrative
provisions. However, because Section 382 contains many ambiguities and
uncertainties, and to permit the Board of Directors flexibility in applying
the Section 382 Restrictions in a manner that may not conform to Section
382, the guidelines adopted by the Board of Directors may be more or less
stringent than the specific requirements for Section 382. In addition,
under the terms of the Section 382 Restrictions, the Board of Directors has
the power to make certain exceptions to, or establish guidelines in the
future to include or exclude certain transactions from, the transfer
restrictions. The Board of Directors intends to consider proposed
transfers individually to determine whether the proposed transfer is in the
best interest of Beard. In making its determination, the Board of
Directors will consider all factors believed to be relevant at the time,
including the effect of the transfer on the aggregate percentage increase
in ownership of capital stock by 5% Holders and any benefit or detriment to
Beard resulting from the transfer. Inasmuch as the Board of Directors
intends to consider each transaction individually, there is a possibility
that the proposed restrictions on transfer may be inconsistently applied to
similar transactions.
Transfer Restrictions No Guarantee of the NOLs
Although the Section 382 Restrictions are intended to preserve the
availability of the NOLs, they may not be effective in preventing all
transfers that might result in an ownership change for purposes of Section
382. Section 382 is an extremely complex provision with respect to which
there are many uncertainties. Many issues that may arise under Section 382
have not been definitively addressed by the Internal Revenue Service or the
courts. Section 382, and the Section 382 Restrictions, apply to all
transfers of a company's stock to or from a 5% Holder, whether the transfer
is of record or merely beneficial. Beard has not requested a ruling from
the Internal Revenue Service regarding the effectiveness of the Section 382
Restrictions and, therefore, there can be no assurance that the Internal
Revenue Service will agree that such a prohibition is effective for
purposes of Section 382. Nevertheless, the Board of Directors believes
that the Section 382 Restrictions are in the best interests of Beard,
because they discourage and most likely effectively prevent transfers which
could lead to an ownership change.
An ownership change could also occur in connection with a transfer
approved by the Board of Directors. The Board of Directors is not aware of
any person intending to become a 5% Holder. Nevertheless, if in the future
the Board of Directors determines to permit a transfer to any 5% Holder
because the transfer would be advantageous to Beard and its shareholders
regardless of its impact on the NOLs, that transfer or later transfers
could result in an ownership change that would limit or eliminate the use
of the NOLs. The Board of Directors intends to consider any such potential
transfers individually and determine at the time whether it is in the best
interests of Beard and its shareholders, in view of the circumstances, to
permit any transfers to a 5% Holder or a person who would thereby become a
5% Holder.
Authority for Restrictions; Applicability of Oklahoma Act
Section 1055C of the Oklahoma Act provides, in pertinent part, that
"[a] restriction on the transfer of securities of a corporation is
permitted by the provisions of this section if it...(4) prohibits the
transfer of the restricted securities to designated persons or classes of
persons, and such designation is not manifestly unreasonable." In
addition, Section 1055E of the Oklahoma Act validates other "lawful"
restrictions on the transfer or registration of transfer of securities, and
Section 1055D of the Oklahoma Act provides that "[a]ny restriction on the
transfer of the shares of a corporation for the purpose...of maintaining
any...tax advantage to the corporation is conclusively presumed to be a
reasonable purpose."
Assuming approval of the Merger, the NOLs will constitute a valuable
asset of Beard. The Section 382 Restrictions have been included in NBC's
Certificate of Incorporation for the sole purpose of preserving this tax
advantage. Additionally, Beard believes the 382 Restrictions are not
manifestly unreasonable. Therefore, Beard believes that the Section 382
Restrictions are valid and, to the extent the restrictions are noted
conspicuously on the certificates representing the stock, the terms of the
restrictions will be enforceable under Oklahoma law, subject to applicable
bankruptcy, moratorium or other similar laws and general principles of
equity.
However, under Article 8 of the Uniform Commercial Code in effect in
Oklahoma, a bona fide purchaser for value without notice of a restriction
on transfer would take the security free of such restriction. In order to
prevent transfers of Beard stock that might impair the NOLs, at the
Effective Time of the Merger, the Beard stock will legally cease to exist
but it will not be automatically converted into stock of NBC; instead, the
certificates formerly representing the Beard stock will thereafter
represent non-transferable rights to receive Beard stock in accordance with
the Merger Agreement. The holders of such certificates will not, until
they have exchanged the same for Beard certificates, be entitled to receive
dividends or other distributions in respect thereof, nor will they be
entitled to vote on any matters presented for approval of the shareholders
or any other rights of ownership with respect to Beard stock. The stock of
Beard was subject to restrictions similar to the Section 382 Restrictions
until they expired in October of 1996.
Other Considerations; Potential Anti-takeover Effects of the Transfer
Restrictions
The Board of Directors of Beard has concluded that the potential
benefits of the Section 382 Restrictions outweigh the possible
disadvantages. However, the Section 382 Restrictions may reduce the
marketability of Beard's Common Stock because it will discourage
acquisitions involving large blocks. The Board of Directors of Beard
believes, however, such disadvantage is outweighed by the risk that the
loss of the NOLs would have a severe negative impact on Beard's future
value.
Although the Section 382 Restrictions are being proposed for the sole
purpose of preserving the NOLs, the Section 382 Restrictions may have the
effect of discouraging takeover attempts. The Section 382 Restrictions
specifically prohibit transactions involving acquisitions of Beard Common
or Preferred Stock by a person who is, or would thereby become, a holder of
5% or more of Beard's capital stock, with the result that the Board of
Directors, in its discretion, may be able to prevent any future takeover
attempt. Therefore, some shareholders may find the Section 382
Restrictions disadvantageous to the extent that it might discourage or
prevent tender offers or accumulations of substantial blocks of shares in
which shareholders might receive a premium above market value. Because the
Section 382 Restrictions are intended to operate to prevent change of
control, they may make the removal of incumbent management more difficult.
Although the Section 382 Restrictions limit the accumulation of large
holdings of Beard Common or Preferred Stock, holders of a majority of
Beard's voting shares will continue to have the power to replace any or all
of the directors in accordance with the provisions of the Oklahoma Act and
the Beard Certificate of Incorporation.
Tax Consequences
The Company has received an opinion from its counsel, McAfee & Taft A
Professional Corporation, to the effect that the proposed Merger will be a
tax-free reorganization under the Internal Revenue Law of 1986, as amended.
Accordingly, (i) no gain or loss will be recognized for federal income tax
purposes by the stockholders of the Company as a result of the Merger and
(ii) the basis and holding period for the stock of NBC received by the
stockholders of the Company will be the same as the basis and holding
period of the stock of the Company exchanged therefor. The Merger will
have no federal income tax effect on the Company. State, local or foreign
income tax consequences to stockholders may vary from the federal tax
consequences described above, and stockholders should consult their own tax
advisors as to the effect of the Merger under applicable state, local or
federal income tax laws.
Accounting Consequences
The Merger will not result in any financial accounting consequences.
The existing assets and liabilities of the Company will continue to be
reported at their historical carrying amounts on the books of NBC.
Regulatory Approvals
There are no regulatory approvals required in connection with the
Merger.
Abandonment
Notwithstanding a favorable vote of the stockholders, the Company
reserves the right by action of the Board of Directors to abandon the
proposed Merger prior to the Effective Date of the Merger if it determines
that such abandonment is in the best interests of the Company. The Board
of Directors knows of no circumstances which might prompt abandonment.
Vote Required
Pursuant to the Oklahoma Act, the affirmative vote of the holders of a
majority of the outstanding shares of the Company's Common Stock and the
Preferred Stock on an as converted basis is required for approval of the
Merger Agreement and the merger which will effectuate the Merger. A vote
of approval of the Merger will constitute specific approval of all other
transactions and proceedings relating to the Merger, including the
assumption by NBC of the Company's Stock Option Plan and all other employee
benefit plans and agreements, and the obligations of the Company under such
plans and agreements, and the provisions in NBC's Certificate of
Incorporation which differ from those in the Company's Certificate of
Incorporation.
Dissenters Rights
Under applicable provisions of the Oklahoma Act, there are no
dissenting stockholder appraisal rights available in connection with the
Merger.
Payment of Merger Consideration; Exchange of Beard Certificates
As soon as practicable following the Merger, there will be mailed to
all holders of record of Beard Common Stock and Beard Preferred Stock at
the Effective Time a Letter of Transmittal to be used by such holders in
surrendering to Liberty Bank and Trust Company of Oklahoma City, National
Association (the "Exchange Agent") certificates which, prior to the Merger,
represented shares of Beard Common Stock and to the Company certificates
which, prior to the Merger represented shares of Beard Preferred Stock.
The Letter of Transmittal will contain instructions concerning the
surrender of Beard stock certificates. Beard shareholders should not
surrender their stock certificates until they have received the Letter of
Transmittal.
Each holder of Beard Common Stock or Beard Preferred Stock will be
entitled to receive, upon surrender to the Exchange Agent of his
certificate(s) which prior to the Merger represented shares of Beard Common
Stock or Beard Preferred Stock, respectively, together with a properly
completed and duly executed Letter of Transmittal and any other required
documents, a certificate representing the number of whole shares of NBC
Common Stock or the number of whole and/or fractional shares of NBC
Preferred Stock to which he is entitled pursuant to the Merger Agreement.
If a certificate representing NBC Common Stock or NBC Preferred Stock is to
be issued in the name of a person other than the person in whose name a
surrendered certificate is registered, the certificate so surrendered must
be endorsed and otherwise be in proper form for transfer and the person
requesting such issuance must pay to the Exchange Agent or the Company, as
the case may be, any transfer taxes required by reason of such issuance in
a name other than that of the holder of record or must establish to the
satisfaction of the Exchange Agent or the Company, as the case may be, that
such taxes either have been paid or are not payable. The Exchange Agent
will issue the NBC Common Stock and the Company will issue the NBC
Preferred Stock attributable to any certificate which has been lost or
destroyed only upon receipt of satisfactory evidence of ownership of the
shares of Beard Common Stock or Beard Preferred Stock represented thereby
and after appropriate indemnification.
Following the Merger, holders of certificates formerly representing
shares of Beard Common Stock or Beard Preferred Stock will cease to have
any rights with respect to the shares formerly represented thereby, except
the right to receive the NBC stock in exchange therefor. In addition,
holders of such certificates will not be entitled to receive any dividends
payable to holders of NBC Common Stock or NBC Preferred Stock, or any other
attributes of ownership, until surrender of the certificates to the
Exchange Agent or the Company, as the case may be.
Amendment and Termination
Prior to consummation of the Merger, the Merger Agreement may be
amended at any time, whether before or after the meeting, by a written
instrument executed by Beard and NBC with the approval of their respective
Boards of Directors. The Oklahoma Act provides that the boards of
directors of the constituent corporations in a merger may amend the merger
agreement after shareholder approval has been obtained by a constituent
corporation, provided the amendment does not (i) alter the amount or kind
of shares, securities, cash, property or rights to be received in exchange
for or on conversion of shares of such constituent corporation, (ii) alter
the certificate of incorporation of the surviving corporation or (iii)
alter the terms of the agreement if such alteration would adversely affect
the holders of shares of such constituent corporation. The Merger
Agreement may be terminated by the mutual consent of the Boards of
Directors of Beard and NBC or by either party if (i) there is a material
default by any party in observing or performing any representations,
warranties, agreements or covenants in the Merger Agreement, the other
party has not complied with all closing conditions and such noncompliance
has not been waived by the remaining parties, or (ii) a suit or other
proceeding is pending or threatened seeking to restrain, prohibit or obtain
damages in connection with the consummation of the Merger Agreement.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND THE MERGER
WHICH WILL EFFECTUATE THE PROPOSED MERGER. THE BOARD UNANIMOUSLY
RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER.
ELECTION OF DIRECTORS
(Proposal No. 3)
The Company's Amended and Restated 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 three-year terms expiring at the date of the Annual
Meeting of Stockholders in 2000. The terms of Messrs. Allan R. Hallock and
Ford C. Price expire this year, and they will be the two nominees for terms
expiring in 2000. 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 will continue to serve in such capacity until his
successor has been elected.
It is the intention of the persons named in the accompanying form of
Proxy to vote Proxies for the election of the two above-named nominees.
Each nominee has served continuously as director of the Company or of its
predecessors since first elected. In the event that any of the nominees
should for some reason, presently unknown, fail to stand for election, the
resulting vacancy would be filled at such time as the board finds a
suitable candidate. Election of each director 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 four
directors whose terms do not expire this year is as follows:
Nominees for Election for Terms of Three Years Expiring in 2000:
Nominee (age), year first became a Director of Beard or Beard Oil.
ALLAN R. HALLOCK (68), 1986
Allan R. Hallock was elected a director of Beard in July 1993. He
served as a director of Beard Oil Company ("Beard Oil"), the predecessor to
Beard, from December 1986 until October 1993. Mr. Hallock is currently an
independent consulting geologist. He served as Vice President and
Exploration Manager of Gemini Corporation from 1970 until December 1986.
FORD C. PRICE (60), 1988
Ford C. Price was elected a director of Beard in July 1993. He served
as a director of Beard Oil from June 1987 until October 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.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ABOVE
NOMINEES.
Director to Continue in Office with Term Expiring in 1998:
HERB MEE, JR. (69), 1974
Herb Mee, Jr. has served as Beard's President since October 1989 and
as its Chief Financial Officer since June 1993. He has served as Beard
Oil's President since its incorporation, and as its Chief Financial Officer
since June 1993. He has also served as a director of Beard 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.
Directors to Continue in Office with Terms Expiring in 1999:
W. M. BEARD (68), 1974
W.M. Beard has served Beard as its Chairman of the Board and Chief
Executive Officer since December 1992. He previously served as Beard's
President and Chief Executive Officer from the Company's incorporation in
October 1974 until January 1985. He has served Beard Oil as its Chairman
of the Board and Chief Executive Officer since its incorporation. He has
also served as a director of Beard and Beard Oil since their incorporation.
Mr. Beard has been actively involved since 1952 in all management phases of
Beard and Beard Oil from their inception, and as a partner of their
predecessor company.
W. R. PLUGGE (73), 1986
W. R. Plugge was elected a director of Beard in July 1993. He served
as a director of Beard Oil from September 1986 until October 1993. Mr.
Plugge was with Stanford Research Institute, a non-profit research
corporation, from 1976 until his retirement in 1988, last serving as Vice
President-International Operations. Mr. Plugge is a private investor, and
also serves as a director of Computer Horizons Corporation, a publicly-held
company (OTC).
Director Elected to Represent the Class of Preferred Stockholders
MICHAEL E. CARR (62), 1994
Michael E. Carr was elected in February 1994 by the preferred
stockholders to fill the directorship vacancy which they are entitled to
fill. He served as Senior Vice President of Beard Oil from December 1986
until October 1993. He served as President of Sensor Oil & Gas, Inc. from
October 1993 until August 1996. He presently serves as President of Mica
Energy Corp.
Mr. Carr will serve as a director of the Company until his successor
has been elected and has qualified in such office or until such time as all
of the preferred stock has been converted or redeemed.
There is no family relationship between any of the directors or
executive officers of the Company.
Committees of the Board of Directors
The Company has standing Audit and Compensation Committees. Mr.
Plugge serves as chairman and Messrs. Hallock, Price and Carr serve as
members of the Audit Committee which met twice in 1996. Mr. Hallock serves
as chairman and Messrs. Plugge, Price and Carr serve as members of the
Compensation Committee which met twice in 1996. During 1996, the Board of
Directors met five times. All of the directors attended more than 75% of
the aggregate of all meetings of the Board of Directors and Committees on
which they served during 1996.
The principal functions of the Company's Audit Committee are: (1) to
annually review the selection of independent auditors and to recommend for
Board approval and stockholder ratification the appointment of independent
auditors; (2) to consult with the independent auditors of the Company with
regard to the plan of audit; (3) to review the results of the annual audit
and request additional reviews and audit procedures if necessary; and (4)
to review and approve internal audit objectives, accounting and control
policies and procedures to determine that a reliable system of internal
controls is functioning.
The principal functions of the Company's Compensation Committee are:
(1) to review the objectives, structure, cost and administration of the
Company's major compensation and benefit policies and programs; (2) to
review and make recommendations concerning remuneration arrangements for
senior management, including the specific relationship of corporate
performance to executive compensation; (3) to review the Company's
performance versus the CEO's compensation and establish measures of the
Company's performance upon which the CEO's compensation is based; and (4)
to administer the Company's compensation, benefit and incentive plans.
The Company does not have a Nominating Committee; the Board of
Directors has nominated the directors to stand for election at the annual
meeting. Each of the persons nominated presently serves as a director.
Executive Officers
Certain information concerning the executive officers of the Company
is set forth below:
In addition to W. M. Beard, the Company's Chairman and Chief Executive
Officer, and Herb Mee, Jr., the Company's President and Chief Financial
Officer, the following are considered to be executive officers of the
Company:
Clifford H. Collen, Jr., age 40, has served as President of Carbonics
since he and Beard Oil founded the company in August 1987. Mr. Collen has
been associated with the CO{2} industry since 1979, working in various
positions in the liquid carbon dioxide business and also serving as
president of an engineering and consulting company in the industrial and
carbon dioxide gas plant industry. In the event the proposed sale of
substantially all of the assets of Carbonics is approved and the sale is
consummated, it is contemplated that Mr. Collen will become an employee of
Airgas.
Marc A. Messner, age 35, has served as President of Horizontal
Drilling Technologies, Inc. ("HDT") since he and another person founded the
company in July 1993. He was elected President of Whitetail Services, Inc.
in November 1996. Mr. Messner has been associated with the environmental
services industry since 1989, last serving as a project manager for a large
national environmental consulting firm before leaving to start HDT.
Philip R. Jamison, age 59, has served as President of Beard
Technologies, Inc. since August 1994. Mr. Jamison has been associated with
the coal industry since 1960, working in various positions. From 1972 to
1977 he served as Vice President Operations for International Carbon and
Minerals and as President and CEO of all its coal producing subsidiaries.
From 1979 to 1988 he served as CEO of four small companies which were
engaged in the production and sale of coal. From 1993 to 1995 he served as
a consultant to Energy International, Inc. ("EI") in its development of the
Mulled Coal process and installed and operated the process at an Alabama
coal preparation plant in connection with EI's performance of a contract
for the Department of Energy.
Jack A. Martine, age 48, was elected as Controller, Chief Accounting
Officer and Tax Manager of Beard in October 1996. Mr. Martine served as
tax manager for Beard from June 1989 until October 1993 at which time he
joined Sensor Oil & Gas, Inc. in a similar capacity. Mr. Martine is a
certified public accountant.
Rebecca G. Witcher, age 37, has served as Corporate Secretary of the
Company and Beard Oil since October 1993, and has served as Treasurer of
such companies since July 1997.
All executive officers serve at the pleasure of the Board of
Directors.
Compliance with SEC Reporting Requirements
Section 16 of the Securities Exchange Act of 1934 requires directors
and executive officers of the Company to file reports with the Securities
and Exchange Commission reflecting transactions by such persons in the
Company's common stock. During 1996, to the knowledge of the Company, or
based on information provided by such persons to the Company, all executive
officers and directors of the Company subject to such filing requirements
fully complied with such requirements.
Compensation of Executive Officers
The table on the next page 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 $100,000, for any of the fiscal years ended December 31,
1996, 1995 or 1994:
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation AWARDS PAYOUTS
(a) (b) (c) (d) (g) (h) (i)
Securities
Underlying All Other
Name and Salary Salary Options/ LTIP Compen-
Principal (A) (B) SAR's Payouts sation (C)
POSITION YEAR ($) ($) (#) ($) ($)
W. M. Beard 1996 99,000(D) -0-(D) -0- $35,150(D) 5,031(D)
Chairman & CEO 1995 129,250(D) -0-(D) -0- $4,850(D) 6,462(D)
1994 132,000 2,050 50,000 -0- 6,703
Herb Mee, Jr. 1996 132,000 1,150 -0- -0- 6,658
President & CFO 1995 132,000 1,100 -0- -0- 6,655
1994 132,000 1,050 50,000 -0- 6,653
C. H. Collen, Jr. 1996 100,000 63,216(E) -0- -0- 5,688
President- 1995 103,134 13,883(E) -0- -0- 5,179
Carbonic
Reserves 1994 72,184 581 -0- -0- 3,600
________
(A) Amounts shown include cash compensation earned and received by
executive officers as well as amounts earned but deferred pursuant to
the Company's 401(k) Plan at the election of those officers.
(B) Bonus for length of service with Beard, Beard Oil or Carbonics.
(C) Consists of the Company's contribution to the Company's 401(k) Plan.
(D) In 1996 Mr. Beard deferred one-fourth ($33,000) of his salary and all
($2,150) of his bonus for the year; in 1995 he deferred one-fourth
($2,750) of his December salary and all ($2,100) of his bonus for the
year pursuant to the Company's Deferred Stock Compensation Plan.
(E) Mr. Collen earned bonuses totaling $63,216 in 1996, of which $500 was
paid in 1996 and $62,716 in 1997. He earned bonuses totaling $13,883
in 1995, of which $633 was paid in 1995 and $13,250 in 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information, with respect to the named
executive officers, concerning the exercise of options during the
Company's last fiscal year and unexercised options held as of the end of
the last fiscal year:
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name On Exercise (#) Realized($) Unexercisable Unexercisable
---- --------------- ----------- ------------- -------------
W. M. Beard -0- $ -0- 25,000/25,000 $21,094/$21,094
Herb Mee, Jr. -0- $ -0- 25,000/25,000 $21,875/$21,875
C. H. Collen, Jr. -0- $ -0- -0-/-0- $-0-/$-0-
Compensation of Directors
Messrs. Hallock, Plugge, Price and Carr each received compensation
of $4,927, $86, $1,909, and $8,450, respectively, for services rendered
during 1996 as directors of Beard, excluding $8,500, $8,850 and $8,750 of
fees deferred by Messrs. Hallock, Price and Plugge, respectively, under
the Company's Deferred Stock Compensation Plan (the "Plan"). Currently,
the non-management directors each receive $500 per month for their
services, and also receive the following fees for directors' meetings
which they attend: annual and 1-1/2 day meetings -- $750; regular
meeting -- $500; telephone meeting -- $100 to $300 depending upon length
of meeting. The non-management directors also receive a small year-end
bonus depending upon their length of service as directors of Beard and
Beard Oil. Accordingly, Messrs. Plugge, Hallock, Price, and Carr
received $500, $400, $400 and $100, respectively, in 1996. All of the
directors except Mr. Carr elected to defer such bonuses pursuant to the
Plan. Beard also provides 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. None of
the directors received additional compensation in 1996 for their
committee participation.
The three eligible non-management directors (Messrs. Hallock, Plugge
and Price) were each granted 5,000 phantom stock units (the "Units")
under the Company's 1994 Phantom Stock Units Plan on November 1, 1994.
Mr. Carr was awarded 5,000 Units when he became eligible on February 22,
1995. All of the awards vest over a five year period at the rate of 20%
per year. All awards were based on an award price of $2.00* per share.
Each participant has the option of receiving payment for his award: (i)
as it vests; (ii) at the conclusion of the award period; or (iii) 50% as
it vests, with the other 50% deferred to the conclusion of the award
period. Payments are based upon appreciation in the market value of the
Company's common stock during the appropriate time interval selected.
Mr. Carr received a cash payment of $3,808 in 1997 for 2,000 Units which
vested on February 22, 1997.
_______
*The market value on November 1, 1994 was $1.875 per share; on
February 22, 1995 it was $1.75 per share.
Compensation Committee Interlocks and Insider Participation
Michael E. Carr, who has been elected by the preferred shareholders
to serve as their representative on the Board of Directors, was elected
to serve as a member of the Compensation Committee on April 26, 1994.
Mr. Carr served as Senior Vice President of Beard Oil from December 1986
until October 1993.
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 chief executive officer ("CEO") and the
president ("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 shareholder value. This goal is to provide
competitive levels of compensation that relate to the Company's long-term
performance goals and objectives, reward outstanding corporate
performance and recognize individual initiative and achievement. 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. However, the Committee has noted that, through June 30,
1997, the Company's per share stock price has grown at a compound annual
rate of 27% since the Company's common shares commenced trading on
October 27, 1993, following the major reorganization (the "1993
Reorganization") which occurred on October 26, 1993.
No executive officer's compensation for 1996 exceeded the $1 million
deduction limit under Section 162(m) of the Internal Revenue Code, as
amended, and the same result is anticipated for 1997. The Committee does
not anticipate that any executive officer's compensation would approach
the threshold level in the foreseeable future.
Base Salaries. Because of the extremely poor financial results
achieved by the Company during 1990-1992, no salary increases have been
granted to executive officers since September of 1990 (except for
performance increases granted to (i) the president of the Company's
largest subsidiary in March of 1991 and in January of 1995; and (ii) to a
Company vice president in June of 1994. Management totally restructured
the Company in 1993-1996. As a result there was a significant
improvement in financial results which restored the Company to
profitability in 1993 and 1994. 1995 and 1996 were disappointing years
profitwise. Despite the progress that has been made during the past four
years, no increases have been made in the base salaries of the CEO or CFO
since 1990 and no changes are currently under consideration.
Cash Bonuses. All employees of the Company receive a small year-end
bonus depending upon their length of service as employees of Beard or
Beard Oil. Because of the overall financial results, no additional cash
bonuses have been paid to executive officers, except as follows. In
early 1995 the Company's largest subsidiary was financially restructured
in a manner which the Board believed would provide greater incentive to
management of, and improved financial performance by, the subsidiary. As
part of the restructure an incentive bonus arrangement was formalized
which established a Key-Employee Bonus pool (the "Pool") pursuant to
which, in each year that the Pool remains in effect, not less than 5% of
pre-tax net income of the subsidiary will be paid in the following year
to one or more of the employees of the subsidiary selected by the
subsidiary's board of directors (presently consisting of Messrs. Beard,
Mee and Collen). The restructure and incentive arrangement were also
unanimously approved by the Company's Board, including all members of the
Committee who were present. In accordance with the provisions of the
Pool, 5% of the subsidiary's pre-tax 1996 net income was paid as a 1997
bonus to Mr. Collen ($62,716) and one other key employee ($12,500).
Beard Group 401(k) Plan. One of the investment options available
under the Company's 401(k) Plan (the "401(k) Plan") is the option for
each participant to invest all or part of his investment account in
Company common stock ("The Beard Company Stock Fund Investment Option").
Because the bank trustee of this portion of the 401(k) Plan was having
difficulty purchasing sufficient shares of such stock in the open market,
the 401(k) Plan was amended in September of 1995 to permit the bank to
purchase authorized shares of Beard common stock directly from the
Company, and the Company reserved 150,000 shares of its authorized but
unissued common stock for such purpose. The Committee felt that this
step was extremely important because it has enabled key management
members to significantly increase their ownership in the Company, further
aligning their interests with those of the shareholders. Since the
amendment was approved, the bank trustee has purchased 88,300 shares from
the Company, with more than 75% of such shares being purchased for the
accounts of executive officers of the Company.
Stock Options. The Committee desires to reward long-term strategic
management practices and enhancement of shareholder 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 shareholders. Additionally, stock
options build stock ownership and provide employees with a long-term
focus.
The Committee and the Board have placed particular emphasis upon
stock options in structuring the compensation package for senior
management, in the belief that an aggressive program to acquire
profitable companies is essential in order to maximize shareholder value
during the next several years and enable the Company to utilize as much
as possible of its substantial net operating loss carryforwards. Both
management and the Committee fully recognize this goal and are desirous
that the interests of senior management and the Company's shareholders be
as closely aligned as possible.
CEO Compensation
W. M. Beard has been Chairman and CEO of the Company and its
predecessors since 1974. Mr. Beard's 1996 base salary was $132,000, and
has not increased since 1990. He has not received an incentive bonus
since 1990. Moreover, he elected to defer one-fourth of his salary and
all of his year-end bonus beginning in December 1995 pursuant to the
Company's Deferred Stock Compensation Plan. 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 shareholders, as described above. The
award also reflected Mr. Beard's position and level of responsibility
within the Company, the Committee's qualitative analysis of his
performance in managing the Company, and the importance of the role he is
expected to play in the Company's future acquisition efforts. In view of
the Company's earnings performance in 1996, the granting of any
additional stock options to Mr. Beard or other key management members was
not considered by the Committee.
COMPENSATION COMMITTEE
Allan R. Hallock, Chairman
W. R. Plugge
Ford C. Price
Michael E. Carr
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 American Stock Exchange Market Value Index and the SIC Code
Index of Industrial Gases compiled by Media General Financial Services
for the period which commenced on October 27, 1993 (date of initial
trading of the Company's shares) and December 31, 1996. The October 27
date was used since, as a result of the 1993 Reorganization, the
Company's shares were initially distributed to shareholders as of that
date and commenced trading on the Exchange on October 27, 1993. The
performance graph assumes that the value of the investment in the
Company's common stock and each index was $100 on October 27, 1993 and
that any dividends were reinvested. The Company has never paid dividends
on its common stock.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG THE BEARD COMPANY,
AMEX MARKET INDEX AND SIC CODE INDEX
ASSUMES $100 INVESTED ON OCT. 27, 1993
ASSUMES DIVIDENDS REINVESTED
FISCAL YEAR ENDED DEC. 31, 1996
October December December December December
1993 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
The Beard Company 100.00 87.50 81.25 106.25 143.75
AMEX Market Index 100.00 105.57 115.46 157.43 213.60
Industrial Gases
Industry Index 100.00 102.50 90.55 116.71 123.16
The Industrial Gases Industry Index consists of four companies: Air
Products & Chemicals, BOC Group PLC ADS, Praxair, Inc. and the Company.
AMENDMENT TO THE BEARD COMPANY
DEFERRED STOCK COMPENSATION PLAN
(Proposal No. 4)
At the Company's 1996 annual shareholder meeting, the shareholders
authorized The Beard Company Deferred Compensation Plan (the "Plan")
which is intended to provide a means to attract and retain highly
qualified persons to serve as directors and officers and promote
ownership of a greater proprietary interest in the Company, thereby
aligning such directors' and officers' interests more closely with the
interests of shareholders of the Company. A copy of the Plan is attached
to this Proxy Statement as Exhibit D and the description contained herein
is qualified in its entirety by reference to the complete text of the
Plan. Capitalized terms used below not otherwise defined herein shall
have the meaning ascribed to them in the Plan.
The Plan enables directors and officers of the Company to defer
Compensation and Fees in cash and to elect payments of such Compensation
and Fees in Beard common stock. All officers and directors are
automatically entitled to participate in the Plan. There are currently
11 individuals eligible for the Plan. 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 Plan are credited to the
individual Participant's Stock Unit Account and are converted into Beard
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 of the
Compensation or Fees would have otherwise been paid. Once the person
ceases to be an officer or director, their participation in the Plan
automatically terminates. See "Summary Compensation Table."
Upon the recommendation of management, the Board of Directors of the
Company voted on April 3, 1997, subject to stockholder approval, to amend
the Plan to increase the number of shares of common stock authorized for
issuance thereunder from 50,000 to 100,000. Management made this
recommendation in view of the fact that, based upon the directors and
officers presently participating in the Plan and the present price of the
Company's common stock, the remaining available authorized shares will
have been set aside for future settlement of such participants' Stock
Unit Accounts during 1998. The Board believes that this increase in the
number of shares available for issuance under the Plan will enable the
Company to continue its policy of compensating officers and directors by
giving them the opportunity to participate in the future growth of the
Company.
The approval and adoption of this proposed amendment requires the
affirmative vote by a majority of the Company's outstanding common and
preferred stock present in person or represented at the meeting and
entitled to vote.
In the event the stockholders approve the proposed amendment the
Company estimates that there will be adequate shares available to fund
the issuance of shares for all directors and officers presently
participating in the Plan through 2002.
The Board of Directors favors a vote "FOR" the proposal to amend The
Beard Company Deferred Stock Compensation Plan to increase the number of
shares authorized for issuance thereunder from 50,000 to 100,000.
Proxies solicited by the Board of Directors will be so voted unless
stockholders specify in their Proxies a contrary choice. See "Voting
Securities Outstanding," above.
APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal No. 5)
KPMG Peat Marwick LLP ("KPMG"), Independent Certified Public
Accountants, have been independent auditors of the Company and Beard Oil
since its incorporation in 1974. Although not formally required,
stockholders' approval of such appointment is requested. To the
knowledge of management, such accountants do not have any direct, or
material indirect, financial interest in the Company and its
subsidiaries, nor have they had any connection during the past three (3)
years with the Company or any of its subsidiaries in the capacity of
promoter, underwriter, voting trustee, director, officer or employee.
Representatives of KPMG 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 Board of Directors favors a vote "FOR" the proposal to approve
the appointment of KPMG. The shares represented by the enclosed Proxy
will be so voted unless otherwise directed. In the event the appointment
of KPMG should not be approved by the stockholders, the Board of
Directors 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 the
Company's stock entitled to cast a majority of the votes represented at
the annual meeting will be required for the approval of (1) the Asset
Sale, (2) the Reorganization, (3) the amendment to the Deferred
Compensation Plan and (4) the appointment of KPMG as independent auditors
of the Company for 1997. 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 to treat them as shares represented at
the meeting for determining results on actions requiring a majority vote;
and to consider neither abstentions or broker non-votes in determining
results of plurality votes. Thus, abstentions and broker non-votes have
the effect of a vote against the Merger and the Carbonics' Asset Sale
because approval of those transactions requires the affirmative vote of
the holders of a majority of the outstanding shares entitled to vote
thereon.
CERTAIN TRANSACTIONS
In September 1995, William M. Beard and Lu Beard, as trustees of the
William M. Beard and Lu Beard 1988 Charitable Unitrust (the "Unitrust")
agreed to loan the Company up to $250,000 under a revolving loan
arrangement for a period of one year. In March 1996, the Unitrust
extended the maturity of such note to October 1997, and in October 1996
the credit line was increased to $500,000. Various advances and
repayments have been made under such arrangement, and at year-end 1996
the principal balance due was $455,000. In February 1997 the maturity was
extended to February 1999 and the principal amount of the loan was
increased to $480,000. The loan is unsecured and bears interest at the
rate of 10% per annum.
In December 1995 the William M. Beard Irrevocable Trust "B" and the
William M. Beard Irrevocable Trust "C" agreed to loan $130,000 and
$95,000, respectively, to the Company for a period of one year. In March
1996, the Trusts extended the maturity of such notes to October 1997.
Loans of $95,000 and $130,000, respectively, were outstanding pursuant to
such arrangement as of year-end 1996. In February 1997 the maturity was
extended to February 1999 and the principal amount of the loans were
increased to $140,000 and $105,000, respectively. The loans are
unsecured and bear interest at the rate of 10% per annum.
STOCKHOLDER PROPOSALS
The Board of Directors anticipates that next year's annual meeting
will be held during the first week of June 1998. Any proposals of
stockholders intended to be presented at the 1998 Annual Meeting of
Stockholders must be received by the Company not later than January 30,
1998 in order for the proposals to be included in the proxy statement and
proxy card relating to such meeting. 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.
OTHER MATTERS
Management knows of no other matters to be brought before the Annual
Meeting of Stockholders; however, if any additional matters are properly
brought before the meeting, the persons named in the enclosed proxy will
vote the proxies in their discretion in the manner they believe to be in
the best interest of the Company.
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.
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. If a proxy is properly signed and is not revoked by the
shareholder, the shares it represents will be voted according to the
instructions of the shareholder; provided, however, if no specific
instructions are given, the shares will be voted as recommended by the
Board of Directors. A shareholder may revoke his or her proxy any time
before it is voted at the meeting. A shareholder who attends the meeting
and wishes to vote in person may revoke his or her proxy at the meeting.
Otherwise, a shareholder must advise the secretary of the Company in
writing of revocation of his or her proxy.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are hereby incorporated by reference into this Proxy Statement
and made a part hereof the Annual Report on Form 10-K of the Company for
the fiscal year ended December 31, 1996, the Quarterly Report on Form 10-
Q of the Company for the quarter ended March 31, 1997, which reports have
been filed by the Company with the Securities and Exchange Commission.
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 and the Quarterly Report on Form 10-Q of the Company
for the quarter ended March 31, 1997, are attached hereto as Appendices A
and B, respectively.
THE BEARD COMPANY
By Order of the Board of Directors
Rebecca G. Witcher
Secretary
Oklahoma City, Oklahoma
July __, 1997
PROXY THE BEARD COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR STOCKHOLDERS MEETING ON AUGUST ___, 1997
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
1997 Annual Meeting of Stockholders (or any adjournment thereof) of The
Beard Company to be held in the Board Room of the Liberty Bank and Trust
Company of Oklahoma City, N.A. in the Liberty Tower, 100 North Broadway,
Oklahoma City, Oklahoma, on Monday, August ___, 1997 at 10:00 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 of the sale of substantially all of the assets of Carbonics
pursuant to the Asset Purchase Agreement, a copy of which is attached to
the accompanying Proxy Statement as Exhibit "A".
_ FOR _ AGAINST _ ABSTAIN
2. Approval of the merger of the Company into The NBC Company pursuant
to the Plan and Agreement of Merger and Reorganization, a copy of which
is attached to the accompanying Proxy Statement as Exhibit "B".
_ FOR _ AGAINST _ ABSTAIN
3. Election of Directors.
_ FOR all nominees listed below _ WITHHOLD AUTHORITY
to vote for all nominees listed below
Allan R. Hallock - three year term expiring in 2000
Ford C. Price - three year term expiring in 2000
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name in the space provided below.)
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
This Proxy is solicited on behalf of the Board of Directors.
4. Approval of an amendment to The Beard Company Deferred Stock
Compensation Plan (the "Plan") to increase the number of common shares
authorized for issuance thereunder from 50,000 to 100,000. A copy of the
Plan is attached to the accompanying Proxy Statement as Exhibit "D".
_ FOR _ AGAINST _ ABSTAIN
5. Approval of Appointment of KPMG Peat Marwick LLP as independent
certified public accountants for fiscal 1997.
_ FOR _ AGAINST _ ABSTAIN
6. 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,
4 AND 5, AND "FOR" THE ELECTION OF THE DIRECTORS NOMINATED.
Dated: __________________________________________________, 1997
____________________________________________________________
(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.
EXHIBIT INDEX
Exhibit No. Description Method of Filing
- ----------- ------------ ----------------
2 Agreement and Plan of Merger Filed herewith electronically
3 Certificate of Incorporation Filed herewith electronically
of The NBC Company
13.1 Form 10K for period ended Filed herewith electronically
December 31, 1996
13.2 Form 10Q for period ended Filed herewith electronically
March 31, 1997
99.1 Asset Purchase Agreement by Filed herewith electronically
and between Airgas Carbonic
Reserves, Inc. and Carbonic
Reserves and The Beard Company
and Clifford H. Collen, Jr.
99.2 The Beard Company Deferred Filed herewith electronically
Stock Compensation Plan