SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / /
/ / Confidential, for use of the Commission only
(as permitted by Rule 14a-b(e)(2)
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
FORTUNE NATURAL RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box)
/x/ No fee required.
/ / $500 per each party to the controversy pursuant to Exchange Act rule
14a-6(i)(3)
/ / 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:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previously 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:
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
515 W. Greens Road, Suite 720
Houston, Texas 77067
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------
TO THE STOCKHOLDERS:
The Annual Meeting of the stockholders of Fortune Natural Resources
Corporation will be held at 8:30 a.m. on Thursday, October 21, 1999, at the
offices of the Company, located at the address listed above. The purposes of the
meeting are:
1. To elect one member of the Board of Directors;
2. To ratify the selection of KPMG LLP as independent auditors for the fiscal
year ending December 31, 1999; and
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
Stockholders of record as of August 31, 1999 will be entitled to receive
notice of, and to vote at, the meeting.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO
COMPLETE, SIGN, AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN
THE POSTPAID ENVELOPE PROVIDED. SHOULD YOU CHOOSE TO CAST YOUR VOTE IN PERSON,
YOUR PROXY VOTE WILL NOT BE COUNTED.
The Annual Report of Fortune Natural Resources Corporation for the year
ended December 31, 1998, is being mailed to stockholders with this notice of
meeting.
By order of the Board of Directors,
/s/ Dean W. Drulias
------------------------------------
Dean W. Drulias
Secretary
Houston, Texas
September 10, 1999
<PAGE>
FORTUNE NATURAL RESOURCES CORPORATION
515 W. Greens Road, Suite 720
Houston, Texas 77067
PROXY STATEMENT
The Board of Directors of Fortune Natural Resources Corporation hereby
solicits your proxy for use in connection with the annual meeting of
stockholders to be held on October 21 , 1999. This proxy statement and
accompanying proxy card is being mailed to the stockholders of the Company on or
about September 10, 1999.
You have the power to revoke your proxy at any time before it is voted.
Your proxy may be revoked by filing a written notice of revocation, or a duly
executed proxy bearing a later date, with the Secretary of the Company at our
principal executive offices. The powers of the proxy holders will be suspended
if you are present at the meeting and elect to vote in person. If your proxy is
neither revoked nor suspended, it will be voted by the proxy holders.
Only stockholders of record at the close of business on August 31, 1999
are eligible to vote at the annual meeting in person or by proxy. The only class
of stock of the Company eligible to vote is the $0.01 par value common stock. As
of August 31, 1999, there were 40,000,000 shares authorized, of which 12,236,811
shares were issued and outstanding. Each share of common stock entitles the
holder to one vote.
ELECTION OF DIRECTORS
The directors of the Company are divided into three classes. The directors
in each class hold office for staggered terms of three years each. The by-laws
of the Company provide for a Board of Directors of not less than three members,
and also provide that the terms of the members of the board shall be staggered
so that approximately one-third of its members shall be elected annually. The
number of directors comprising the Company's board is currently set at seven,
with two vacancies which the board has elected to leave unfilled at present. One
director previously elected by the stockholders who is standing for re-election
in 1999 and the four directors whose terms do not expire in 1999 are listed on
the following pages.
VOTING RIGHTS
Each stockholder is entitled to one vote for each share held of record on
the record date on all matters being voted on at the annual meeting.
Stockholders will not be entitled to cumulative voting in the election of
directors at this meeting. Directors will be elected by a simple majority vote
of the shares present and voting at the meeting.
If your proxy card is duly executed and returned, it will be voted in
accordance with the instructions on the proxy card. If no instructions are
given, it will be voted in favor of the nominee listed in the following table.
The board has been informed that this nominee is willing to serve, but if he
should decline or be unable to act as a director, the proxy holders will vote
for the election of another person as they, in their discretion, may choose. The
board has no reason to believe that the nominee will be unable or unwilling to
serve. Certain information regarding the nominee and the continuing directors is
set forth in the following table:
2
<PAGE>
DIRECTOR
NAME AGE PRINCIPAL POSITIONS WITH THE COMPANY SINCE
- ------------------------ --- --------------------------------------- --------
NOMINEE FOR DIRECTOR FOR A TERM TO EXPIRE IN 2002
Barry Feiner............ 65 Director 1995
CONTINUING DIRECTORS WHOSE TERMS EXPIRE IN 2000
Tyrone J. Fairbanks..... 42 President, Chief Executive Officer
and Director 1991
Dean W. Drulias......... 52 Executive Vice President, General
Counsel, Corporate Secretary
and Director 1990
CONTINUING DIRECTORS WHOSE TERMS TO EXPIRE IN 2001
Graham S. Folsom........ 41 Director 1992
Daniel R. Shaughnessy... 49 Director 1997
Mr. Feiner graduated from Columbia Law School and is a member of the Bar
of the State of New York. He has practiced law in the State of New York since
1965. His practice concentrates on the areas of corporate and securities law.
Prior to beginning private practice, Mr. Feiner served on the staff of the
Securities and Exchange Commission. Mr. Feiner also serves on the board of
directors of Alfin, Inc. He is chairman of the Company's Compensation Committee.
Mr. Fairbanks currently serves as President and Executive Officer of the
Company, having previously served as Vice President and Chief Financial Officer
from January 1991 to June 1994. Prior to joining Fortune, Mr. Fairbanks served
as President, Chief Executive Officer and Director of Fairbanks & Haas, Inc.
from January 1990 to January 1991. Fairbanks & Haas, Inc. was an oil and gas
exploration, production, acquisition and operations company located in Ventura,
California, the assets of which were acquired by Fortune in 1991. Mr. Fairbanks
co-founded Fairbanks & Haas, Inc. and served in the capacity of Director and
Executive Vice President from February 1987 to January 1990.
Mr. Drulias joined the Company in October 1996 as Executive Vice President
and General Counsel. Prior to that time, he was a stockholder of and a
practicing attorney at the law firm of Burris, Drulias & Gartenberg, a
Professional Corporation, which served as counsel to the Company from 1987
through 1996. He practiced law in the Los Angeles area since 1977, specializing
in the areas of energy, environmental and real property law. Mr. Drulias is a
member of the State Bars of California and Texas and serves on the Company's
Compensation Committee.
Mr. Folsom has served as the Chief Financial Officer of Klein Ventures,
Inc. ("KVI"), a diversified investment company, since April 1987. Mr. Folsom has
been active in the oil investments of KVI and its affiliates since 1987. Mr.
Folsom has been licensed as a Certified Public Accountant in the State of
California since 1982 and is responsible for all of the accounting and financial
affairs of KVI and its affiliates. KVI is a principal stockholder of the
Company. There is no arrangement between KVI and the Company with respect to the
appointment or selection of members of the Board. Mr. Folsom is chairman of the
Company's Audit Committee.
Mr. Shaughnessy is a geologist and geophysicist, as well as the founder
and President of Interpretation-3, a company specializing in the interpretation
of 2D and 3D seismic data. His firm provides consultation services to Fortune.
Prior to organizing Interpretation-3, Mr. Shaughnessy served as a consultant
with Interactive Exploration Solutions, Inc. for approximately one year. For
most of the period from 1980 through 1993, he worked for Mobil Oil, most
recently as Exploration Supervisor in Louisiana. During 1998, the Company paid
Interpretation3 $421,000 for consulting services. Mr. Shaughnessy is a member of
the Company's Audit Committee.
3
<PAGE>
The Company is not aware of any family relationship between any directors
or executive officers of the Company. The Board of Directors met eight times
during 1998. No director attended fewer than 75% of the meetings of the Board.
The Compensation Committee of the Board met twice and the Audit Committee of the
Board met once in 1998; all members were in attendance at each of the meetings
of their respective committees.
Section 16 of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors and persons who own more than ten percent
of a registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
and to furnish the Company with copies of all such forms which they file. Based
upon the Company's review of the forms it has received, the Company believes
that Mr. Folsom failed to file two Forms 4 which were required to be filed by
him in 1998. These forms have both subsequently been filed.
PRINCIPAL STOCKHOLDERS
The following table contains information, as of August 31, 1999, relating
to the beneficial ownership of common stock and securities convertible into
common stock of the Company by each person known to the Company to be the
beneficial owner of more than five percent of the outstanding shares of such
common stock and securities, by each officer and director, and by all officers
and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name Of Beneficial Ownership Of Class
- ------------------------------------------------------- ----------------------- --------
<S> <C> <C>
Barry Blank
5353 N. 16th St., Phoenix, AZ (1) 2,641,338 18.0%
J. E. McConnaughy, Jr.
1011 Highridge Road, Stanford, CT 06905 (2) 1,366,667 10.0%
Renaissance Capital Growth
8080 N. Central Expressway, #210, Dallas, TX 75206 (3) 1,061,728 8.0%
Renaissance US Growth and Income
8080 N. Central Expressway, #210, Dallas, TX 75206 (3) 1,061,728 8.0%
Tyrone J. Fairbanks (Director, President and CEO)
515 W. Greens Rd., Houston, TX (4) 557,946 4.4%
Dean W. Drulias (Director, Executive Vice President,
General Counsel and Corporate Secretary)
515 W. Greens Rd., Houston, TX (4) 457,466 3.6%
J. Michael Urban (Vice President and CFO)
515 W. Greens Rd., Houston, TX (4) 447,526 3.5%
Barry Feiner (Director)
515 W. Greens Rd., Houston, TX (4)(5) 316,459 2.5%
Graham S. Folsom (Director)
515 W. Greens Rd., Houston, TX (4) 213,926 1.7%
Daniel R. Shaughnessy (Director)
515 W. Greens Rd., Houston, TX (4) 129,500 1.1%
All Officers and Directors
as a group of six (6) persons 2,122,823 9.3%
========= ====
</TABLE>
4
<PAGE>
(1) Includes 204,300 shares of common stock; 17,917 shares of common stock
which underlie an equal number of private stock purchase warrants,
exercisable at $3.60 per warrant; 885,787 shares of common stock which
underlie 616,200 stock purchase warrants held by Mr. Blank and exercisable
at $3.75 per warrant; 200,000 shares of common stock underlying an equal
number of stock purchase warrants, exercisable at $2.40 per share; 666,667
shares of common stock underlying an equal number of stock purchase
warrants, exercisable at $1.00 per share; and 666,667 shares of common
stock into which his 12% notes issued by the Company are convertible. Mr.
Blank was managing director of J. Robbins Securities, LLC., the
underwriter for the Company's 1997 Convertible Note offering, at the time
of that offering.
(2) Includes 666,667 shares of common stock underlying stock purchase
warrants, exercisable at $1.00 each, 33,333 warrants to purchase common
stock exercisable at $4.75 each, and 666,667 shares of common stock into
which his 12% notes issued by the Company are convertible.
(3) Holders of $350,000 of 12% notes due December 31, 2007 which are
convertible at approximately $0.33.
(4) Includes 525,599 shares issuable to Mr. Fairbanks upon the exercise of
stock options granted to him under the Company's various stock option
plans, exercisable at prices of $1.56 to $3.13 per share, and 8,905 shares
held by the trustees of the Company's 401(k) Plan for the benefit of Mr.
Fairbanks; an aggregate of 1,195,200 shares issuable upon exercise of
stock options granted to other officers and directors under the Company's
various stock option plans, exercisable at prices of $1.56 to $3.13 per
share; 7,187 shares issuable upon exercise of 5,000 stock purchase
warrants (at $3.75 per warrant) held by Graham S. Folsom; 35,000 shares
issuable upon the exercise of common stock purchase warrants (at $2.56 per
share) issued to J. Michael Urban on March 11, 1996 and 7,526 shares held
by the trustees of the Company's 401(k) Plan for the benefit of Mr. Urban;
and 20,000 shares issuable upon the exercise of common stock purchase
warrants (at $2.75 per share) issued to Dean W. Drulias on October 16,
1996 and 6,425 shares held by the trustees of the Company's 401(k) Plan
for the benefit of Mr.
Drulias.
(5) All shares shown, except those which underlie stock purchase options
granted to Mr. Feiner by virtue of his service as a director, are owned by
his wife, Janet Portelly. Mr. Feiner disclaims beneficial ownership of all
such securities owned by Mrs. Portelly. The number shown includes 14,375
shares issuable upon exercise of 10,000 stock purchase warrants (at $3.75
per warrant), 66,667 shares of common stock underlying stock purchase
warrants exercisable at $1.00 each, and 66,667 shares of common stock into
which Mrs. Portelly's 12% notes issued by the Company are convertible.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table lists the total compensation paid by the Company to
persons who served in the capacity of chief executive officer and to other
executive officers who received annual compensation in excess of $100,000 (or at
a rate in excess of $100,000) during the periods indicated:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
--------------------------- ----------------------
Securities Underlying All Other
Name and Principal Salary Bonus Other1 Options/Warrants Compensation
Position Year ($) ($) ($) (#) ($)
- ------------------------ ---- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Tyrone J. Fairbanks 1998 164,667 17,500 20,885 100,000 5,000
President and CEO 1997 155,833 17,500 35,309 120,000 4,748
1996 150,000 - 20,934 80,000 3,000
Dean W. Drulias 1998 125,000 - - 150,000 5,000
Executive Vice President 1997 125,000 3,000 - 75,000 4,750
1996 26,291 250 - 56,000 1,972
J. Michael Urban 1998 120,000 - - 150,000 5,000
Chief Financial Officer 1997 120,000 5,000 - 100,000 4,750
1996 97,308 - - 55,000 4,750
</TABLE>
(1) Amounts include automobile expenses and loan forgiveness, but are shown only
if such amounts exceed 10% of the total annual salary and bonus.
The following table lists the outstanding options held on December 31,
1998 by the Company's executive officers under Company's Stock Option Plans:
AGGREGATE OPTION EXERCISE IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options/ in-the-Money Options/
Warrants at FY-End Warrants at FY-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized ($) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Tyrone J. Fairbanks - - 506,999 / 0 -
Dean W. Drulias 1,200 - 299,800 / 0 -
J. Michael Urban - - 305,000 / 0 -
</TABLE>
6
<PAGE>
EMPLOYMENT AGREEMENT
The Company has entered into an employment agreement with Tyrone J.
Fairbanks, its President and Chief Executive Officer. The agreement provides
that if employment is terminated for any reason other than for cause, death or
disability within two years following a change in control (which for purposes of
his agreement means a change in more than one-third of the Board of Directors
following certain special events), Mr. Fairbanks is entitled to receive a single
payment equal to two year's compensation and all shares of common stock subject
to stock options then held by him without payment of the exercise price
therefor. Mr. Fairbanks' agreement also provides for two (2) years of consulting
services upon the completion of the primary term of his contract at forty
percent (40%) of the last compensation thereunder. Mr. Fairbanks' employment
agreement currently provides for an annual salary of $176,000 and additional
compensation, in an amount not to exceed his annual salary, based upon the
increase in the value of the Company's stock. The term of Mr. Fairbanks'
employment contract extends through the later of May 31, 2000 or six months
following notice that the contract will not be extended further. As part of the
relocation of the Company's headquarters to Houston, Fortune provided Mr.
Fairbanks with an incentive relocation package to facilitate his move. The
package consisted of a payment by the Company of Mr. Fairbanks' moving expenses,
a nonrecourse, unsecured loan in the amount of $80,000 bearing interest at the
rate of 6% per annum, with $20,000 of such loan forgiven in each of four
consecutive years beginning in 1996, provided Mr. Fairbanks is still employed by
the Company or has been terminated by the Company without cause, and a secured
recourse loan in the amount of $70,000 also bearing interest at the rate of 6%
per annum, payable interest only for two years with a $35,000 principal payment
due on each of the second and third anniversary dates of the loan. As of the
date of this proxy statement, the nonrecourse loan has been entirely forgiven
and the recourse loan has a balance due of $2,000 and is payable by December 31,
1999. All payments on this loan are current.
STOCK OPTIONS
Fortune has two Stock Option Plans. Both plans cover officers, employees
and directors of the Company. Awards are made by the Board of Directors upon
recommendations of its Compensation Committee. There is no performance formula
or measure for determining the grant of options. All options granted must be
exercised within five years of the date of grant or they are forfeited.
Options have been granted as follows: (1) under the 1993 plan, options to
purchase 264,000 shares at $6.03 per share granted in 1995, options to purchase
450,000 shares at $3.125 per share granted in 1996, and options to purchase
615,000 shares at from $1.88 to $3.00 per share granted in 1997 and (2) under
the 1998 plan, options to purchase 727,500 shares granted in 1998 and 600,000
shares granted in 1999, each at $1.56 per share. The exercise price of all
options granted prior to January 12, 1995 were reduced to $2.75 on that date.
The following table shows the grants of stock options during 1998 to each
of the executives named in the Summary Compensation Table.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Individual Grants
-----------------------------------------------------------------
Number of % of Total Potential Realizable Value At
Securities Options Assumed Annual Rates Of
Underlying Granted to Stock Price Appreciation
Options Employees in Exercise or Base Expiration For Option Term
Name Granted Fiscal Year Price ($/Sh) Date 5% 10%
- ------------------- --------- ------------ ---------------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Tyrone J. Fairbanks (1) 100,000 17.9% 1.56 March 4, 2003 $ 43,000 $ 95,000
Dean W. Drulias (1) 150,000 26.8% 1.56 March 4, 2003 65,000 143,000
J. Michael Urban (1) 150,000 26.8% 1.56 March 4, 2003 65,000 143,000
</TABLE>
(1) Each individual was also granted, on March 25, 1999, options to purchase
120,000 shares of the Company's common stock at an exercise price of $1.56
per share.
In the event of a change in control of the Company which is not approved
by the board of directors, the shares of common stock subject to options granted
to all officers, directors, and employees under the Company's stock option plans
will be issued to them without further action on their part or the payment of
the exercise price for such shares.
7
<PAGE>
RETIREMENT PLAN
During 1996, the Company adopted the Fortune Natural Resources Corporation
401(k) Profit Sharing Plan for its eligible employees. Under the plan, all
employees on the Company's payroll as of November 1, 1996, and all employees
hired after that date who have attained age 21 and three months of service, are
permitted to make salary deferrals up to the lesser of 15% of their annual
compensation or the maximum allowable by law. Salary deferrals will be matched
50% by the Company; matching contributions are 100% vested after two years of
service with the Company. Salary deferrals are 100% vested at all times. The
Company does not make profit sharing contributions to the plan. Messrs. Drulias
and Urban are the trustees of the plan.
For 1998, the Company's matching contribution was $29,430, all of which
was paid in shares of common stock. The amounts to be contributed to the plan as
matching contributions for executives of the Company are shown in the Summary
Compensation Table set forth above.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Fortune's Executive Compensation Program is administered by the
Compensation Committee of the Board of Directors. The committee is comprised of
two independent, nonemployee directors and one director who is an officer of the
Company. The committee strives to set an executive compensation program which
emphasizes both business performance and shareholder value. It attempts to do
this by attracting, rewarding, and retaining qualified and productive
individuals, tying compensation to both Company and individual performance,
ensuring competitive and equitable compensation levels, and fostering executive
stock ownership. The committee also relies on recommendations from the Company's
management regarding executive compensation levels.
The committee reviews each management employee's salary annually. In
determining an appropriate salary level, the committee considers the level and
scope of responsibility, experience, individual performance, an evaluation of
the Company's performance, and pay practices among similar companies in the
industry. There are no specific performance or other criteria assigned to any of
these measurements.
Fortune does not currently implement any annual incentive compensation
plan but, as discussed below, has adopted incentives as a component of the
compensation of its Chief Executive Officer. The Company's long term incentive
philosophy is that compensation should be related to an improvement in
shareholder value, thereby creating a mutuality of interest with the Company's
stockholders. In furtherance of this objective, the Company awards its executive
officers stock options, the objective being to provide a competitive total
long-term incentive opportunity.
The committee believes that the Company's stock option plan is compatible
with shareholder interest in that it encourages executives to maintain a
long-term equity interest in the Company. The provisions of the plan are also
consistent with prevailing practices in the oil and gas industry. The committee
is currently reviewing ways in which both the award of options and their
exercise may be tied more closely to the performance of the Company's stock.
Mr. Fairbanks' salary as Chief Executive Officer was set at $150,000
shortly after he assumed that position in June 1994. His base salary was
increased to $160,000 in June 1997, at which time the Company incorporated an
annual cost-of-living escalator and an incentive component into his employment
agreement. This incentive provides for an annual bonus based upon the increase,
if any, in the Company's stock price as determined in May of each year. Such
bonus cannot exceed the amount of Mr. Fairbanks' annual salary. No such bonus
was earned in 1998. Mr. Fairbanks' current salary is $176,000. There are no
other performance-based criteria which may be relied upon to either increase or
diminish his annual salary.
Messrs. Feiner and Drulias serve on the Company's Compensation Committee.
Each has specifically concurred in the foregoing report.
8
<PAGE>
PERFORMANCE GRAPH
The following performance graph compares the performance of Fortune's
common stock to the AMEX Market Value Index and the S&P Oil and Gas (Exploration
& Production) Index for the five years ended December 31, 1998. The graph
assumes that the value of the investment in the common stock and each index was
$100 at December 31, 1993, and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG FORTUNE NATURAL RESOURCES CORPORATION,
THE AMEX MARKET VALUE INDEX
AND THE S & P OIL & GAS (EXPLORATION & PRODUCTION) INDEX
<TABLE>
<CAPTION>
Cumulative Total Return*
--------------------------------
Symbol 12/31/93 1994 1995 1996 1997 1998
-------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Fortune Natural Resources Corporation FPXA $ 100 $ 81 $211 $111 $114 $ 22
AMEX Market Value Index IAMX 100 93 120 122 152 163
S & P Oil & Gas (Exploration & Production) Index SDOI 100 77 92 120 108 72
</TABLE>
* $100 Invested on December 31, 1993 in stock or index including reinvestment of
dividends.
Fiscal year ending December 31.
9
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors selected KPMG LLP as the Company's independent
public accountants for the fiscal year ending December 31, 1999, and has further
directed that management submit the selection of independent public accountants
for ratification by the stockholders at the Annual Meeting. KPMG LLP has audited
the Company's financial statements since 1992. Its representatives are expected
to be present at the meeting, will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions.
Shareholder ratification of the selection of KPMG LLP as the Company's
independent public accountants is not required by the Company's By-Laws or
otherwise. The Board of Directors is submitting the selection of KPMG LLP to the
stockholders for ratification as a matter of good corporate practice. In the
event the stockholders fail to ratify the selection, the Board of Directors will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different independent accounting firm at any time during the year if the
Board of Directors determines that such a change would be in the best interest
of the Company and its stockholders. The affirmative vote of the holders of a
majority of the shares represented and voting at the Annual Meeting will be
required to ratify the selection of KPMG LLP.
OTHER MATTERS
The total cost of this solicitation will be borne by the Company. In
addition to use of the mails, proxies may be solicited by officers, directors,
and employees of the Company by telephone, telegraph, or facsimile. Stockholder
proposals for the 2000 annual meeting of stockholders must be received no later
than May 10, 2000 at the Company's executive office, 515 West Greens Road, Suite
720, Houston, Texas 77067, Attention: Corporate Secretary.
Management knows of no other business to be presented at the meeting, but
if other matters do properly come before the meeting, it is intended that the
persons named in the proxy will vote on said matters in accordance with their
best judgment.
By order of the Board of Directors,
/s/ Dean W. Drulias
-----------------------------------
Dean W. Drulias
Secretary
Houston, Texas
September 10, 1999
10
<PAGE>
PROXY CARD
PROXY
FORTUNE NATURAL RESOURCES CORPORATION
ANNUAL MEETING OF STOCKHOLDERS -- OCTOBER 21, 1999
The undersigned stockholder(s) of Fortune Natural Resources Corporation
("Fortune") hereby nominates, constitutes and appoints Dean W. Drulias and
Tyrone J. Fairbanks, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all stock of Fortune
Natural Resources Corporation which the undersigned is entitled to vote at the
Annual Meeting of Stockholders of Fortune to be held at 8:30 a.m. on Thursday,
October 21, 1999 at the company's offices, located at 515 W. Greens Rd., Suite
720, Houston, Texas and any and all adjournments thereof, as fully and with the
same force and effect as the undersigned might or could do if personally present
thereat, as follows:
1. To elect one member of the Board of Directors.
AUTHORITY GIVEN to vote WITHHOLD AUTHORITY to vote
for the nominee listed below / / for the nominee listed below / /
BARRY FEINER
2. To ratify the selection of KPMG LLP as independent auditors for the fiscal
year ending December 31, 1998.
/ / FOR / / AGAINST / / ABSTAIN
3. To transact such other business as may properly come before the meeting
or any adjournment thereof
-----------------------------
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR PROPOSAL 1 AND
A VOTE "FOR" PROPOSAL 2. THE PROXY CONFERS AUTHORITY TO VOTE, AND SHALL BE
VOTED, "AUTHORITY GIVEN" FOR PROPOSAL 1 AND "FOR" PROPOSAL 2, UNLESS "WITHHOLD
AUTHORITY", "AGAINST", OR "ABSTAIN" IS INDICATED, IN WHICH CASE THE PROXY SHALL
BE VOTED IN ACCORDANCE WITH SUCH INSTRUCTIONS.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED IN
ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
Dated: _______________________________________
______________________________________________
(Signature of Stockholder)
______________________________________________
(Please Print Name)
______________________________________________
(Signature of Stockholder)
______________________________________________
(Please Print Name)
I/WE DO EXPECT TO ATTEND THE MEETING / /
I/WE DO NOT EXPECT TO ATTEND THE MEETING / /
<PAGE>
