<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
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-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
GLOBAL NATURAL RESOURCES INC.
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 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:
- --------------------------------------------------------------------------------
<PAGE> 2
GLOBAL NATURAL RESOURCES INC.
Robert F. Vagt
CHAIRMAN OF THE BOARD
March 28, 1996
To Our Shareholders:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders
of Global Natural Resources Inc., which will be held in the Director's Room of
The Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas at 9:00 a.m. on Tuesday,
May 7, 1996.
The accompanying Notice of Annual Meeting and Proxy Statement describe the
formal matters to be acted upon at the meeting. In addition, we will discuss
current matters concerning the future of the Company and review the Company's
operations during the past year. At the conclusion of the formal meeting, an
opportunity will be provided for questions by the shareholders.
Representation of your shares at the meeting is very important. We urge
each shareholder, whether or not you now plan to attend the meeting, to promptly
date, sign and return the enclosed proxy in the envelope furnished for that
purpose. If you do attend the meeting, you may, if you wish, revoke your proxy
and vote in person.
It is always a pleasure to meet with our shareholders, and I personally
look forward to seeing as many of you as possible at the Annual Meeting.
Sincerely,
Robert F. Vagt
5300 Memorial, Suite 800 Houston, Texas 77007-8295 (713) 880-5464 P.O. Box 4682
Houston, Texas 77210-9698
Telecopy: (713) 865-4386 Telex: 49602475 GLOBAL NATURAL
<PAGE> 3
GLOBAL NATURAL RESOURCES INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 7, 1996
To the Shareholders of
Global Natural Resources Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Global Natural Resources Inc., a New Jersey corporation (the "Company"), will be
held in the Director's Room of The Ritz-Carlton, 1919 Briar Oaks Lane, Houston,
Texas on Tuesday, May 7, 1996 at 9:00 a.m. (C.D.T.), for the following purposes:
(1) To elect three directors to hold office for a term of three years or
until their respective successors shall be duly elected and qualified.
(2) To consider and act upon a proposal to increase the aggregate number
of shares for which options may be granted under the Company's 1992
Stock Option Plan from 1,000,000 to 1,500,000 shares.
(3) To transact such other business as may properly come before the
meeting and any adjournment(s) thereof.
The Board of Directors has fixed the close of business on March 15, 1996 as
the record date for the determination of shareholders entitled to receive notice
of and to vote at the Annual Meeting. A list of all shareholders entitled to
vote is on file at the principal offices of the Company, 5300 Memorial Drive,
Suite 800, Houston, Texas.
So that we may be sure your vote will be included, please date, sign and
return the enclosed proxy promptly. For your convenience, a postpaid return
envelope is enclosed for your use in returning your proxy. If you attend the
meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors,
E. Lynn Hill
Secretary
March 28, 1996
<PAGE> 4
GLOBAL NATURAL RESOURCES INC.
5300 MEMORIAL, SUITE 800
HOUSTON, TEXAS 77007-8295
(713) 880-5464
------------------------
PROXY STATEMENT
------------------------
SOLICITATION AND REVOCABILITY OF PROXIES
The Board of Directors of Global Natural Resources Inc., a New Jersey
corporation (the "Company"), is
furnishing this proxy statement in connection with the solicitation of proxies
for use at the 1996 Annual Meeting of Shareholders (the "Annual Meeting") of the
Company to be held in the Director's Room of The Ritz-Carlton, 1919 Briar Oaks
Lane, Houston, Texas at 9:00 a.m. (C.D.T.) on Tuesday, May 7, 1996 (and any
adjournment(s) thereof). Solicitation of proxies will be primarily by mail, but
proxies may also be solicited personally or by telephone or telegraph by
officers, directors, regular employees and other representatives of the Company.
The Company will bear the cost of such solicitation. The Company also will make
arrangements with brokerage firms, banks and other nominees to forward proxy
materials to beneficial owners of shares and will reimburse such nominees for
their reasonable costs.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by either (i) attending the meeting
and voting in person or (ii) giving written notice of such revocation to Mr. E.
Lynn Hill, Secretary of the Company, at Global Natural Resources Inc., 5300
Memorial, Suite 800, Houston, Texas 77007-8295. The enclosed proxy may also be
revoked by a subsequently dated proxy received by the Company prior to voting of
the previously dated proxy.
This proxy statement and the related form of proxy are being first mailed
or delivered to shareholders of the Company on or about March 28, 1996.
VOTING SECURITIES AND PRINCIPAL HOLDERS
On March 15, 1996, the record date for those entitled to notice of and to
vote at the Annual Meeting, there were outstanding 29,650,874 shares of Common
Stock, par value $1.00 per share (the "Common Stock"). Each of the shares of
Common Stock outstanding is entitled to one vote and may be voted in person or
by proxy.
-1-
<PAGE> 5
The following table sets forth, with respect to each person (or "group"
within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) who is known by the Company to be the
beneficial owner of more than 5% of the Common Stock of the Company, the number
of shares beneficially owned by such person or group and the percentage such
number constitutes of the entire class as of March 15, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS
OF
MARCH 15, 1996
-------------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
- ------------------------------------ ---------- ----------
<S> <C> <C>
Mr. Leon S. Gross.................................................... 1,517,300(1) 5.1%
Enterprises, Inc.
River Park House
3600 Conshohocken Avenue
Philadelphia, Pennsylvania 19131
Interamerican Securities Corp........................................ 1,520,048(2) 5.1%
One Riverway, Suite 2450
Houston, Texas 77056
Metropolitan Life Insurance Company.................................. 2,269,900(3) 7.7%
One Madison Avenue
New York, New York 10010-3690
The Prudential Insurance Company..................................... 6,311,547(4) 21.3%
of America
Prudential Plaza
Newark, New Jersey 07102-3777
</TABLE>
- ---------------
(1) Information on Leon S. Gross ("Mr. Gross") is from Schedule 13D dated
October 10, 1995, filed under the Exchange Act. Mr. Gross has sole voting
and investment power with respect to his shares.
(2) Information on Interamerican Securities Corp. ("Interamerican") is from
Interamerican's Schedule 13G dated February 6, 1995, filed under the
Exchange Act. Shares reported include 265,330 shares beneficially owned by
certain shareholders of Interamerican, as to which Interamerican disclaims
beneficial ownership.
(3) Information on Metropolitan Life Insurance Company ("Met Life") is from Met
Life's Schedule 13G dated February 9, 1996, filed under the Exchange Act.
The shares were acquired by a subsidiary of Met Life, State Street Research
and Management Company, Inc. ("State Street"). State Street has the sole
power to vote or to direct the vote of 2,081,300 of the shares. State
Street disclaims any beneficial interest in all of the securities as the
shares are owned by various clients.
(4) Information on The Prudential Insurance Company of America ("Prudential") is
from Prudential's Schedule 13G dated February 10, 1995, filed under the
Exchange Act. Prudential has sole voting and investment power with respect
to its shares.
ELECTION OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors is divided into three classes and each director
serves a term of three years. At the Annual Meeting, three Class I directors are
to be elected. Proxies cannot be voted for a greater number of persons than the
number of nominees named on the enclosed form of proxy. A plurality of the votes
cast in person or by proxy at the meeting is required to elect a director.
Accordingly, abstentions and broker non-votes would have no effect on the
election of directors. A broker non-vote occurs if a broker or other nominee
does
-2-
<PAGE> 6
not have discretionary authority and has not received instructions with respect
to a particular item. Shareholders may not cumulate their votes in the election
of directors.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the Annual Meeting in accordance with the
directions given. If no specific instructions are given with respect to the
election of directors, the shares represented by each signed proxy will be voted
for the election of the nominees listed below. Mr. R.A. Walker, a Class I
nominee, has not previously served as a director of the Company. All other
nominees for director are currently members of the Board of Directors. Mr.
Hollimon, a Class III director, resigned from the Board effective December 31,
1995. Mr. Bennett, a Class I director, resigned from the Board effective on the
date of the Annual Meeting. If any nominee becomes unavailable for election to
the Board of Directors, the persons appointed as proxies will have discretionary
authority to vote the proxy for such other person, if any, as may be designated
by the Board of Directors. However, the Board of Directors has no reason to
believe that any nominee named herein will be unable to accept nomination or
election.
The following table sets forth the information concerning the three
nominees for election as directors and the five continuing directors of the
Company, including the principal occupations of each during the last five years
and the number of shares of Common Stock beneficially owned by each of them as
of March 15, 1996:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND PRINCIPAL OCCUPATION SERVED AS A MARCH 15, OF
DURING THE LAST FIVE YEARS(1)(2) AGE DIRECTOR SINCE 1996(3) CLASS
- -------------------------------- --- -------------- ------------ -------
<S> <C> <C> <C> <C>
NOMINEES
CLASS I - TERM EXPIRES IN 1999
- ------------------------------
R.A. WALKER........................................ 39 -- 6,311,547(4) 21.3%
Managing director, Prudential Capital Group and
Vice President, The Prudential Insurance Company
of America. Mr. Walker has held a similar
position with Prudential Capital Group for the
past five years.
JOHN A. BROCK(A)(C)................................ 65 1993 15,000 *
Owner and President of Rockford Exploration, Inc.
for more than five years. Until April 1992,
principal owner, Chairman and Chief Executive
Officer of Medallion Petroleum, Inc. for more
than five years.
PATRICK L. MACDOUGALL(A)........................... 56 1994 12,500 *
Chairman of the Board and Chief Executive Officer
of West Merchant Bank Limited for more than five
years.
CONTINUING DIRECTORS
CLASS II - TERM EXPIRES IN 1997
- -------------------------------
PAUL E. CARLTON(A)................................. 70 1994 14,500 *
Independent investor since 1984. Prior thereto,
was Group Vice President, Domestic Exploration
and Production of Getty Oil Co.
SIDNEY R. PETERSEN(B)(D)........................... 65 1992 19,500(5) *
Independent investor since 1984. Prior thereto,
was Chairman and Chief Executive Officer of Getty
Oil Co...........................................
</TABLE>
-3-
<PAGE> 7
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED AS OF PERCENT
NAME AND PRINCIPAL OCCUPATION SERVED AS A MARCH 15, OF
DURING THE LAST FIVE YEARS(1)(2) AGE DIRECTOR SINCE 1996(3) CLASS
- --------------------------------------------------- --- -------------- ------------ -------
<S> <C> <C> <C> <C>
JAMES G. NIVEN(A)(D)............................... 50 1985 354,166 1.2%
Managing Director of Burson-Marsteller since
January 1996. Chairman of the Board of Directors
of Simmons Outdoor Corporation from December 1994
to December 1995. Chairman of the Board of the
Company from November 1989 to December 1994.
Member of the Board of Directors of Texneft Inc.
since November 1991. General Partner of Pioneer
Associates Co., a venture capital firm, for more
than five years.
CLASS III - TERM EXPIRES IN 1998
- --------------------------------
LINDA F. SJOMAN(C)................................. 49 1995 10,000 *
Secretary General and member of the Board of
Directors of the Petroleum Advisory Forum since
July 1993. Prior thereto, was Special Counsel in
the Moscow office of Vinson & Elkins L.L.P. from
February 1990 to July 1993. Prior thereto, was
engaged in private law practice for more than
five years.
ROBERT F. VAGT(C)(D)............................... 49 1992 376,806(6) 1.3%
Chairman of the Board of the Company since
December 1994. President and Chief Executive
Officer of the Company since May 1992. Prior
thereto, was a Director, President and Chief
Operating Officer of Adobe Resources Corporation
(Director from May 1986 to May 1992 and President
and Chief Operating Officer from November 1990 to
May 1992). Prior thereto, was Executive Vice
President of Adobe Resources Corporation from
August 1987 to October 1990.
</TABLE>
- ---------------
* Represents less than 1%
(1) Directorships other than those listed in the table are: Sidney R.
Petersen-Avery Dennison Corporation, Group Technologies Corporation, Nicor,
Inc., and Union Bank; James G. Niven-Noel Group, Inc., The Prospect Group,
Inc., Lincoln Snacks Company, HealthPlan Services Corporation, Tatham
Offshore, Inc., Staffing Resources, Inc., The Lynton Group, Inc., and is an
advisory director of Houston National Bank; R.A. Walker-Maxus Energy Corp.,
and Robert F. Vagt-First Albany Corporation and Santa Fe Energy Resources,
Inc.
(2) Committee memberships are indicated by "(a)" for Audit Committee, "(b)" for
Compensation Committee, "(c)" for Nominating Committee and "(d)" for
Executive Committee. The Audit Committee recommends to the Board of
Directors the appointment of independent auditors and meets with the
independent auditors to review the scope and results of their examination
and the adequacy of the Company's system of internal accounting controls
and to approve services performed by the auditors. The Compensation
Committee consults with and advises senior management regarding
compensation of executive officers and certain eligible directors and
submits to the Board of Directors its recommendation with respect to
compensation of the Company's executive officers. The Nominating Committee
designates the nominees for election as directors at the Annual Meeting of
Shareholders and will consider written recommendations by shareholders for
nominees for director at any meetings of shareholders
-4-
<PAGE> 8
called for the election of directors delivered to the Nominating Committee
c/o E. Lynn Hill, Secretary, Global Natural Resources Inc., 5300 Memorial
Drive, Suite 800, Houston, Texas 77007 not fewer than fourteen (14) days
nor more than fifty (50) days prior to such meeting. Each such notice shall
set forth (i) the name, business address, if any, and residence address of
the nominator, (ii) the name, age, business address and, if known, resident
address of each nominee proposed in such notice, (iii) the principal
occupation or employment of each such nominee, (iv) the number of shares of
the Company which are owned beneficially and the number of shares which are
owned of record by each such nominee, and (v) the number of shares of the
Company which are owned beneficially and the number of shares which are
owned by the nominator. The Executive Committee has and may exercise all
the powers and authority of the Board of Directors except that the
Executive Committee shall not (1) make, alter or repeal any By-law, (2)
elect or appoint any director or remove any officer or director, (3) submit
to shareholders of the Company any action that requires shareholder
approval, (4) amend or repeal any resolution theretofore adopted by the
Board of Directors which by its terms is amendable or repealable only by
the Board of Directors, or (5) authorize the issuance of stock (including
Preferred Stock or any series thereof) of the Company or take any other
action then prohibited by law.
(3) The persons listed have sole voting and investment power with respect to
their shares, except as noted. Shares of Common Stock beneficially owned as
of March 15, 1996 includes shares of Common Stock of the Company that could
be acquired within 60 days after March 15, 1996, upon the exercise of
options granted pursuant to the Company's stock option plans as follows:
Mr. Petersen, 17,500 shares; Mr. Niven, 327,500 shares; Ms. Sjoman, 10,000
shares; Mr. Vagt, 360,000 shares; Mr. Brock, 15,000 shares; Mr. Macdougall,
12,500 shares; and Mr. Carlton, 12,500 shares.
(4) Included in the number of shares owned by Mr. Walker are the shares held by
the Prudential Insurance Company of America ("Prudential"), of which Mr.
Walker is an executive officer. Prudential has sole voting and investment
power with respect to such shares. Mr. Walker disclaims beneficial
ownership of such shares.
(5) Of the 19,500 shares held by Mr. Petersen, 2,000 are held in The Petersen
Family Trust, as to which he is one of two trustees.
(6) Mr. Vagt's common stock ownership includes 1,806 shares arising from
participation in Global Natural Resources Inc. Employees 401(K) Savings
Plan.
Each director who is not a salaried officer of the Company and does not
receive compensation under consulting arrangements receives $13,000 annually for
serving as a director, an additional fee of $1,000 per board meeting attended,
$2,000 for serving as the Chairman of a committee and $650 for attending any
committee meeting.
Under the Company's 1992 Stock Option Plan (the "1992 Plan"), each director
of the Company who is not also an employee is granted non-qualified stock
options to purchase 10,000 shares of the Common Stock of the Company on the
first business day following their election to the Board. Thereafter, on the
first business day following the anniversary of such directors' initial grant,
each director is granted a non-qualified stock option to purchase 2,500 shares
of the Common Stock of the Company. The options are issued at a price equal to
the fair market value of the Common Stock on the date of grant. The options have
a ten year term and are fully exercisable after the date of grant and may be
exercised only during the non-employee director's lifetime, only while he or she
is a member of the Board of Directors of the Company and during the one-year
period immediately following the termination of such membership status, and may
in event of the Non-Employee Director's death while the option is exercisable,
be exercised by the administrator of the Non-Employee Director's estate during
the one year period following such date of death.
During 1995, the Board of Directors held six meetings, the Compensation
Committee held three meetings, the Audit Committee held three meetings, and the
Nominating Committee held two meetings. No incumbent director attended fewer
than 75% of the total meetings held by the Board and all committees of which
they were members.
-5-
<PAGE> 9
The Company's executive officers are elected by the Board of Directors to
serve for a term of one year or until their successors are elected and
qualified. The Company's executive officers, in addition to those named in the
above table, are:
<TABLE>
<CAPTION>
NAME AND PRESENT POSITION AGE PRIOR BUSINESS EXPERIENCE
- ------------------------- --- -------------------------
<S> <C> <C>
Kelly M. Barnes.................. 42 Vice President -- Land of Global Natural Resources
Vice President -- Land and Corporation of Nevada ("GNRC"), a wholly-owned
Assistant Secretary subsidiary of the Company since August 1992; Senior
since July 1993. Staff Landman for Santa Fe Energy, Inc. from April
1992 to August 1992; Southern Division Landman for
Adobe Resources Corporation from January 1988 to
April 1992.
Gerald R. Colley................. 45 Vice President -- International Exploration of the
Senior Vice President -- Company from July 1993 to December 1994; Vice
International Exploration since President -- International Exploration of GNRC since
December 1994. October 1992; Vice President and Exploration
Director of Hadson Europe, Inc. from August 1986 to
October 1992.
Gregory S. Cusack................ 36 Vice President -- Operations of GNRC since September
Vice President -- Operations 1991; Manager of Operations from August 1991 to
since July 1993. September 1991; Operations Engineer from October
1983 to August 1991.
Scott A. Griffiths............... 41 Vice President -- Exploration of GNRC since
Vice President -- Exploration September 1991; Manager of Exploration from August
since July 1993. 1991 to September 1991; Chief Geologist from May
1988 to August 1991.
E. Lynn Hill..................... 50 Vice President -- Finance and Administration and
Senior Vice President -- Secretary of the Company from July 1988 until August
Finance and Administration and 1992.
Secretary-Treasurer since
August 1992.
William D. Hubbard............... 52 Senior Vice President -- Exploration of GNRC since
Senior Vice President -- June 1992; Division Exploration Manager for Santa Fe
Domestic Exploration since July Energy, Inc. from May 1992 until June 1992; Vice
1993. President- Exploration of Adobe Resources
Corporation from October 1987 to May 1992.
David W. Martin.................. 57 Vice President -- Engineering of Trend Exploration,
Senior Vice President since a subsidiary of Adobe Resources Corporation, for
July 1993 and President of more than five years prior to October 1992.
Texneft Inc., a subsidiary of
the Company, since October
1992.
Gordon L. McConnell.............. 49 Controller of the Company from July 1993 to January
Vice President -- Accounting 1996; Controller of GNRC since October 1991;
since January 1996. Assistant Controller from July 1991 to October 1991;
Vice President -- Accounting for Prairie Producing
from June 1989 to July 1990; Vice President --
Finance and Administration for Felmont Oil Company
from January 1988 to 1989.
</TABLE>
-6-
<PAGE> 10
<TABLE>
<CAPTION>
NAME AND PRESENT POSITION AGE PRIOR BUSINESS EXPERIENCE
- ------------------------- --- -------------------------
<S> <C> <C>
Darrell G. Molnar................ 49 Senior Vice President -- Operations of GNRC since
Senior Vice President -- August 1992; Drilling Superintendent and Engineering
Operations since July 1993. Manager of Transco Exploration and Production Co.
from August 1988 until July 1992.
Thomas H. Pielech................ 35 Manager of Gas Supply for USAgas from April 1990
Vice President -- Oil and Gas until May 1992; Manager of Gas Supply for
Marketing since January 1996 Amalgamated Pipeline Co. from July 1989 to April
and Vice President -- USAgas 1990; Gas Contract Representative for Arco Oil and
Pipeline, Inc., a wholly owned Gas Company from June 1987 until July 1989.
subsidiary of the Company,
since May 1992.
M. Lee Van Winkle................ 43 Vice President -- Corporate Planning of GNRC since
Vice President -- August 1992; Corporate Manager -- Planning and
Corporate Planning since July Budget for Adobe Resources Corporation for more than
1993. five years prior to August 1992.
</TABLE>
COMPENSATION COMMITTEE REPORT
ON
EXECUTIVE COMPENSATION
Decisions regarding compensation of the Company's executive officers are
generally made by the three member Compensation Committee of the Company's Board
of Directors. Effective December 31, 1995, one of the members of the
Compensation Committee resigned from the Board of Directors. His position on the
Compensation Committee will be filled. Each member of the Compensation Committee
is a non-employee director. In addition to setting compensation levels, the
Committee selects officers and key employees for participation in stock option
plans, establishes performance goals for those officers and key employees who
participate in such plans and reviews and monitors benefits under all employee
benefit plans of the Company. The Compensation Committee does not currently
intend to award compensation that would result in a limitation on the
deductibility of a portion of such compensation pursuant to Section 162(m) of
the Internal Revenue Code; however, the Compensation Committee may in the future
decide to authorize compensation in excess of the limits of Section 162(m) if it
determines that such compensation is in the best interests of the Company.
COMPENSATION POLICIES FOR EXECUTIVE OFFICERS
The Compensation Committee's executive compensation policies are intended
to provide competitive levels of compensation in order to attract and retain
qualified executives, to recognize individual contributions to the successful
achievement of the Company's business objectives, and to align management's and
shareholders' interests in the enhancement of shareholder value over the
long-term. The Committee does this by setting specific annual objectives for the
Company and for each of the Company's key employees. The basis for these annual
targets are the operational objectives, and the asset growth and the financial
objectives contained in the capital budget and operating plan which is adopted
annually. Individual performance relative to these goals is reviewed at least
annually.
The key tool used to provide long-term incentives is the stock option plan,
which is intended to align the interests of the Company's employees with that of
its shareholders. Thus, success in achieving annual objectives and success in
enhancing shareholder value should translate directly into an enhanced benefit
for key employees. The Compensation Committee believes that rewarding employees
through stock based performance compensation arrangements enhances shareholder
value over the long-term.
Once yearly, there is also a review of salary levels. At that time the
Compensation Committee considers on an informal basis the prevailing levels of
compensation paid by comparable organizations, individual
-7-
<PAGE> 11
contributions to the Company which each of the executives has made and can be
expected to make in the future, and such other factors as the Committee may deem
relevant at the time of making such determinations.
In 1993, the Company adopted an annual management incentive plan for the
Company's executive officers. This plan established performance goals for the
Company and for each individual, and is administered by the Compensation
Committee. Performance goals for 1995 required that production of oil and gas,
cash flow and oil and gas reserves reach the levels established in the Company's
capital budget and operating plan. In addition, a goal was established for the
Company's stock price performance compared to the Company's peer group. Based on
performance versus 1995 objectives, the Committee awarded $773,500 in bonuses to
13 individuals in January 1996.
In January 1996 the Committee authorized, and the Company issued,
approximately 132,000 non-qualified stock options to 33 executive officers and
key employees. The options granted will vest twenty percent (20%) after six
months from the date of grant with an additional twenty percent (20%) becoming
vested and exercisable on each of the first, second, third and fourth
anniversaries of the date of grant. Such options are forfeitable in the event
the employee voluntarily terminates employment prior to vesting.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Vagt was retained as President and Chief Executive Officer in May 1992.
The subjective factor given the most weight in determining his compensation was
to provide a salary level competitive with that which would be made available to
him by organizations with which the Company competes for the services of
qualified executives. In 1992, consistent with the Company's philosophy of
issuing long-term compensation to help align an executive's interests with that
of the Company's shareholders, Mr. Vagt was granted 450,000 non-qualified stock
options. Under the Company's annual management incentive plan, the Committee
awarded Mr. Vagt a bonus of $225,000 in respect of 1995.
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
William L. Bennett, Chairman
Sidney R. Petersen
-8-
<PAGE> 12
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued during each
of the Company's last three fiscal years to the Company's Chief Executive
Officer and each of the Company's four other most highly compensated executive
officers (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
SALARY BONUS ------------------
NAME AND PRINCIPAL ------------------ OTHER ANNUAL SECURITIES ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION UNDERLYING OPTIONS COMPENSATION(1)
- ------------------------- ---- ------- ------- ------------ ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
($) ($) ($) (#) ($)
Robert F. Vagt........... 1995 320,000 225,000 -- -- 4,620
Chairman of the Board, 1994 300,000 180,000 -- -- 4,620
President and Chief 1993 280,000 190,000 -- -- 4,000
Executive Officer
William D. Hubbard....... 1995 168,682 64,000 -- 10,000 4,620
Senior Vice President 1994 160,650 59,000 -- -- 2,310
-- Exploration 1993 153,000 50,000 -- 36,000 2,206
David W. Martin.......... 1995 154,350 58,000 51,188(2) 12,000 4,244
Senior Vice President 1994 147,000 54,000 -- -- 2,310
1993 140,000 20,000 -- 18,000 875
Gerald R. Colley......... 1995 133,000 72,000 -- 20,000 4,620
Senior Vice President 1994 121,800 58,000 -- -- 1,540
-- 1993 116,000 25,000 -- 17,500 1,350
International
Exploration
E. Lynn Hill............. 1995 137,812 52,000 -- 7,000 4,495
Senior Vice President 1994 131,250 42,000 -- -- 3,281
-- 1993 125,000 15,000 -- 14,000 1,156
Finance and
Administration,
Secretary-Treasurer
</TABLE>
- ---------------
(1) Amounts received by the individuals listed above reflect matches made by the
Company for employee contributions to the Global Natural Resources Inc.
Employees 401(K) Savings Plan. (See Benefit Plans -- Savings Plan for a
description of the Savings Plan.)
(2) Other annual compensation for Mr. Martin represents the gain on exercise of
stock options.
-9-
<PAGE> 13
STOCK OPTIONS
The following table sets forth information with respect to grants of stock
options to the Named Officers during the last fiscal year pursuant to the
Company's Stock Option Plans:
STOCK OPTION GRANTS IN 1995
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SHARES TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED FOR OPTION TERMS
OPTIONS TO EMPLOYEES IN EXERCISE OR EXPIRATION ------------------
NAME GRANTED(1) FISCAL YEAR BASE PRICE DATE 5% 10%
- --------------------------- ---------- --------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
(#) ($/sh) ($) ($)
William D. Hubbard......... 10,000 6% 8.3125 1/23/05 52,300 132,480
David W. Martin............ 12,000 7% 8.3125 1/23/05 62,760 158,976
Gerald R. Colley........... 20,000 11% 8.3125 1/23/05 104,600 264,960
E. Lynn Hill............... 7,000 4% 8.3125 1/23/05 36,610 92,736
</TABLE>
- ---------------
(1) Stock options granted in 1995 were granted under the Company's 1992 Stock
Option Plan. The options have a ten year term and vest twenty percent (20%)
after six months from the date of grant, with an additional twenty percent
(20%) becoming vested and exercisable on each of the first, second, third
and fourth anniversaries of the grant. Termination of the employee for
cause or voluntary resignation shall cause forfeiture of all awards after
service to the Company ends. In the event of an involuntary termination
without good cause, or in the event of termination by reason of disability,
retirement or death, options earned as of the date of termination are
forfeited one year after service to the Company ends.
The following table sets forth the aggregate option exercises during the
last fiscal year and the value of outstanding options at year-end held by the
Named Officers.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT YEAR-END
ACQUIRED ON ----------------------------
NAME EXERCISE EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
(#) (#) (#) ($) ($)
Robert F. Vagt.................... 0 360,000 90,000 922,500 230,000
William D. Hubbard................ 0 39,600 26,400 123,400 79,350
David W. Martin................... 9,300 9,900 18,300 32,269 52,419
Gerald R. Colley.................. 0 20,500 24,500 69,875 63,875
E. Lynn Hill...................... 0 109,800 11,200 488,163 32,900
</TABLE>
-10-
<PAGE> 14
STOCK OWNERSHIP
The following table sets forth, with respect to each Named Officer, the
number of shares beneficially owned by such person and the percentage such
number constitutes of the entire class as of March 15, 1996.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF
MARCH 15, 1996
------------------------------
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
- ---------------------------------------------------------------- --------------- ----------
<S> <C> <C>
Robert F. Vagt.................................................. 376,806 1.3%
William D. Hubbard.............................................. 44,581 *
David W. Martin................................................. 15,082 *
Gerald R. Colley................................................ 26,624 *
E. Lynn Hill.................................................... 113,904 *
All officers and directors as a group (19 persons) 7,523,728 25.4%
</TABLE>
- ---------------
* Represents less than 1%
(1) The persons listed have sole voting and investment power with respect to
their shares. Shares of common stock beneficially owned as of March 15,
1996 includes shares of common stock of the Company that could be acquired
within 60 days after March 15, 1996, upon the exercise of options granted
pursuant to the Company's stock option plan as follows: Mr. Vagt, 360,000
shares; Mr. Hubbard, 43,200 shares; Mr. Martin, 13,900 shares; Mr. Colley,
25,500 shares; and Mr. Hill, 112,800 shares.
(2) Common stock ownership for the persons listed includes shares arising from
participation in Global Natural Resources Inc. Employees 401(K) Savings
Plan as follows: Mr. Vagt, 1,806 shares; Mr. Hubbard, 1,381 shares; Mr.
Martin, 1,182 shares; Mr. Colley, 1,124 shares; and Mr. Hill, 1,104 shares.
-11-
<PAGE> 15
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the NYSE Index and to an index of peer companies for the
Company's last five fiscal years. The companies in the peer index were initially
selected based on the following criteria: (i) total assets ranging from
approximately $100 million to $625 million, (ii) total revenue ranging from
approximately $40 million to $300 million and (iii) oil and gas and related
revenue comprising at least 64% of total revenue. The companies included in the
peer index were American Exploration Co., Crystal Oil Corporation, Forest Oil
Corporation, Plains Resources, Inc., Pogo Producing Co., Wainoco Oil Corporation
and Wiser Oil Co. Harkin Energy Corporation, Kelly Oil and Gas Partners and
Plains Petroleum Co. were included in the peer index in prior years but were
excluded in 1995 due to either mergers or reorganizations. The graph assumes
that the value of the investment in the Company's Common Stock and each index
was $100 at December 31, 1990 and that all dividends were reinvested.
<TABLE>
<CAPTION>
Measurement Period Global Natu- Broad Market
(Fiscal Year Covered) ral Resources Peer Group (NYSE)
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 142.86 88.10 129.41
1992 92.86 99.34 135.50
1993 103.57 127.97 153.85
1994 121.43 127.31 150.86
1995 150.00 167.82 195.61
</TABLE>
BENEFIT PLANS
The Company maintains a 401(K) employee savings plan ("Savings Plan") and a
defined benefit pension plan ("Pension Plan"). These plans are briefly described
below.
Savings Plan -- The Savings Plan was established by the Company effective
October 1, 1993. The Savings Plan offers eligible employees an opportunity to
make long-term investments on a regular basis through salary contributions,
which are supplemented by matching employer contributions. All employees at
least eighteen (18) years of age and that have completed six (6) months of
service are eligible to participate. The Company will match up to 50% of the
first 5% of compensation deferred. The employee's contribution could not exceed
$9,240 in 1994 and 1995. The limit amount is increased to $9,500 for 1996. The
employer matching contribution is made in the Company's common stock.
The Savings Plan is intended to qualify as a Section 401(K) cash or
deferred compensation arrangement whereby, an employee's contributions and the
Company's matching contributions are not subject to federal income taxes at the
time of the contribution to the Savings Plan, and the Savings Plan is subject to
the restrictions imposed by the Internal Revenue Code of 1986, as amended.
Investment alternatives to which
-12-
<PAGE> 16
contributions may be allocated by the participants include a fixed income fund,
a balanced fund, a diversified fund and a concentrated fund. Only the Company's
matching contribution is allowed to be made in Company common stock. Employees
may, however, direct the sale of Company common stock held in their account and
allocate proceeds to any of the other investment alternatives.
Pension Plan -- The Pension Plan covers employees of the Company and
employees of affiliated companies who are at least 21 years old and who have
completed certain service requirements.
The Company pays the entire cost of the Pension Plan, the amount of the
contribution being determined annually on an actuarial cost method under which
contributions are determined for all participants as a group, and individual
participant contributions are not readily available. Aggregate contributions to
the Pension Plan for 1995 were approximately 10.34% of total remuneration of
participants covered under the Pension Plan.
The following table shows the estimated annual benefits payable upon
retirement at age 65 to persons in specified compensation and years-of-service
classifications under the Pension Plan.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE AT RETIREMENT
-------------------------------------------------------------------------
10 15 20 25 30 35 40
AVERAGE SALARY YEARS YEARS YEARS YEARS YEARS YEARS YEARS
- ------------------------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 50,000................. $15,000 $17,500 $20,000 $21,250 $22,500 $23,750 $25,000
75,000................. 22,500 26,250 30,000 31,875 33,750 35,625 37,500
100,000................. 30,000 35,000 40,000 42,500 45,000 47,500 50,000
150,000................. 45,000 52,500 60,000 63,750 67,500 71,250 75,000
200,000................. 45,000 52,500 60,000 63,750 67,500 71,250 75,000
300,000................. 45,000 52,500 60,000 63,750 67,500 71,250 75,000
400,000................. 45,000 52,500 60,000 63,750 67,500 71,250 75,000
500,000................. 45,000 52,500 60,000 63,750 67,500 71,250 75,000
</TABLE>
The term "average salary" in the table refers to the average annual
compensation, including bonuses and overtime pay, during the period of 60
consecutive months which results in the highest such average.
The normal retirement benefit is a monthly benefit that commences on the
first day of the month coincident with or next following the later of (i) the
attainment of age 65 and (ii) the fourth anniversary of the date on which
participation commenced, and is payable for the lifetime of the participant in
an amount that it is equal to 3% of the average salary for each of the first ten
years of service plus 1% of the average salary for each of the next ten years of
service plus 1/2% of the average salary for each year of service in excess of
twenty, limited in 1995 to $120,000 per year for those whose social security
retirement age is 65. The estimated number of years of credited service
completed through December 31, 1995 by the named officers are as follows:
<TABLE>
<CAPTION>
NAME YEARS NAME YEARS
------------------------ ------ ------------------------ ------
<S> <C> <C> <C>
Robert F. Vagt.......... Four E. Lynn Hill............ Seven
William D. Hubbard...... Four Gerald R. Colley........ Three
David W. Martin......... Three
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act and the rules issued thereunder require
the Company's executive officers and directors, and persons who own more than
10% of a registered class of equity securities of the Company, to file with the
Securities and Exchange Commission and the New York Stock Exchange reports of
ownership and changes in ownership of such securities. Based solely on its
review of the copies of such reports furnished to the Company, or written
representations that no reports were required, the Company believes that during
1995, its executive officers, directors and greater than 10% shareholders
complied with all applicable filing requirements.
-13-
<PAGE> 17
PROPOSAL TO INCREASE THE AGGREGATE NUMBER OF SHARES
FOR WHICH OPTIONS MAY BE GRANTED UNDER THE COMPANY'S
1992 STOCK OPTION PLAN
INTRODUCTION
The Board of Directors unanimously recommends that the Company's
shareholders consider and approve a proposal to increase the aggregate number of
shares for which options may be granted under the Company's 1992 Stock Option
Plan (the "1992 Plan") from 1,000,000 to 1,500,000.
PROPOSED AMENDMENT TO THE 1992 PLAN
The 1992 Plan provides for the issuance of options to purchase up to an
aggregate of 1,000,000 shares of the Company's Common Stock to employees,
directors and other persons performing services for the Company, as determined
by a committee of members of the Board of Directors. As of March 1, 1996, there
were outstanding options under the 1992 Plan to purchase an aggregate of 828,500
shares of the Company's Common Stock, and there were 76,500 shares reserved for
future option grants.
The Board of Directors believes that the number of shares of Common Stock
for which options may be granted under the 1992 Plan is insufficient to meet the
Company's needs to attract and retain qualified personnel and to continue to
provide incentives to employees, directors and potential recipients. In
addition, the granting of options fosters the interests of both the recipients
and the Company's shareholders, in that the recipients have an incentive to
maximize the value of the Company to its shareholders. Therefore, the
shareholders of the Company are being asked to consider and vote for a proposal
to increase the aggregate number of shares for which options may be granted
under the 1992 Plan from 1,000,000 to 1,500,000.
DESCRIPTION OF THE 1992 PLAN
ADMINISTRATION
The 1992 Plan is administered by a committee consisting of members of the
Board of Directors (the "Committee") who are appointed by the Board of
Directors. Members of the Committee must consist of directors who are, and shall
continue to be "disinterested persons" within the meaning of Rule 16b-3 under
the Securities Act of 1934, as amended. The Committee has sole authority to
select the individuals who are to be granted options from among those eligible
to participate in the 1992 Plan and to establish the number of shares which may
be issued under each option.
ELIGIBILITY
Options may be granted only to (i) individuals who are employees of the
Company and its subsidiaries, including officers and directors who are also
employees at the time the option is granted, (ii) individuals who are directors
but not also employees of the Company and its subsidiaries, and (iii) any other
persons who perform services for or on behalf of the Company deemed by the
Committee to be in a position to perform such services in the future; provided,
however, that options that constitute incentive stock options ("ISOs") qualified
under the Internal Revenue Code (the "Code") (See "Federal Income Tax
Consequences," below) may be granted only to employees described in clause (i)
above, and that members of the Committee shall be granted options only as
described under the heading "Grants to Non-Employee Directors," below. No
options may be granted under the 1992 Plan after June 26, 2002. Currently there
are approximately 90 persons eligible to receive options under the 1992 Plan.
SHARES SUBJECT TO THE 1992 PLAN
A maximum of 1,000,000 shares of Common Stock may be awarded under the 1992
Plan as currently in effect. The shareholders are being asked to approve an
increase to 1,500,000 shares. As of March 1, 1996 the market value of the shares
subject to the 1992 Plan was $12,125,000. Both treasury shares and shares that
are authorized but unissued may be utilized under the 1992 Plan. The number of
shares available under the 1992 Plan is subject to adjustments for changes in
capitalization or in connection with certain corporate
-14-
<PAGE> 18
transactions. Any shares subject to options which expire or terminate prior to
being exercised in full may again be used for an option under the 1992 Plan.
OPTIONS
Options granted under 1992 Plan may be either ISOs or non-qualified stock
options, i.e., not qualified under the Code ("NQSOs"). (See "Federal Income Tax
Consequences," below.) The option price of each share of Common Stock subject to
an option is fixed by the Committee but (i) in the case of an ISO, such purchase
price shall not be less than the fair market value of the Common Stock on the
date of grant of the option and (ii) in the case of an NQSO, such purchase price
shall not be less than 50% of the fair market value of the Common Stock on the
date of grant of the option. Under the 1992 Plan, the fair market value with
respect to such shares is equal to the mean of the reported high and low sales
prices of the Common Stock on the New York Stock Exchange Composite Tape on the
day on which an option is granted. All options designated as an ISO is intended
to qualify as such under Section 422 of the Code. Thus, the aggregate fair
market value, determined at the time of grant, of the shares with respect to
which ISOs are exercisable for the first time by an individual during any
calendar year may not exceed $100,000. NQSOs are not subject to this
requirement. Certain adjustments in the option price may be made for
extraordinary dividend distributions. No option may be outstanding for more than
ten years after its grant. Upon exercise of an option, payment for shares may be
made in cash, or, if the option document so provides, in shares of Common Stock
calculated based upon their fair market value as of the date of their delivery
or, if the option document so provides, a combination of stock and cash.
STOCK APPRECIATION RIGHTS
Under the 1992 Plan, an option may provide for the surrender of the right
to purchase shares under the option in return for payment in cash and/or shares
of the Company's Common Stock equal in value to the excess of the fair market
value of the shares with respect to which the right to purchase is surrendered
over the exercise price therefor, such right being commonly referred to as a
"stock appreciation right" or "SAR."
CASHLESS EXERCISE
An option under the 1992 Plan may provide for a "cashless exercise" by
allowing the optionee to direct an immediate market sale or margin loan
respecting the shares under the option pursuant to the Company's extension of
credit for the option price. Pursuant to this procedure the optionee would
direct the delivery of the shares under the option from the Company to a
brokerage firm and the delivery of the option price from sale or margin loan
proceeds from the brokerage firm to the Company.
GRANTS TO NON-EMPLOYEE DIRECTORS
The 1992 Plan provides that each director of the Company who is not also an
employee of the Company or its subsidiaries will be granted, following their
election, an option to purchase 10,000 shares of the Common Stock of the Company
at a price equal to the fair market value of the Common Stock on the date of
grant of the option. Thereafter, each director will be granted during the term
of the 1992 Plan, on the first business day following the anniversary in each
calendar year of such director's initial grant, an option to purchase 2,500
shares of Common Stock of the Company at a price equal to the fair market value
of the Common Stock on the date of grant of the option. The options granted
hereunder are fully exercisable after the date of grant and may be exercised
only during the non-employee director's lifetime, only while he or she is a
member of the Board of Directors of the Company and during the one-year period
immediately following the termination of such membership status, and may in the
event of the Non-Employee Director's death while the option is exercisable, be
exercised by the administrator of the Non-Employee Director's estate during the
one year period following such date of death. The options granted to
Non-Employee Directors will be NQSOs, will not provide for SARs but will provide
for "cashless exercise."
-15-
<PAGE> 19
TRANSFERABILITY
Options granted under the 1992 Plan are not transferable by the optionee
other than by will or the laws of descent and distribution and are exercisable
during the lifetime of the optionee only by the optionee or by the optionee's
guardian or legal representative.
SHAREHOLDER STATUS
Recipients of options under the 1992 Plan do not have any rights as
shareholders by virtue of the grant of an option. Such rights are accorded only
with respect to shares of Common Stock actually issued or delivered to such
recipient.
TERMINATION, SUSPENSION OR MODIFICATION OF THE 1992 PLAN
The Board of Directors may terminate, suspend, or modify the 1992 Plan at
any time but may not, without authorization of the Company's shareholders,
effect any change (other than adjustments for changes in capitalization or
corporate transactions, as provided in the 1992 Plan) that increases the
aggregate number of shares for which options may be exercised, changes the class
of individuals eligible to receive options, or extends the period of time during
which options may be granted.
OPTIONS OUTSTANDING
At March 1, 1996, there were outstanding options granted under the 1992
Plan covering an aggregate of 828,500 shares of the Company's Common Stock,
having a weighted average per share exercise price of $8.235. On March 1, 1996,
the closing price of the Company's Common Stock on the New York Stock Exchange
was $12.125.
FEDERAL INCOME TAX CONSEQUENCES
ISOS. A participant under the 1992 Plan does not realize income for
federal income tax purposes as a result of (i) the grant of an ISO under the
1992 Plan or (ii) the exercise of an ISO under the 1992 Plan. The Company is not
entitled to a federal income tax deduction upon the grant or exercise of an ISO.
Long-term capital gains tax rates will apply to the gain (excess of the amount
received for the shares over the amount paid for the shares) at the time that
the participant disposes of the shares provided that certain holding
requirements discussed below are met. The spread between the exercise price and
the fair market value of the transferred shares at the time of the exercise of
an ISO is included in alternative minimum taxable income subject to the
alternative minimum tax for the taxable year in which such transfer occurs. If
the shares are disposed of in the same taxable year and the amount realized is
less than that fair market value at the time of exercise, the amount included in
the alternative minimum taxable income will not exceed the amount realized over
the adjusted basis of the shares.
The availability of the income tax treatment discussed in the foregoing
paragraph is subject to two conditions. First, the participant must continue to
be an employee of the Company or a parent or subsidiary of the Company at all
times during the period beginning on the date that the ISO was granted and
ending (with exceptions for disability and death) on the date three months
before the option is exercised. Second, such income tax treatment is available
only if the participant does not dispose of the shares acquired pursuant to the
exercise of the ISO (1) within two years from the date of granting of the option
nor (2) within one year after the shares were transferred pursuant to the
exercise of the option. If the participant disposes of the shares prior to the
expiration of the required holding period, the participant realizes ordinary
income in the year of disposition and the same amount is then deductible by the
Company.
In the case of an ISO, the tax consequences to the participant of the
payment of the option price with shares of stock previously acquired
("Previously Acquired Shares") will depend on the nature of the Previously
Acquired Shares. If the Previously Acquired Shares were acquired through the
exercise of an ISO ("Statutory Option") and if such Previously Acquired Shares
are being transferred prior to the expiration of the applicable minimum
statutory period, the transfer is treated as a disqualifying disposition of the
Previously
-16-
<PAGE> 20
Acquired Shares. If the Previously Acquired Shares were acquired other than
pursuant to the exercise of a Statutory Option, or were acquired pursuant to the
exercise of a Statutory Option but have been held for the applicable minimum
statutory holding period, no gain or loss is recognized on the exchange. In
either case, (i) the participant's basis in the number of shares received equal
to the Previously Acquired Shares exchanged is the same as his basis in the
Previously Acquired Shares, increased by any income recognized upon the
disqualifying disposition of the Previously Acquired Shares, and (ii) the
participant's basis in the shares received in excess of the number of Previously
Acquired Shares is zero.
NQSOS. A participant realizes no income as a result of the grant of a NQSO
under the 1992 Plan. However, a participant realizes ordinary income upon the
exercise of the NQSO (or at the later date described below) equal to the excess
of the fair market value of the shares at the time of exercise (or at such later
date) over the option price. The Company is not entitled to a federal income tax
deduction upon the grant of the NQSO, but upon transfer of the shares to such
participant upon its exercise (or at the later date described below) an amount
corresponding to the participant's taxable income becomes deductible by the
Company. The amount of income recognized at the time of exercise is added to the
option price to determine the participant's basis in the shares, and any further
appreciation upon ultimate sale of the shares is taxable as short or long term
capital gains (with the holding period measured from the date of exercise). If
the shares received upon exercise are not transferable and are subject to a
substantial risk of forfeiture, the realization of compensation income is
postponed until the earlier of the lapse of the forfeiture restrictions or the
making of an "IRC 83(b) election." For such purposes, potential liability by
Company insiders under securities laws with respect to short swing trading
constitutes a substantial risk of forfeiture. Where other shares of stock have
been purchased within six months of exercise of the option, recognition of the
compensation attributable to such exercise may be postponed for a period of six
months from the date of purchase of such other shares of stock due to such
liability.
In the case of an NQSO, if the option price is paid by the delivery of
Previously Acquired Shares having a fair market value equal to the option price,
gain or loss is not recognized on the exchange. The participant would recognize
ordinary income equal to the fair market value at the date of exercise of shares
in excess of the number of Previously Acquired Shares. The participant's basis
in the number of shares received equal to the number of Previously Acquired
Shares exchanged is the same as his basis in the Previously Acquired Shares. The
Participant's basis in the excess shares is equal to the income recognized at
the date of exercise of the NQSO.
SARS. As part of either an ISO or a NQSO, the Company may issue stock
appreciation rights which would entitle the participant to receive, in cash or
in Common Stock, the spread between the fair market value of the shares
converted by the option on the date of exercise and the option price in return
for surrendering the option. Stock appreciation rights trigger compensation
income as payments are made. The Company can claim a tax deduction in an amount
equal to the compensation income.
The foregoing is only a summary of the principal tax consequences to the
Company and the participants from the grant and exercise of options under the
1992 Plan.
RECOMMENDATION
The Board of Directors unanimously recommends that shareholders vote "FOR"
the proposal to increase the aggregate number of shares for which options may be
granted under the 1992 Plan. Approval of this proposal requires an affirmative
vote of a majority of the total number of votes cast at the Annual Meeting,
either in person or by proxy. Unless indicated to the contrary, the enclosed
proxy will be voted "FOR" this proposal.
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<PAGE> 21
INDEPENDENT ACCOUNTANTS
The firm of KPMG Peat Marwick LLP has acted as independent public
accountants for the Company continually since 1976. The Board of Directors
contemplates the continuation of the services of that firm for the year ended
December 31, 1996. However, the Board of Directors will act pursuant to the
recommendation of the Audit Committee in connection with the selection of
independent accountants. A representative of KPMG Peat Marwick LLP is expected
to be present at the Annual Meeting and will have an opportunity to make a
statement and respond to shareholder questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals intended to be presented by shareholders at the Company's 1997
Annual Meeting must be received by the Company, at the address set forth on the
first page of this Proxy Statement, no later than November 29, 1996, in order to
be included in the Company's proxy statement and form of proxy relating to such
meeting. Shareholder proposals must also be otherwise eligible for inclusion.
OTHER MATTERS
Management of the Company does not know of any other matter to be acted
upon at the Annual Meeting, and so far as is known to management, no matters are
to be brought before the Annual Meeting except as specified in the notice
thereof. However, if any other matters should come before the Annual Meeting, it
is intended that proxies will be voted in respect thereof in accordance with the
judgment of the persons holding such proxies.
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<PAGE> 22
GLOBAL NATURAL RESOURCES INC.
PROXY FOR 1996 ANNUAL MEETING OF SHAREHOLDERS
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Robert F. Vagt and E. Lynn Hill, and either of them, with full power of
substitution, are hereby authorized as attorneys and proxies of the undersigned
to represent and to vote the common stock of the undersigned at the Annual
Meeting of Shareholders of Global Natural Resources Inc. (the "Company") to be
held at The Ritz-Carlton, 1919 Briar Oaks Lane, Houston, Texas on May 7, 1996
at 9:00 a.m., and any adjournment(s) thereof, with authority to vote as
follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY to vote
(except as listed to the contrary) for all nominees listed below
Class I -- term ending 1999
R. A. Walker, John A. Brock, Patrick L. Macdougall
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL STRIKE A LINE
THROUGH THE NOMINEE'S NAME.)
2. INCREASE NUMBER OF SHARES FOR WHICH OPTIONS MAY BE GRANTED UNDER THE 1992
STOCK OPTION PLAN.
[ ] FOR increasing the shares [ ] WITHHOLD AUTHORITY to vote for
increasing the shares
In accordance with their discretion, said attorneys and proxies are
authorized to vote upon such other matters as may properly come before such
meeting and any adjournments(s) thereof.
<PAGE> 23
THIS PROXY, IF PROPERLY SIGNED, WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREON. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR THE PROPOSALS AND IN ACCORDANCE WITH THE JUDGEMENT OF THE PERSONS
VOTING THE PROXY WITH RESPECT TO ANY OTHER MATTERS WHICH MAY PROPERLY BE
PRESENTED AT THE MEETING.
------------------------------------------------
------------------------------------------------
SIGNATURE(S)
DATED_____________________________________, 1996
[Please sign exactly as name appears hereon
and return in accompanying postage-prepaid
envelope. When signing as attorney, executor,
administrator, trustee, guardian, etc., give
full title of such. For joint accounts, each
joint owner should sign.]
