SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[ X ] Filed by the Registrant
[ ] 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 ss. 240.14a-11(c) or ss. 240.14a-12
BASIC 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(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, of 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>
BASIC NATURAL RESOURCES, INC.
2540 South Shore Boulevard
Suite 210
League City, Texas 77573
Telephone: (281) 334-0708
Facsimile: (281) 535-0410
December 30, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting (the "Meeting") of
Shareholders of Basic Natural Resources, Inc. (the "Company") to be held on
January 10, 1997. The Meeting will begin at 10:00 a.m., Houston Time, at the
principal executive offices of the Company, 2540 South Shore Drive, Suite 210,
League City, Texas 77573.
At the Meeting you will be asked to elect a Board of Directors for the
ensuing year, and to approve amendments to the Company's Amended and Restated
Articles of Incorporation to (i) effect a one-for sixty reverse split of all
issued and outstanding shares of Common Stock; (ii) change the par value from
$.00005 to $.003, and (iii) reduce the number of authorized shares of Common
Stock from Five Hundred Thirty Six Million to Twenty Five Million.
During the Meeting a report will be given on the operations of the Company.
Directors and executive officers of the Company will be present to respond to
any questions that shareholders may have.
Please fill out, sign, date and return the enclosed Proxy Card promptly. If
you attend the Meeting and wish to vote your shares personally, you may revoke
your proxy at that time. Your interest is very much appreciated.
Sincerely yours,
BASIC NATURAL RESOURCES, INC.
Alan W. Harvey, Chairman, President and
Chief Executive Officer
<PAGE>
BASIC NATURAL RESOURCES, INC.
2540 South Shore Boulevard
Suite 210
League City, Texas 77573
Telephone: (281) 334-0708
Facsimile: (281) 535-0410
NOTICE OF ANNUAL MEETING
To the Shareholders of BASIC NATURAL RESOURCES, INC.:
Notice is hereby given that the Annual Meeting (the "Meeting") of
Shareholders of Basic Natural Resources, Inc. (The "Company") will be held on
the 10th day of January, 1997, at the principal executive offices of the
Company, 2540 South Shore Boulevard, Suite 210, League City, Texas 77573, at
10:00 a.m. Central Standard Time, for the purposes of:
(1) electing a board of directors for the ensuing year;
(2) considering and acting upon a proposal for amendments to the Amended
and Restated Articles of Incorporation which would (i) effect a
one-for sixty reverse split of all issued and outstanding shares of
Common Stock; (ii) change the par value of the Common Stock from
$.00005 to $.003, and (iii) reduce the number of authorized shares of
Common Stock from Five Hundred Thirty Six Million to Twenty Five
Million.
(3) ratification of the appointment of Smith & Company, the Company's
Independent Auditors, for the ensuing year; and
transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The holders of record of Common Stock at the close of business on December
24, 1996, will be entitled to vote at the Meeting and at any adjournments
thereof. Proxy soliciting material is first being mailed or given to
shareholders on or before December 30, 1996.
By Order of the Board of Directors,
Dated: December 30, 1996 Alan W. Harvey, President
IMPORTANT: Your presence at the Meeting is desired, but if you cannot be present
in person, please fill out, sign, date and return the enclosed form of proxy in
the envelope provided. Due to the number of shareholders, your cooperation in
returning your proxy promptly is essential and will be very much appreciated.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN. TO VOTE YOUR
SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN
THE ENCLOSED RETURN ENVELOPE.
<PAGE>
BASIC NATURAL RESOURCES, INC.
2540 South Shore Boulevard
Suite 210
League City, Texas 77573
Telephone: (281) 334-0708
Facsimile: (281) 535-0410
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on January 10, 1997
PROXY STATEMENT
This Proxy Statement and accompanying Proxy are being furnished in
connection with the solicitation by the Board of Directors of Basic Natural
Resources, Inc. ("Basic" or the "Company") of proxies to be voted at the Annual
Meeting of Shareholders of the Company to be held on Friday, January 10, 1997 at
10:00 a.m. at the principal executive offices of the Company, 2540 South Shore
Boulevard, Suite 210, League City, Texas 77573, and at any adjournment or
postponement thereof (the "Annual Meeting"), for the purposes set forth in this
Proxy Statement and the accompanying Notice of Annual Meeting. This Proxy
Statement and accompanying Proxy are being mailed to shareholders on or about
December 31, 1996, to shareholders of record on December 24, 1996.
SHAREHOLDERS ARE URGED, WHETHER OR NOT THEY EXPECT TO ATTEND THE ANNUAL
MEETING, TO COMPLETE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED ENVELOPE. Your executed Proxy may be revoked at any time before it is
exercised by filing with the Secretary of the Company, at the Company's
principal executive offices, a written notice of revocation or a duly executed
Proxy bearing a later date. The execution of the enclosed Proxy will not affect
your right to vote in person, should you find it convenient to attend the
Meeting and desire to vote in person. Attendance at the Annual Meeting will not
in and of itself constitute the revocation of a Proxy.
The purpose of the Annual Meeting is to elect three (3) directors to serve
one-year terms until the next Annual Meeting which will be held in December
1997, and until their respective successors shall be elected and qualified;
considering and acting upon a proposal for amendments to the Amended and
Restated Articles of Incorporation which would (i) effect a one-for sixty
reverse split (the "Reverse Split") of all issued and outstanding shares of
Common Stock; (ii) change the par value of the Common Stock from $.00005 to
$.003, and (iii) reduce the number of authorized shares of Common Stock from
Five Hundred Thirty Six Million to Twenty Five Million.
The Company intends to solicit proxies principally by the use of the mails
and will bear all expenses in connection with such solicitations. In addition,
some of the directors, officers and regular employees of the Company may,
without extra compensation, solicit proxies by telephone, telegraph and personal
interview. Arrangements have been made with banks, brokerage houses and other
custodians and nominees to forward copies of the Proxy Statement and the
Company's Annual Report for the fiscal year ended June 30, 1996, to persons for
whom they hold stock of the Company and to request authority for the execution
of proxies. The Company will reimburse the foregoing persons for their
reasonable expenses, upon request.
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VOTING SECURITIES
On December 24, 1996, the Record Date for the determination of shareholders
entitled "to notice of and to vote at the Annual Meeting, 81,185,744 shares of
the Company's Common Stock ("Common Stock") were outstanding. Shareholders are
entitled to one vote per share on all matters to be considered at the Meeting.
In accordance with Article IV of the Company's Articles of Incorporation,
shareholders are not entitled to cumulative voting.
In accordance with the Company's Articles of Incorporation, one-third of
the shares entitled to vote, represented in person or by proxy, shall constitute
a quorum at a meeting of shareholders. When with respect to any action to be
taken by shareholders of the corporation Colorado General Corporation Law
requires the vote or concurrence of the holders of two-thirds of the outstanding
shares, of the shares entitled to vote thereon. Except as otherwise specified by
law, if a quorum is present, the affirmative vote of a majority of the shares
represented in person or by proxy at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Shareholders are not
entitled to cumulative voting, in accordance Article Fourth of the Company's
Articles of Incorporation. If a quorum is present, directors are elected by a
plurality of the votes cast by the shares entitled to vote. Votes will be
counted as being represented at the Meeting for quorum purposes but will not
have an effect on the vote.
The shareholders shall also vote on the proposals presented by the Company
to approve and ratify the selection of Independent Auditors, and to consider and
act upon one proposal. As to any other business which may properly come before
the Annual Meeting, the proxy holders will vote in accordance with their best
judgment. Management of the Company does not presently know of any other such
business.
The shares represented by an executed proxy (i) will be voted for the
election of directors, or withheld if so specified, and (ii) will be voted for
or against the proposed amendments to the Articles of Incorporation, or will
abstain with respect thereto, all in accordance with the specifications made in
said proxy, and to approve and ratify the selection of Independent Auditors. If
no specification is made in said proxy, the proxy will be voted "FOR" the
nominees listed herein, and "FOR" the proposed amendments to the Amended and
Restated Articles of Incorporation, and "FOR" the selection and ratification of
Smith & Company, Independent Auditors.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of December 24, 1996 by each person
or entity known to the Company to own beneficially 5% or more of the outstanding
shares of Common Stock, and the beneficial ownership of the Company's Common
Stock by the Company's Chief Executive Officer, and all directors and executive
officers as a group. No director or executive officer personally owns any of the
Company's Voting Preferred Stock.
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<TABLE>
<CAPTION>
Amount and Percent of Total
Name and Address of Nature of Percent of Outstanding
Title of Class Beneficial Owner Beneficial Interest Class Voting Securities
- ------------------------- --------------------------------- ------------------- ------------- -------------------
<C> <C> <C> <C> <C>
$.00005 par value Alan W. Harvey 73,050,000 13.6 % 89.9 %
Common Stock 2540 South Shore Drive
Suite 210
League City, Texas 77573
All executive officers 73,050,000 13.6% 89.9 %
as a group (1)
</TABLE>
(1) Unless otherwise indicated in the footnotes below, each person has sole
voting and dispositive power over the shares indicated.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board of Directors proposes the election of three directors, each to
hold office for a term of one year until the 1997 Annual Meeting and until their
respective successors are elected and qualified. All of the nominees were
elected to serve as directors effective as of December 15, 1996. If any person
other than the nominees proposed by management is nominated for election as a
director, the persons named in the accompanying Proxy, unless otherwise
directed, may, in their discretion vote so as to elect the maximum number of
management nominees. All of the nominees have consented to serve if elected.
Although it is not anticipated that any of the nominees will decline or be
unable to serve, if that should occur, the proxy holders may, in their
discretion, vote for substitute nominees.
The following table sets forth the name, principal occupation, age and the
year in which the individual first became a director for each nominee, and all
persons nominated or chosen to become directors, together with all positions and
offices with the Company held by each such person and term or period during
which each nominee has served, for election as a director at the Annual Meeting
of Shareholders to be held on January 10, 1997.
<TABLE>
<CAPTION>
Name and Principal Served as a
Occupation Age Director Since
- ---------- --- --------------
<S> <C> <C>
Alan W. Harvey, Chairman of the Board, 37 December 1996
President and Chief Executive Officer (1)
Edward S. Fleming, Vice President, 41 December 1996
Chief Financial Officer and Director (2)
Mark F. Walz, Director (3) 39 December 1996
</TABLE>
(1) Mr. Harvey was elected to serve as Chairman of the Board, President and
Chief Executive Officer effective as of December 23, 1996. Prior to joining
the Company, Mr. Harvey held the position of Vice President - Development
of Synaptix, a company that provides management consulting services with an
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<PAGE>
emphasis in the marketing and development of Oracle Financials and Oracle
EIS solutions through large system integrators to non-Fortune 1000
companies. From 1992 to 1993, Mr. Harvey held the position of Oil & Gas
Practice Director at Oracle Corporation, and was responsible for
comprehensive consulting and vertical software integration services, as
well as the creation and development of Oracle's Environmental Information
System. From 1991 to 1992, Mr. Harvey served as Director of MIS at Exlog
Inc., a subsidiary of Baker Hughes, and was responsible for the
implementation of an MIS strategic plan to implement Oracle Financials
worldwide.
(2) Mr. Fleming was elected to serve as Vice President and Chief Financial
Officer effective as of December 23, 1996. From 1993 to the present, Mr.
Fleming has held the position of Geologic Science Advisor to the Astronaut
Office, Johnson Space Center, and was primarily responsible for the
planning, coordination and evaluation of military and civilian manned space
observations of the Earth, including the management of all Army personnel
assigned to the Space Center. He has an extensive background in systems
administration of the SUN and UNIX programs, as well as experience in a
wide variety of sophisticated remote sensing software packages. Prior to
1993, Mr. Fleming held a succession of various leadership positions of
National and military prominence while serving as an officer in the United
States Army for more than 20 years.
(3) Mr. Walz was elected to serve as a member of the Board of Directors
effective as of December 23, 1996. Mr. Walz has held the position of Vice
President - Finance and Accounting for Inliner Americas, Inc., a leading
company engaged in the development, application and international licensing
of proprietary trenchless pipeline rehabilitation processes, since
September 1995. Prior to that time, Mr. Walz held the position of
Controller for the period November 1994 through September 1995. Mr. Walz
held various management positions with CRSS, Inc., prior to joining Inliner
Americas, Inc., most recently as Controller of CRSS Architects, Inc., and
as Assistant Director of Internal Audit. He has also held various
management positions with Arthur Anderson and Ernst & Young for a combined
period of more than nine years. Mr. Walz is a Certified Public Accountant.
The Board of Directors recommends a vote "FOR" the election of the nominees
listed above for election as directors.
Meetings of the Board of Directors
Standing Committees. The Company does not have any Standing Committees,
which would consist of an audit, compensation or nominating committee. No
director serves as a member of the Board of Directors of any other company with
a class of securities registered under the Securities Act of 1934, as amended,
or which is registered as an investment company under the Investment Company Act
of 1940.
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<PAGE>
Attendance at Board Meetings. During the last fiscal year, the Board of
Directors of the Company held three (3) special meetings. The Board of Directors
consisted of one sole director during the last fiscal year.
Compensation of Directors
During the last fiscal year, the sole director did not receive any
compensation for services rendered in such capacity as a director of the
Company.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The executive officers of Basic Natural Resources, Inc., together with the
years in which such Officers were named to their present office, are as follows:
<TABLE>
<CAPTION>
Positions held with Year Named to
Name Age the Company Present Position
<S> <C> <C> <C>
Alan W. Harvey 37 Chairman, President, December 1996
Chief Executive Officer
Edward S. Fleming 41 Vice President and December 1996
Chief Financial Officer
Christine N. Cronau 33 Secretary (1) December 1996
Samuel M. Skipper 37 Chairman, President and August 1995 to
Chief Executive Officer, December 1996
Director (2)
Kenneth O'Neal 49 Chairman, President and March 1995 to
Chief Executive Officer (3) August 1995
Don Larrick 47 Secretary (4) March 1995 to
August 1995
Robert Patterson 60 Principal Financial Officer (5) March 1995 to
August 1995
</TABLE>
(1) Ms. Christine N. Cronau was appointed to serve as Secretary of the Company
effective as of December 15, 1996. During the past five years, Ms. Cronau
has held various management positions with Lockheed-Martin Services, Inc.
in Houston, Texas, and most recently held the position of Senior
Engineer/Biomedical Engineer. Prior to that time, Ms. Cronau held the
position of Research Assistant at Baylor College of Medicine.
(2) Mr. Skipper served as Chairman of the Board, President and Chief Executive
Officer for the period August 1995 through December 23, 1996.
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<PAGE>
(3) Mr. O'Neal served as Chairman of the Board, President and Chief Executive
Officer for the period March 1995 through August 1995.
(4) Mr. Larrick served as Secretary of the Company for the period March 1995
through August 1995.
(5) Mr. Patterson served as Principal Financial Officer for the period March
1995 through August 1995.
SUMMARY COMPENSATION TABLE
Executive Compensation
The following table sets forth information concerning compensation for
services in all capacities awarded to, earned by, or paid to, the Company's
Chief Executive Officer during the fiscal year ended June 30, 1996 and for the
period through December 23, 1996. The Company did not compensate any other of
its executive officers, on an annual basis, in excess of $60,000.
Annual Compensation
<TABLE>
<CAPTION>
Name and Principal Other Annual All other
Position Year Salary Bonus Compensation Compensation
<S> <C> <C> <C> <C> <C>
($) ($) ($) ($)
Samuel M. Skipper, 1996 43,348 - - -
Chief Executive 1995 - - - -
Officer and President
</TABLE>
Messrs. Kenneth O'Neal, Don Larrick and Robert Patterson did not receive
compensation for services rendered to the corporation in their respective
capacities during the period March 1995 through August 1995.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Business Relationships.
There are no employees other than the executive officers disclosed above
who make, or are expected to make, significant contributions to the business of
the Registrant, the disclosure of which would be material.
Indebtedness of Management.
During the Company's last fiscal year, no executive officer, director, any
member of the immediate family or any of those persons, any corporation or
organization for which any of those persons serve as an executive officer or
partner or which they own directly or indirectly 10% or more of its equity
securities, or any trust or other estate in which any of the Company's executive
officers
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or directors have a substantial beneficial interest or for which they serve as a
trustee or in a similar capacity, has owed the Company at any time since the
beginning of its last fiscal more than $60,000.
Transactions with Management and Others
During the last fiscal year ended June 30, 1996, the Company has not been
involved in any related party transactions with any director or executive
officers of the Company, or entities controlled or affiliated with such
individuals.
Termination and Change In Control Arrangements.
The Company has no compensatory plan or arrangement with respect to its
Executive Officers that would result from the resignation, retirement or
termination of any Executive Officer's employment with the Company, from a
change in control of the Company, or from a change in an Executive Officer's
responsibilities following a change in control of the Company.
Identification of Certain Significant Employees.
There are no employees who have made or are expected to make, significant
contributions to the business of the Company, the disclosure of which would be
material.
PROPOSAL 2
RECAPITALIZATION
GENERAL
The Board of Directors of the Company has adopted resolutions approving and
recommending to the shareholders of the Company for their approval amendments to
the Articles of Incorporation of the Company (the "Articles"), as set forth in
Exhibit A hereto (the "Amendments"), which would (i) effect a one-for sixty
reverse split of all issued and outstanding shares of Common Stock; (ii) change
the par value of the Common Stock from $.00005 to $.003, and (iii) reduce the
number of authorized shares of Common Stock from Five Hundred Thirty Six Million
to Twenty Five Million (the "Authorized Share Reduction" and together with the
Reverse Split, the "Recapitalization".)
If the Recapitalization is approved by the requisite vote of the Company's
shareholders, it will become effective at the time (the "Effective Time") of the
filing of the Amendment with the Colorado Corporation Commission (the "CCC").
At and after the Effective Time, each share of the Common Stock, $.00005
par value issued and outstanding immediately prior to the Effective Time will be
reclassified and change into one- sixtieth (1/60) of one (1) share of the Common
Stock, $.003 par value (shares of Common Stock issued and outstanding prior to
the Effective Time being hereinafter called "Old Shares" and shares of Common
Stock issued and outstanding at and after the effective Time being hereinafter
called "New Shares"); provided, however, that, with respect to each holder of
Old Shares such reclassification will be effected on the basis of the total
number of Old Shares held by such shareholder and, if such reclassification
would result in any holder of Old Shares becoming the holder of a fractional
share interest in a New Share, the number of New shares into which such
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<PAGE>
holder's Old Shares are reclassified will be rounded upward to the nearest whole
share. For example, the holder of 60 Old Shares prior to the Effective Time
would be holder of one (1) New Share at the Effective Time. The holder of 61 Old
Shares prior to the Effective Time would be a holder of two (2) New Shares at
the Effective Time.
Each holder of certificates representing Old Shares will be entitled, upon
surrender of such certificates to the Company or any transfer or exchange agent
for cancellation, to receive a new certificate or certificates representing the
number of fully paid and nonassessable New Shares into which such Old Shares
have been reclassified and changed. Until so presented and surrendered,
certificates for Old Shares will be deemed for all purposes to evidence the
ownership of a number of New Shares into which such Old Shares have been
reclassified.
After the Effective Time, shareholders will be asked to surrender all
certificates representing Old Shares in accordance with the procedures set forth
in a letter of transmittal to be sent by the Company. Upon such surrender,
certificates representing the appropriate number of New Shares will not be
issued to a shareholder until such shareholder has surrendered his certificates
together with the properly completed and executed letter of transmittal to the
Company. Shareholders should not submit their certificates until requested to do
so.
In addition to the reclassification of the Common Stock resulting from the
Reverse Split, the Authorized Share Reduction will be effected at the Effective
Time. At and after the Effective Time, the number of authorized shares of Common
Stock will be reduced from Five Hundred Thirty-Six Million, $.00005 par value
per share to Twenty Five Million, $.003 par value per share.
Each shareholders' percentage ownership interest in the Company and
proportional voting power will remain substantially unchanged after the
Effective Time, except for minor differences resulting from adjustments for
fractional interests. The rights and privileges of the shareholders will be
substantially unaffected by the Recapitalization.
REASONS FOR THE RECAPITALIZATION
Reverse Split
The Board believes that the Reverse Split should increase the marketability
and liquidity of the Common Stock. The Common Stock is listed for trading on the
OTC Bulletin Board under the symbol "BNRSU". On the record date, the reported
closing date, the Common Stock was not reported on the OTC Bulletin Board. The
Board believes that a decrease in the number of shares of Common Stock
outstanding without any material alteration of the proportionate economic
interest in the Company represented by individual shareholders may increase the
trading price of such shares to a price more appropriate for an exchange-listed
security. However, no assurance can be given that the market price of the Common
Stock will rise in proportion to the reduction in the number of outstanding
shares resulting from the Reverse Split.
The Board further believes that the current per share price of the Common
Stock may limit the effective marketability of the Common Stock because of the
reluctance of many brokerage firms and institutional investors to deal in or
follow lower-priced stock. Certain policies and practices of the securities
industry may tend to discourage individual brokers within those firms from
dealing
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<PAGE>
in lower priced stock. Some of those policies and practices involve
time-consuming procedures that make the handing of lower-priced stock
economically unattractive. The brokerage commission on a sale of lower-priced
stock may also represent a higher percentage of the sale price than the
brokerage commission on a higher-priced issue. Any reduction in brokerage
commissions resulting from the Reverse Split may be offset, however, in whole or
in part, by increased brokerage commissions required to be paid by shareholders
selling "odd lots" created by the Reverse Split.
The text of Article SECOND of the Articles, as proposed to be amended to
effect the Reverse Split, is set forth in Part 1 of Exhibit A to this Proxy
Statement.
Authorized Share Reduction
As part of the Recapitalization, the Board of Directors has approved an
amendment to Article SECOND of the Articles to decrease the number of shares of
Common Stock which the Company is authorized to issue from Five Hundred
Thirty-Six Million to Twenty Five Million, so that the number of shares of
authorized Common Stock will be significantly reduced while providing for
additional flexibility to issue shares of Common Stock in the future. At the
Effective Time the number of issued and outstanding shares of Common Stock will
be reduced from approximately 81,185,744 to approximately 1,353,097. The Board
concluded, however, that the reduction in the number of authorized shares of
Common Stock resulting from the Authorized Share Reduction should not be
disproportionate to the reduction in the number of shares of Common Stock
outstanding as a result of the Reverse Split. The Board of Directors believes
that the increased ratio of authorized shares to issued and outstanding shares
resulting from the Recapitalization will provide additional flexibility for the
Company to issue additional shares of Common Stock, as the need may arise, in
the raising of additional capital for working capital, acquisitions and other
corporate purposes.
The Board of Directors considers it to be in the best interests of the
Company to have, after the Effective Time, shares of Common Stock of the Company
authorized and available for issuance without further action by the
shareholders, unless such shareholder action is required by applicable law or
the rules of any national securities exchange on which the Company's securities
may be listed.
If the Authorized Share Reduction is approved, shareholders will have no
preemptive rights with respect to the additional shares of Common Stock. Such
shares will be issued on such terms, at such time and on such conditions as the
Board of Directors may determine without further action by the shareholders. The
Board of Directors has neither entered into any negotiations, agreements, or
understandings, nor made any other determinations, with respect to the issuance
of any shares of such Common Stock.
The text of Article SECOND of the Articles, as proposed to be amended to
effect the Authorized Share Reduction, is set forth in Part II of Exhibit A to
this Proxy Statement.
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<PAGE>
NO DISSENTERS RIGHTS
Shareholders have no right under Colorado law or under the Articles or
Bylaws to dissent from the Recapitalization or to dissent from the rounding up
of any fractional interest in New Shares to the nearest whole New Share as a
result of the Reverse Split.
CHANGES AFFECTING CAPITAL
The Common Stock will have a $.003 par value following the
Recapitalization. After the Effective Time, the number of outstanding shares of
Common Stock will be reduced from approximately 81,185,744 (assuming that no
additional shares of Common Stock are issued after the record date and prior to
the Effective Time) and the number of authorized shares of Common Stock will be
reduced from Five Hundred Thirty Six Million to Twenty Five Million. .
The Common Stock is currently registered under Section 12(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, as a
result, the Company is subject to the periodic reporting and other requirements
of the Exchange Act. The Recapitalization will not affect the registration of
the Common Stock under the Exchange Act. After the Effective Time, trades of New
Shares will continue to be reported on the OTC Bulletin Board under the symbol
"BNRSU". The Company may elect to change the symbol.
FEDERAL INCOME TAX CONSEQUENCES OF THE RECAPITALIZATION
The following description of Federal income tax consequences is based upon
the Code, the applicable Treasury Regulations promulgated thereunder, judicial
authority and current administrative rulings and practices as in effect on the
date of this Proxy Statement. This discussion is for general information only
and does not discuss consequences which may apply to special classes of
taxpayers (e.g., non-resident aliens, broker-dealers or insurance companies).
Shareholders are urged to consult their own tax advisors to determine the
particular consequences to them of the Recapitalization.
The Company believes that because the Reverse Split is not part of a plan
to periodically increase a shareholder's proportionate interest in the assets or
earnings and profits of the Company, the Reverse Split will have the following
federal income tax effects:
1. A shareholder will not recognize gain or loss upon the reclassification of
the Common Stock. In the aggregate, a shareholders' basis in the New Shares
will equal such shareholder's basis in the Old Shares.
2. A shareholder's holding period for the New Shares will be the same as the
holding period of the Old Shares.
3. The Reverse Split will constitute a reorganization within the meaning of
Section 368(a)(1)(E) of the Code and the Company will not recognize any
gain or loss as a result of the Reverse Split.
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MISCELLANEOUS
The Board of Directors may abandon the proposed Recapitalization at any
time before or after the Meeting and prior to the Effective Time if for any
reason the Board of Directors deems it advisable to abandon the proposal. The
Board of Directors may consider abandoning the proposed Recapitalization if it
determines, in its sole discretion, that the Recapitalization will adversely
affect the ability of the Company to raise capital or the liquidity of the
Common Stock, among other things. In addition, the Board of Directors may make
any and all changes to the Amendments that it deems necessary in order to file
the Amendments with the CCC and give effect to the Recapitalization.
Vote Required
Approval of Proposal No. 1 requires the affirmative vote of the holders of
a majority of the shares of the Company's Common Stock present at the Annual
Meeting, in person or by proxy, voting as a single class.
THE BOARD OF DIRECTORS RECOMMENDS APPROVAL AND ADOPTION OF THE
RECAPITALIZATION PROPOSAL AND URGES EACH SHAREHOLDER TO VOTE "FOR" THE ADOPTION
OF THIS PROPOSAL.
RATIFICATION AND APPOINTMENT OF
INDEPENDENT AUDITORS
The Board of Directors has reappointed the firm of Smith & Company,
independent public accountants, as the Company's auditors for the fiscal year
ending June 30, 1997, subject to the approval of and ratification by the
shareholders. Smith & Company has served as the Company's auditors for a period
of three years, including the fiscal year most recently completed. The Company
does not expect any representatives of Smith & Company to attend the annual
meeting.
The Board of Directors recommends a vote "For" the approval and
ratification of the reappointment of Smith & Company.
Vote Required
Approval of the ratification of the appointment of Smith & Company as the
independent auditors of the Company requires the affirmative vote of the holders
of a majority of the shares of the Company's Common Stock present at the
Meeting, in person or by proxy, voting as a single class.
SECTION 16 COMPLIANCE
The Company does not know of any director or executive officer who failed
to file on a timely basis, any reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended.
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SHAREHOLDER PROPOSALS FOR ANNUAL MEETING
From time to time the shareholders of the Company submit proposals which
they believe should be voted upon by the shareholders. The Securities and
Exchange Commission has adopted regulations which govern the inclusion of such
proposals in the Company's annual proxy materials. All such proposals must be
submitted to the Corporate Secretary not later than July 15, 1997, in order to
be considered for inclusion in the proxy materials for the Company's Annual
Meeting of Shareholders to be held in December 1997.
OTHER BUSINESS
The Company does not intend to present any other business for action at the
Annual Meeting and does not know of any other business intended to be presented
by others. Should any other matters come before the meeting, the Proxies will be
voted by the persons authorized therein, or their substitutes, in accordance
with their best judgment on such matters.
ANNUAL REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1996, as filed with the Securities and Exchange Commission, is being mailed
concurrently with the mailing of this Proxy Statement to shareholders of record
on December 24, 1996. The cost of furnishing such Annual Report on Form 10-K and
of making this proxy solicitation will be borne by the Company. Copies of
exhibits to the Annual Report on Form 10-K are available, but a reasonable
handling fee will be charged to the requesting shareholder. Each written request
must set forth a good faith representation that, as of the record date, the
person making the request is a beneficial owner of the Company's Common Stock
and entitled to vote at the Annual Meeting. Shareholders should direct their
written request to the Company, Attention: Secretary, 2540 South Shore Drive,
Suite 210, League City, Texas 77573.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Alan W. Harvey, President
Dated: December 30, 1996 Alan W. Harvey, President
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EXHIBIT A
BASIC NATURAL RESOURCES, INC.
PART I
AMENDMENT TO ARTICLE SECOND OF THE RESTATED AND AMENDED
ARTICLES OF INCORPORATION TO ADD THE FOLLOWING PARAGRAPHS:
(1) Each share of the Corporation's Common Stock, $.00005 par value issued and
outstanding immediately prior to the time of effectiveness of this
Amendment to the Amended and Restated Articles of Incorporation of the
Corporation (the "Effective Time") is hereby reclassified and shall be
split and converted into one (1) share of the Corporation's Common Stock,
$.003 par value (shares of Common Stock issued and outstanding immediately
prior to the Effective Time being hereinafter called "Old Shares" and
shares of Common Stock issued and outstanding at and after the Effective
Time being hereinafter called "New Shares"); provided, however, that with
respect to each holder of Old Shares such reclassification, split and
conversion shall be effected on the basis of the total number of Old Shares
held by such holder, and if such reclassification, split and conversion
would result in any holder of Old Shares becoming the holder of a
fractional share interest in a New Share, then the number of New Shares
into which such holder's Old Shares are split and converted shall be
rounded upward to the nearest whole share.
(2) Each holder of certificates representing Old Shares shall be entitled, upon
surrender of such certificates to the Corporation or any transfer or
exchange agent for cancellation, to receive a new certificate or
certificates representing the number of fully paid and nonassessable New
Shares into which such Old Shares have been reclassified, split and
converted. Until so presented and surrendered, certificates for Old Shares
shall, except as provided in the following sentence, be deemed for all
purposes to evidence the ownership of the number of New Shares into which
such Old Shares have been reclassified, split and converted pursuant to
paragraph 1 hereof. The holder of any certificate for Old Shares shall not
be paid any distributions payable on the Common Stock to which such holder
shall otherwise be entitled until such holder surrenders such certificate
in exchange for a certificate or certificates representing New Shares.
AMENDMENT TO FIRST PARAGRAPH OF ARTICLE SECOND OF THE RESTATED AND AMENDED
ARTICLES OF INCORPORATION TO READ AS FOLLOWS:
The total number of shares of Capital Stock of all classes which the
Corporation shall have authority to issue is Thirty Five Million (35,000,000)
shares, divided into Twenty Five Million (25,000,000) shares of Common Stock,
$.003 par value, and Ten Million (10,000,000) shares of Preferred Stock, $1.00
par value. No share shall be issued until it has been paid for, and all shares,
when and as issued, shall thereafter be nonassessable. Each outstanding share of
Common Stock shall be entitled to one vote on each matter submitted to a vote of
shareholders.
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BASIC NATURAL RESOURCES, INC.
2540 South Shore Boulevard
Suite 210
League City, Texas 77573
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Alan W. Harvey and Christine N. Cronau as
Proxies, each with power to appoint his substitute, to represent and to vote on
behalf of the undersigned all shares of Common Stock which the undersigned is
entitled to vote at the Annual Meeting of Shareholders scheduled to be held at
the principal executive offices of Basic Natural Resources, Inc., League City,
Texas, on January 10, 1997, and to any and all adjournments thereof, will all
powers the undersigned would possess if personally present and particularly with
respect to Proposals 1,2 and 3, in their discretion, upon such other business as
may properly come before the meeting. This proxy, when properly executed, will
be voted in the manner directed herein by the undersigned shareholder. If no
direction is made, this proxy will be voted "FOR" Proposals 1, 2 and 3, and in
accordance with the best judgment of the proxies on any other matters which may
properly come before the meeting.
1. ELECTION OF DIRECTORS
NOMINEES: Alan W. Harvey, Edward S. Fleming and Mark F. Walz (INSTRUCTION:
To withhold authority to vote for any individual nominee, write that
nominee's name in the space below.)
[ ] FOR all nominees listed, except [ ] WITHHOLD AUTHORITY
as marked to the contrary to vote for all nominees listed
2. RECAPITALIZATION PROPOSAL
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVE AND RATIFY THE SELECTION OF SMITH & COMPANY,
AS THE CORPORATION'S INDEPENDENT AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT OF THE MEETING.
DATED:
(Signature)
(Signature if held jointly)
Please sign exactly as name appears in type. When the shares are
held for joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sing in partnership name by authorized
person. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
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