<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
GARNET RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ $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
[GARNET RESOURCES LOGO]
GARNET RESOURCES CORPORATION
11011 RICHMOND AVENUE, SUITE 650
HOUSTON, TEXAS 77042-6720
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1996
April 19, 1996
To the Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Garnet
Resources Corporation ("Garnet") will be held at the offices of Noel Group,
Inc., 667 Madison Avenue, 25th Floor, New York, New York 10021 on May 22, 1996
at 10:00 a.m. (local time) for the following purposes:
1. To elect six directors to hold office for the term of one year and
until their successors are elected and qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed April 4, 1996 as the record date for the
determination of the shareholders entitled to notice of and to vote at such
meeting or any adjournment thereof, and only shareholders of record at the close
of business on that date are entitled to notice of and to vote at such meeting.
A copy of Garnet's 1995 Annual Report is enclosed herewith.
You are cordially invited to attend the meeting. Whether or not you plan to
attend the meeting, it is important that your shares be represented.
Accordingly, please complete, date and sign the enclosed proxy and return it
promptly.
By Order of the Board of Directors,
W. KIRK BOSCHE
Secretary
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
TO ENSURE A QUORUM, PLEASE COMPLETE AND RETURN THE PROXY IN THE ENCLOSED
ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU ATTEND
THE MEETING, YOUR PROXY WILL BE RETURNED TO YOU UPON REQUEST TO THE SECRETARY OF
THE MEETING.
- --------------------------------------------------------------------------------
<PAGE> 3
[GARNET RESOURCES LOGO]
GARNET RESOURCES CORPORATION
11011 RICHMOND AVENUE, SUITE 650
HOUSTON, TEXAS 77042-6720
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 22, 1996
---------------------
This Proxy Statement and accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors of Garnet
Resources Corporation, a Delaware corporation ("Garnet"), for use at the Annual
Meeting of Shareholders to be held on May 22, 1996 at 10:00 a.m. (local time) at
the offices of Noel Group, Inc., 667 Madison Avenue, 25th Floor, New York, New
York 10021, or any adjournment or postponement thereof (the "Meeting").
A proxy in the accompanying form, which is properly executed, duly returned
to the Board of Directors and not revoked, will be voted in accordance with the
instructions contained in the proxy. If no instructions are given with respect
to any matter specified in the Notice of Annual Meeting to be acted upon at the
Meeting, the proxy will vote the shares represented thereby in favor of Item 1
as set forth in the Notice of Annual Meeting and in accordance with his judgment
on any matters which may properly come before the Meeting. Each shareholder who
has executed a proxy and returned it to the Board of Directors may revoke the
proxy by notice in writing to the Secretary of Garnet, or by attending the
Meeting in person and requesting the return of the proxy, in either case at any
time prior to the voting of the proxy. Presence at the Meeting does not by
itself revoke the proxy. The cost of the solicitation of proxies will be paid by
Garnet. In addition to the solicitation of proxies by the use of the mails,
management and regularly engaged employees of Garnet may, without additional
compensation therefor, solicit proxies on behalf of Garnet by personal
interviews, telephone, telegraph or other means, as appropriate.
Garnet will, upon request, reimburse brokers and others who are only record
holders of Garnet's Common Stock, par value $.01 per share ("Common Stock"), for
their reasonable expenses in forwarding proxy material to, and obtaining voting
instructions from, the beneficial owners of such stock.
The Board of Directors has fixed the close of business on April 4, 1996 as
the record date for determining the shareholders entitled to notice of and to
vote at the Meeting (the "Record Date"). As of the Record Date, there were
11,492,162 shares of Common Stock issued and outstanding and entitled to vote.
Each share of Common Stock entitles the holder thereof to one vote. A
majority of the shares of Common Stock issued and outstanding and entitled to
vote constitutes a quorum. Abstentions and broker's non-votes are considered
present for purposes of determining whether the quorum requirement is met. A
broker's non-vote occurs when a nominee holds shares for a beneficial owner but
cannot vote on a proposal because the nominee does not have discretionary voting
power and has not received instructions from the beneficial owner. As directors
are elected by a plurality vote, the six nominees receiving the highest vote
totals will be elected and the outcome of the vote for directors will not be
affected by abstentions or broker's non-votes.
This Proxy Statement and the proxy in the accompanying form are being sent
on or about April 19, 1996 to shareholders of record as of the close of business
on the Record Date.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of April 1, 1996 as
to each person who, to the knowledge of Garnet, was the beneficial owner of more
than five percent of the outstanding Common Stock of Garnet.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP(1) CLASS(2)
------------------------------------------------------ ----------------------- ----------
<S> <C> <C>
Rockefeller & Co., Inc................................ 1,514,375(3) 13.1%
30 Rockefeller Plaza
New York, New York 10112
Wellington Management Company......................... 1,070,300(4) 9.3%
75 State Street
Boston, Massachusetts 02109
Pecks Management Partners Ltd......................... 1,090,910(5) 8.7%
One Rockefeller Plaza
New York, New York 10020
Rockefeller University................................ 881,639 7.7%
1230 York Avenue
New York, New York 10021
R. B. Haave Associates, Inc........................... 616,900(6) 5.4%
36 Grove Street
New Canaan, Connecticut 06840
State Street Research & Management Company............ 610,000(7) 5.3%
One Financial Center, 30th Floor
Boston, Massachusetts 02111-2690
</TABLE>
- ---------------
(1) Except as set forth below, to the best knowledge of Garnet, each beneficial
owner has sole voting power and sole investment power.
(2) Based on 11,492,162 shares of Garnet's Common Stock issued and outstanding
on April 1, 1996. Treated as outstanding for the purpose of computing the
percentage ownership of each beneficial owner or group are shares
("Convertible Debenture Shares") issuable to such beneficial owner or group
upon conversion of Garnet's 9 1/2% convertible subordinated debentures
("Debentures") and shares issuable upon exercise of vested stock options
issued pursuant to Garnet's stock option plans.
(3) According to information supplied to Garnet by Rockefeller & Co., Inc., by
virtue of serving as a registered investment advisor, Rockefeller & Co.,
Inc. has sole voting and dispositive power with respect to 1,439,375
shares. The indicated number of shares also includes 75,000 shares issuable
to Mr. Wendell W. Robinson upon exercise of vested stock options issued
pursuant to Garnet's stock option plans. Pursuant to Mr. Robinson's
employment with Rockefeller & Co., Inc., all benefits of such options
accrue to Rockefeller & Co., Inc., which may be deemed the beneficial owner
of such shares. See footnote 8 on page 3.
(4) According to a Schedule 13G dated January 30, 1996, the indicated number of
shares are owned by various investment advisory clients of Wellington
Management Company, which has shared voting power with respect to 1,003,300
shares and shared dispositive power with respect to 1,070,300 shares.
(5) According to a Schedule 13G dated February 9, 1995 filed by Pecks Management
Partners Ltd. ("Pecks"), as a registered investment advisor, the indicated
number of shares consists of Convertible Debenture Shares issuable to three
investment advisory clients of Pecks upon conversion of Debentures owned by
such clients. One such client, Delaware State Employees' Retirement Fund,
would acquire more than 5% of Garnet's Common Stock, if its Debenture were
converted. Pecks has sole investment and dispositive power with respect to
the Convertible Debentures Shares issuable to its clients and the
discretion to convert the Debentures owned by them.
2
<PAGE> 5
(6) According to a Schedule 13G dated January 17, 1996, the indicated number of
shares are held by R. B. Haave Associates, Inc., an investment adviser
registered under the Investment Advisers Act of 1940, which has sole voting
and dispositive powers with respect to such shares.
(7) According to Schedules 13G dated February 13, 1996 filed by State Street
Research & Management Company ("State Street") and Metropolitan Life
Insurance Company, the parent holding company, the indicated number of
shares is owned by various clients of State Street and State Street
disclaims any beneficial interest therein. State Street is an investment
advisor registered under the Investment Advisers Act of 1940 and, pursuant
to the Schedules 13G, has sole voting power with respect to such shares.
The following table sets forth certain information as of April 1, 1996
concerning the shares of Common Stock of Garnet owned beneficially by each
director, by each of the Named Executive Officers in the Summary Compensation
Table, and by directors and officers of Garnet as a group:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP(1) CLASS(2)
------------------------------------------------------- ----------------------- ----------
<S> <C> <C>
W. Kirk Bosche......................................... 80,290(3) *
Robert J. Cresci....................................... 45,000(4) *
Douglas W. Fry......................................... 75,080(5) *
Montague H. Hackett, Jr. .............................. 212,230(6) 1.8%
Alastair Manson........................................ 110,000(3) *
George M. Nevers....................................... 214,600(7) 1.8%
Wendell W. Robinson.................................... 79,200(8) *
John V. Tunney......................................... 89,000(9) *
Albert E. Whitehead.................................... --(10) *
Current directors and officers of Garnet as a group
(7 persons).......................................... 690,800(11) 5.7%
</TABLE>
- ---------------
* Less than 1%
(1) Except as noted below, each beneficial owner has sole voting power and sole
investment power.
(2) Based on 11,492,162 shares of Garnet's Common Stock issued and outstanding
on April 1, 1996. Treated as outstanding for the purpose of computing the
percentage ownership of each director, each executive officer and all
directors and executive officers as a group are shares issuable upon
exercise of vested stock options issued pursuant to Garnet's stock option
plans.
(3) Consists solely of shares issuable upon exercise of vested stock options
issued pursuant to Garnet's stock option plans.
(4) Consists solely of shares issuable upon exercise of vested stock options
issued pursuant to Garnet's stock option plans. Does not include shares
owned by clients of Pecks, a New York corporation, of which Mr. Cresci is a
managing director. For information with respect to such shares, see
footnote 5 on page 2.
(5) Consists of 13,868 shares held directly by Mr. Fry and 61,212 shares
issuable upon exercise of vested stock options issued pursuant to Garnet's
stock option plans.
(6) Consists of 75,000 shares held directly by Mr. Hackett, 10,000 shares held
by a trust for the benefit of Mr. Hackett's minor child as to which Mr.
Hackett disclaims beneficial ownership, and 127,230 shares issuable upon
exercise of vested stock options issued pursuant to Garnet's stock option
plans.
(7) Consists of 13,500 shares held directly by Mr. Nevers, 2,100 shares held by
Mr. Nevers' wife and 200,000 shares issuable upon exercise of vested stock
options issued pursuant to Garnet's stock option plans. Mr. Nevers
disclaims beneficial ownership of the shares held by his wife. Mr. Nevers
resigned as Chief Executive Officer and as a director of Garnet on June 21,
1995.
(8) Consists of 3,100 shares held directly by Mr. Robinson, 1,100 shares held
by Mr. Robinson's wife and minor children, as to which Mr. Robinson
disclaims beneficial ownership, and 75,000 shares issuable upon exercise of
vested stock options issued pursuant to Garnet's stock option plans.
Pursuant to Mr. Robinson's employment with Rockefeller & Co., Inc., all
benefits of such options accrue to
3
<PAGE> 6
Rockefeller & Co., Inc., which may be deemed the beneficial owner of such
shares. See footnote 3 on page 2.
(9) Consists of 4,000 shares held by a trust for the benefit of Mr. Tunney's
family, of which Mr. Tunney is a co-trustee, and 85,000 shares issuable
upon exercise of vested stock options issued pursuant to Garnet's stock
option plans.
(10) Mr. Whitehead resigned as a director and chief executive officer of Garnet
on January 19, 1995.
(11) Includes 107,068 shares beneficially owned and 583,732 shares issuable upon
exercise of vested stock options issued pursuant to Garnet's stock option
plans.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Board of Directors has nominated the six individuals whose names are
set forth below for election to the Board of Directors, each to hold office
until the next Annual Meeting of Shareholders and until their successors are
duly elected and qualified. Unless otherwise specified, the enclosed proxy will
be voted in favor of the persons named below, all of whom are now directors of
Garnet. If events not now known or anticipated make any of the nominees unable
to serve, it is intended that votes will be cast pursuant to the accompanying
proxy for such substitute nominees as the Board of Directors may designate
unless the Board of Directors reduces the number of directors. The directors are
to be elected by vote of the holders of a plurality of shares of Common Stock
entitled to vote and present in person or represented by proxy at the Meeting.
The information set forth below, furnished to the Board of Directors by the
respective individuals, shows as to each nominee and each director of Garnet his
name, age and principal position with Garnet.
<TABLE>
<CAPTION>
NAME AGE POSITION
-------------------------------------------- --- ----------------------------------
<S> <C> <C>
Montague H. Hackett, Jr..................... 63 Chairman of the Board, and a
Director
Douglas W. Fry.............................. 53 President, Chief Executive Officer
and a Director
Wendell W. Robinson......................... 55 Chairman of the Executive
Committee and a Director
Robert J. Cresci............................ 52 Director
Alastair Manson............................. 66 Director
John V. Tunney.............................. 61 Director
</TABLE>
The following sets forth the periods during which directors have served as
such and a brief account of the business experience of such persons during the
past five years.
Montague H. Hackett, Jr. Mr. Hackett has been employed as Chairman of the
Board of Garnet since January 1995 and has served as a director of Garnet since
April 1987. Since January 1996, Mr. Hackett has been employed by Victory Capital
LLC, a privately held limited liability company ("Victory") that conducts its
operations through small and medium-sized companies in which Victory holds
controlling or other significant equity interests. From October 1989 through
June 1994, Mr. Hackett served as President and as a director of Wood River
Capital Corporation, a Small Business Investment Company. From October 1991
through December 1995, Mr. Hackett was employed by Noel Group, Inc., ("Noel"), a
publicly-traded company which also conducts its principal operations through
small and medium-sized companies. Mr. Hackett is a director and Deputy Chairman
of International Gold Resources Corporation.
Douglas W. Fry. Mr. Fry has been employed as President of Garnet and has
served as a director of Garnet since September 1995, and has been Chief
Executive Officer of Garnet since February 1996. Since 1980 he has also been
President of Argosy Energy Incorporated, a wholly owned subsidiary of Garnet, or
of the subsidiary's predecessor.
4
<PAGE> 7
Wendell W. Robinson. Mr. Robinson has served as a director of Garnet since
December 1991. Since January 1990, Mr. Robinson has been the Manager of Private
Investments for Rockefeller & Co., Inc., a registered investment adviser. Mr.
Robinson is also a director of Noel, Gwalia Consolidated, Ltd., an Australian
natural resource company, Consolidated Nevada Goldfields Corp., a western North
America gold mining company, and several private companies.
Robert J. Cresci. Mr. Cresci has served as a director of Garnet since
December 1993. Mr. Cresci has been a Managing Director of Pecks Management
Partners Ltd., an investment management firm, since September 1990. Mr. Cresci
currently serves on the boards of Bridgeport Machines, Inc., Serv-Tech, Inc.,
EIS International, Inc., Sepracor, Inc., Vestro Natural Foods, Inc., Olympic
Financial, Ltd., GeoWaste, Inc., Hitox, Inc., Natures Elements, Inc., HarCor
Energy, Inc., Meris Laboratories, Inc., and several private companies.
Alastair Manson. Mr. Manson has served as a director of Garnet since July
1987. From 1978 through 1985, Mr. Manson was the President of BP North America,
Inc., the company responsible for the activities of British Petroleum in the
United States. Through 1985, and for several years prior thereto, Mr. Manson
served as a member of the board of directors of Standard Oil and BP Canada.
During 1986, Mr. Manson participated in the organization of Keep Able, Ltd.,
which provides services and equipment to the elderly and disabled. Mr. Manson
served as Chairman of the Board of Directors of Keep Able, Ltd. from December
1986 through July 1988. Mr. Manson currently serves as a member of the Board of
Governors of the Royal Brompton National Heart and Lung Hospital of London,
England and as chairman of its Finance and Investment Committees, and as a
director of Keep Able, Ltd.
John V. Tunney. Mr. Tunney has served as a director of Garnet since April
1987. Mr. Tunney has been Chairman of the Board of Logan Manufacturing Co., the
manufacturer of wide track, light weight snow grooming and utility equipment,
since February 1993, and Chairman of the Board of Cloverleaf Group, Inc., a real
estate development company, since 1981. From 1977 to 1987, Mr. Tunney was a
senior partner of the law firm of Manatt, Phelps, Rothenberg, Tunney & Phillips.
From 1971 to 1977, Mr. Tunney served as United States Senator from the State of
California and as a Member of the United States House of Representatives from
1965 to 1971. Mr. Tunney is also a director of The Prospect Group, Inc., The
Forschner Group, Inc., Illinois Central Corporation and Foamex International
Inc.
Under the terms of its 9 1/2% Convertible Subordinated Debentures, Garnet
includes a candidate selected by the purchasers of the Debentures in
management's slate of nominees for election as directors and solicits proxies
for such candidate if the purchasers continue to own at least 30% in aggregate
principal amount of the Debentures originally issued. Mr. Cresci is the
candidate selected by the purchasers of the Debentures.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of Garnet held seven meetings during 1995, and also
took action once by unanimous written consent. All directors attended at least
75% of the total of the meetings of the Board of Directors and the committees of
which they were members.
The Executive Committee, the Audit Committee and the Stock Option and
Compensation Committee are the only standing committees of the Board of
Directors. Garnet does not have a formal nominating committee; the Board of
Directors or the Executive Committee performs this function.
The Executive Committee, which is comprised of Mr. Robinson, its Chairman,
and Mr. Hackett, has all the powers of the Board of Directors in the management
of the business affairs of Garnet, except as such powers are limited by the
Delaware General Corporation Law. During 1995, the Executive Committee held
three meetings and also took action once by unanimous written consent.
The Audit Committee, which is comprised of Mr. Manson, its Chairman, and
Mr. Cresci, consults with the independent accountants of Garnet and such other
persons as the members deem appropriate, reviews the preparations for and scope
of the audit of Garnet's annual financial statements, makes recommendations as
to the engagement and fees of the independent accountants, and performs such
other duties relating to the
5
<PAGE> 8
financial statements of Garnet as the Board of Directors may assign from time to
time. The Audit Committee met two times during 1995.
The Stock Option and Compensation Committee, which is currently comprised
of Messrs. Cresci, Manson, Robinson and Tunney, has all of the powers of the
Board of Directors in respect of any matters relating to the administration of
Garnet's stock option plans and the compensation of officers, employees and
other persons performing substantial services for Garnet, including the
authority to issue stock or other securities of Garnet. The Stock Option and
Compensation Committee met once in 1995, and also took action once by unanimous
written consent.
DIRECTORS' FEES
Pursuant to the 1990 Directors' Stock Option Plan, each Garnet director who
was not a full time employee of Garnet or its subsidiaries received, in April
1995, an option to purchase 25,000 shares of Garnet Common Stock at an exercise
price of $2.87 per share, which represented the average of the fair market value
of a share of Garnet Common Stock on the ten business days preceding the date of
grant. Directors are also reimbursed for expenses incurred in connection with
attending meetings of the Board.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
earned in each of the last three fiscal years by the current Chairman of the
Board and the current Chief Executive Officer, by certain additional executive
officers, and by two former Chief Executive Officers of Garnet (collectively,
the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION
------------------------------- AWARDS
OTHER ---------------------- PAYOUTS
ANNUAL RESTRICTED ------- ALL OTHER
COMPEN- STOCK LTIP COMPEN-
NAME AND PRINCIPAL FISCAL SALARY BONUS SATION AWARD(S) OPTIONS/ PAYOUTS SATION
POSITION YEAR ($) ($) ($) ($) SARS(#) ($) ($)
- -------------------------------- ------ -------- -------- ------- ---------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas W. Fry.................. 1995 $152,500 none none none 30,000 none none
President and Chief 1994 $145,200 $ 61,000 none none none none none
Executive Officer(1) 1993 $123,000 $ 61,000 none none 37,500 none none
Montague H. Hackett, Jr......... 1995 $127,083 none none none 100,000 none $ 4,944
Chairman of the Board(2)
W. Kirk Bosche.................. 1995 $160,750 none none none 35,000 none $ 1,280
Vice President 1994 $163,300 $ 67,000 none none none none $ 1,060
and Treasurer(3) 1993 $148,500 $ 67,000 none none 37,500 none none
Albert E. Whitehead............. 1995 $ 42,350 none none none none none $ 75,000
Chairman of the Board and 1994 $242,000 $100,000 none none none none $ 67,794
Chief Executive Officer 1993 $220,000 $100,000 none none 56,250 none $ 65,166
through January 19, 1995(4)
George M. Nevers................ 1995 $101,650 none none none 250,000 none $266,694
President and Chief Executive 1994 $193,600 $ 80,000 none none none none $ 5,240
Officer from January 19, 1995 1993 $176,000 $ 80,000 none none 56,250 none none
through June 21, 1995(5)
</TABLE>
6
<PAGE> 9
- ---------------
(1) Mr. Fry was elected President of Garnet in September 1995 and Chief
Executive Officer of Garnet in February 1996. Prior to September 1995, he
served as President of Argosy Energy Incorporated ("Argosy") a wholly-owned
subsidiary of Garnet. The amounts reported for 1995 reflect his
compensation for the full fiscal years, including that earned as President
of Argosy. The amounts reported for 1994 and 1993 reflected his
compensation for the respective fiscal year as President of Argosy.
(2) Mr. Hackett became Chairman of the Board of Garnet in January 1995. The
amounts reported for all other compensation represent the premium paid on a
term life insurance policy for his benefit.
(3) The amounts reported for all other compensation for Mr. Bosche represent the
premium paid on a term life insurance policy for his benefit.
(4) Mr. Whitehead resigned as Chairman of the Board and Chief Executive Officer
of Garnet in January 1995, but continued as an employee of the Company
through February 1995. The amounts reported for 1995 salary reflect his
compensation through February 1995. The amounts reported for all other
compensation include (a) a payment of $75,000 in 1995 pursuant to an
agreement entered into in connection with his resignation (see "Certain
Relationships and Related Transactions -- Transactions with Management and
Others"), (b) $6,640 in 1994 representing the premium paid on a term life
insurance policy for his benefit and (c) principal and interest which was
forgiven by Garnet pursuant to the terms of a loan made by Garnet to Mr.
Whitehead in 1987, consisting of $57,143 in principal and $4,011 in
interest in 1994, and $57,143 in principal and $8,023 in interest in 1993.
(5) Mr. Nevers resigned as President and Chief Executive officer of Garnet in
June 1995. The amounts reported for 1995 salary reflect his compensation
through that date. The amounts reported for all other compensation include
(a) $266,694 paid or accrued in 1995 pursuant to an agreement entered into
in connection with his resignation (see "Certain Relationships and Related
Transactions -- Transactions with Management and Others") and (b) $5,240 in
1994 representing the premium paid on a term life insurance policy for his
benefit. The number of stock options granted to Mr. Nevers in 1995 includes
an option for 200,000 shares granted in connection with his resignation and
in exchange, among other things, for certain outstanding options held by
him.
OPTION GRANTS DURING 1995
The following table provides information related to options granted to the
Named Executive Officers during 1995. No stock appreciation rights have been
issued by Garnet.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
OPTIONS EXERCISE PRICE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM(2)
GRANTED EMPLOYEES IN PRICE -------------------
NAME (#)(1) FISCAL YEAR ($/SH) EXPIRATION DATE 5% 10%
- ------------------------- ------- ------------ -------- --------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Fry........... 30,000 10.2% $ 2.69 March 26, 2006 $ 51,244 $130,214
Montague H. Hackett,
Jr..................... 100,000 34.1% $ 2.69 March 26, 2006 170,814 434,048
W. Kirk Bosche........... 35,000 11.9% $ 2.69 March 26, 2006 59,785 151,917
George M. Nevers(3)...... 50,000 17.1% $ 2.69 March 26, 2006 85,407 217,024
200,000 -- $ 2.50 June 21, 1998 51,250 105,000
</TABLE>
7
<PAGE> 10
- ---------------
(1) Each of these options was granted pursuant to the 1990 Stock Option Plan.
The exercise price of the options was equal to the fair market value of a
share of Garnet's Common Stock on the date of grant and may be paid in cash
or by delivery of shares of Common Stock which have a fair market value on
the date of exercise equal to the exercise price. The right to exercise each
option vests over a four-year period but will accelerate upon the occurrence
of certain events, including a change of control. The options are
exercisable for a period of 10 years and 30 days after the date of grant
unless the optionee resigns, retires or dies, in which case the right to
exercise the option is limited.
(2) The values set forth in this column represent the gain which would be
realized by each Named Executive Officer assuming (i) the options granted in
1995 are exercised on their respective expiration dates, and (ii) the value
of a share of Garnet Common Stock has increased annually by a rate of 5% and
10%, respectively, during the term of the option. These growth rates are
prescribed by the rules of the Securities and Exchange Commission and are
not intended to forecast possible future appreciation for Garnet Common
Stock.
(3) Includes options for 200,000 shares of Garnet's Common Stock granted to Mr.
Nevers in connection with his resignation as President, Chief Executive
Officer and a director. See "Certain Relationships and Related
Transactions -- Transactions with Management and Others." As a result of his
resignation, the option for 50,000 shares granted in 1995 expired in
accordance with its terms in September 1995.
OPTION EXERCISES DURING 1995 AND YEAR END OPTION VALUES
The following table provides information related to options exercised by
the Named Executive Officers during 1995 and the number and value of options
held at year-end. No stock appreciation rights have been issued by Garnet.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE -------------------------- --------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Douglas W. Fry........... none none 122,783 40,071 none none
Montague H. Hackett,
Jr..................... none none 105,000 80,000 none none
W. Kirk Bosche........... none none 130,203 44,071 none none
Albert E. Whitehead...... none none none none none none
George M. Nevers......... none none 200,000 none none none
</TABLE>
- ---------------
(1) Because the exercise prices of all options exceed $1.56, the market value of
a share of Garnet Common Stock at December 31, 1995, the value of
unexercised options was zero.
TEN-YEAR OPTION/SAR REPRICINGS
Report of the Board of Directors on Repricing
In connection with Mr. Nevers' resignation as Chief Executive Officer and
director, Garnet entered into an agreement which provided, among other things,
for the surrender of certain stock options by Mr. Nevers in consideration for
the issuance to him of a three-year option entitling him to purchase 200,000
shares at an exercise price of $2.50 per share, which represented the fair
market value of a share of Garnet Common Stock on the date of grant. The Board
of Directors believes that the option exchange was beneficial to Garnet in that
it reduced the cash component of Mr. Nevers' agreement while giving him the
opportunity to participate in any stock appreciation over a three-year period
which may result, in part, from his prior service to Garnet.
8
<PAGE> 11
Submitted by the following members of the Board of Directors of Garnet who
served on the Board at the time of the repricing:
<TABLE>
<S> <C> <C>
Robert J. Cresci Montague H. Hackett, Jr. Alastair Manson
Wendell W. Robinson Arthur L. Swanson John V. Tunney
</TABLE>
The following table sets forth certain information concerning repricings of
stock options held by any executive officers of Garnet during the last ten
completed fiscal years.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE ORIGINAL
SECURITIES OF STOCK AT EXERCISE PRICE OPTION TERM
UNDERLYING TIME OF AT TIME OF REMAINING AT
OPTIONS/SARS REPRICING OR REPRICING OR NEW DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) PRICE($) AMENDMENT
- ---------------------------- ------- ------------ ------------ -------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
George M. Nevers, 6/28/95 54,441 $ 2.50 $ 11.750 $ 2.50 90 days
Chief Executive Officer 6/28/95 50,000 $ 2.50 $ 6.625 $ 2.50 90 days
from January 19, 1995 6/28/95 22,500 $ 2.50 $ 5.750 $ 2.50 90 days
through June 21, 1995 6/28/95 3,211 $ 2.50 $ 4.000 $ 2.50 90 days
</TABLE>
REPORT ON EXECUTIVE COMPENSATION
In 1995 decisions regarding the compensation of executive officers and the
agreement with Mr. Whitehead, a former Chief Executive Officer and director,
were made by the Stock Option and Compensation Committee of the Board of
Directors (the "Committee"). In June 1995, the Board of Directors approved the
terms of the agreement executed with Mr. Nevers in connection with his
resignation as Chief Executive Officer and a director of Garnet. Pursuant to
rules adopted by the Securities and Exchange Commission, the following report is
submitted by members of the Committee and, with respect to the agreement with
Mr. Nevers, by the directors constituting the Board in June 1995.
Compensation Policies Regarding Executive Officers. The 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 Garnet's business
objectives, and to align management's and shareholders' interests over the long
term. Garnet's business strategy is to acquire, explore and develop potentially
significant oil and gas properties located outside of the United States. Because
of the inherent risks in such business strategy and in the exploration for oil
and gas in general, the Committee believes it is inappropriate to rely upon
mechanistic performance criteria such as profitability, revenue growth, return
on equity, market share, or operating budget performance to determine the
appropriate compensation for its executive officers, including its Chief
Executive Officer. In determining such compensation, the Committee relies
heavily on the success of management in fulfilling Garnet's business strategy
and the individual contributions which each executive has made and can be
expected to make in the future. In reviewing compensation for 1995, the
Committee reviewed a number of events and developments in Garnet's business in
1995 including Garnet's activities in Colombia and in Papua New Guinea, and its
successful completion of the second stage of its $9.2 million loan commitment
from Overseas Private Investment Corporation. The Committee also considered, on
an informal basis, the prevailing levels of compensation paid by companies with
which Garnet may be deemed to compete, the small, streamlined nature of Garnet's
management team, the fact that Garnet has no pension, retirement or
profit-sharing plans, information relating to standard cost-of-living
adjustments, and the bonuses and salary increases previously approved.
In December 1994 the Committee approved salary increases for the executive
officers of Garnet based on increases in cost-of-living indices. In February
1995 the Committee approved the issuance of additional options to the officers
and employees of Garnet, including options which entitled Messrs. Hackett, Fry
and Bosche to purchase 100,000, 30,000 and 35,000 shares, respectively, at an
exercise price of $2.6875 per share. As a result of the implementation of a cost
containment program in June 1995, no cash bonuses were awarded for 1995, no
salary increase was granted to Mr. Fry upon his promotion to President and
subsequently to Chief Executive Officer of Garnet, and two executive officers
agreed to accept reduced salaries. In view of the cost
9
<PAGE> 12
containment program, the Committee has sought to balance the objectives of
providing competitive compensation to Garnet's executives with the goal of
conserving its cash reserves by emphasizing stock-based compensation
arrangements. In March 1996, as an incentive to executive officers and
employees, the Committee offered to exchange all outstanding stock options with
an exercise price in excess of $2.6875 per share (most of which were fully
vested) held by executive officers and employees for new options, with a new
vesting schedule and an exercise price of $1.1875 per share. An aggregate of
336,102 outstanding options were exchanged, including 112,854 and 96,774 options
held by Messrs. Fry and Bosche, respectively. In addition, the Committee
approved the grant of an additional 123,898 options at an exercise price equal
to $1.1875 per share, including 11,151, 33,204 and 22,178 options issued to
Messrs. Hackett, Fry and Bosche, respectively. All options were issued with an
exercise price equal to the fair market value on the date of grant and with a
new vesting schedule which provides that 20% of the shares subject thereto are
immediately exercisable and an additional 20% of the shares subject thereto will
become exercisable on each subsequent anniversary of the date of grant. The
Committee believes that the grant of new options combined with the inclusion of
the vesting schedule described above will serve the dual purposes of providing
an incentive to management to increase share value over the long term and
conserving the cash reserves of Garnet.
1995 Compensation of the Chief Executive Officer. In determining the 1995
compensation payable to Messrs. Whitehead and Nevers, who served as Chief
Executive Officers during 1995, the Committee applied the same factors and
analyses as it applied to executive officers in general with the most weight
being given to the perceived necessity for providing them with a total
compensation package which the Committee believed was competitive. Accordingly,
there is no direct relationship between the amount of such compensation and
measurable objective criteria of Garnet's performance in 1995.
In determining the compensation payable to Mr. Fry, who was elected as
President of Garnet in September 1995 and Chief Executive Officer in February
1996, the Committee applied the same factors and analyses as it applied to
executive officers in general with the most weight being given to stock-based
compensation. Accordingly, Mr. Fry's salary has remained at the level paid to
him as President of Argosy Energy Incorporated, Garnet's wholly-owned
subsidiary, but Mr. Fry was granted additional stock options in 1996.
In assessing the agreement entered into with Mr. Whitehead upon his
resignation as Chief Executive Officer, the Committee took into consideration
his prior contribution to Garnet, the need for his continued assistance to
Garnet during the transition period, and his agreement to relinquish certain
stock options. In assessing the agreement entered into with Mr. Nevers upon his
resignation as Chief Executive Officer, including the exchange of certain stock
options, the Board took into consideration his prior contribution to Garnet, the
need for his continued assistance to Garnet during the transition period, and
the potential savings to Garnet by including a stock-based compensation element
in his overall compensation package. Accordingly, the Board approved the
issuance to Mr. Nevers of an option entitling him to purchase 200,000 shares of
Garnet Common Stock at an exercise price of $2.50 per share for a period of
three years after his resignation. In exchange for this option, Mr. Nevers
surrendered options which entitled him to purchase an aggregate of 130,152
shares with exercise prices ranging from $4.00 to $11.75 per share, which
options would have expired within 90 days from the date of his resignation. The
Board believes that the option exchange was beneficial to Garnet in that it
reduced the cash component of Mr. Nevers' agreement while giving him the
opportunity to participate in any stock appreciation over a two-year period
which may result, in part, from his prior service to Garnet.
<TABLE>
<S> <C> <C>
Robert J. Cresci Montague H. Hackett, Jr. Alastair Manson
Wendell W. Robinson Arthur L. Swanson John V. Tunney
</TABLE>
Mr. Manson was appointed as a member of the Committee in January 1995. Mr.
Hackett served as a member of the Committee until April 1995. Messrs. Cresci,
Robinson and Swanson were appointed as members of the Committee in April 1995.
Mr. Swanson participated in the decisions of the Committee which were made prior
to his resignation as a director of Garnet in March 1996. In June 1995, when the
agreement with Mr. Nevers was approved, the six members of the Board listed
above constituted the entire Board of Directors of Garnet.
10
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hackett was appointed as Chairman of the Board and became an employee
of Garnet on January 19, 1995. From January through April 1995, the Stock Option
and Compensation Committee consisted of Messrs. Hackett, Manson and Tunney. In
April 1995, Mr. Hackett resigned as a member of such committee and the committee
was expanded to include Messrs. Cresci, Swanson and Robinson.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires the inclusion in this proxy
statement of a line-graph presentation comparing five year cumulative
shareholder returns on an indexed basis with a broad equity market index and
either a published industry index or an index of peer companies selected by
Garnet. Garnet has selected as a broad equity market index the CRSP Total Return
Index for the Nasdaq Stock Market (US Companies) and as a published industry
index the CRSP Index for companies with Standard Industrial Classification Code
Nos. 1310-1319 traded on the New York Stock Exchange, the American Stock
Exchange, and the Nasdaq Stock Market.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
GARNET COMMON STOCK, CRSP INDEX FOR THE NASDAQ STOCK
MARKET (US COMPANIES), AND CRSP INDEX FOR NYSE/AMEX/NASDAQ
(SIC 1310-1319 US) CRUDE PETROLEUM AND NATURAL GAS**
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) GARNET MARKET INDUSTRY
<S> <C> <C> <C>
12/31/90 100.0 100.0 100.0
12/31/91 138.9 160.5 109.9
12/31/92 66.7 186.8 122.8
12/31/93 63.0 214.5 142.4
12/31/94 50.0 209.7 138.8
12/31/95 23.1 296.6 169.9
</TABLE>
- ---------------
Assumes $100 invested on January 1, 1991 in Garnet Common Stock, CRSP Index for
The Nasdaq Stock Market (US Companies), and CRSP Index for NYSE/AMEX/Nasdaq (SIC
1310-1319 US) Crude Petroleum and Natural Gas.
* Total return assumes reinvestment of dividends.
** Fiscal year ending December 31.
11
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH MANAGEMENT AND OTHERS
In connection with the resignation of Mr. Whitehead in January 1995 as
Chairman of the Board, Chief Executive Officer and a director, Garnet paid Mr.
Whitehead $75,000 in consideration for his substantial services to Garnet during
the prior seven years, for his service during a transition period following his
resignation, and for his surrender to Garnet of all vested unexercised stock
options issued pursuant to Garnet's Stock Option Plans.
In connection with the resignation of Mr. Nevers in June 1995 as President,
Chief Executive Officer and a director, Garnet agreed to pay Mr. Nevers $203,300
over a two-year period and to continue certain life, medical and long-term
disability insurance coverage until June 1997, and granted him a stock option
entitling him to purchase 200,000 shares of Garnet's Common Stock at an exercise
price of $2.50 per share at any time prior to June 21, 1998. The agreement also
provided that Mr. Nevers would relinquish certain stock options then held by
him.
COMPLIANCE WITH SECTION 16(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires officers,
directors and holders of more than 10% of Garnet's Common Stock (collectively,
"Reporting Persons") to file reports of ownership and changes in ownership of
the Common Stock with the Securities and Exchange Commission within certain time
periods and to furnish Garnet with copies of all such reports. Based solely on
its review of the copies of such reports furnished to Garnet by such Reporting
Persons or on the written representations of such Reporting Persons, Garnet
believes that, during the year ended December 31, 1995, all of the Reporting
Persons complied with their Section 16(a) filing requirements.
AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent public
accountants, to audit the consolidated financial statements of Garnet for the
year ending December 31, 1996. Representatives of Arthur Andersen LLP are
expected to be present at the Meeting and, while they are not expected to make a
statement, they will have the opportunity to do so if they desire. They will
also be available to respond to appropriate questions.
DEADLINE FOR SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the next annual meeting
of shareholders, to be held in 1997, must be received by Garnet at 11011
Richmond Avenue, Suite 650, Houston, Texas 77042-6720 on or before December 20,
1996 to be included in the proxy statement and form of proxy relating to that
meeting.
ANNUAL REPORT ON FORM 10-K
Garnet's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, is available on request and may be obtained by writing to:
Garnet Resources Corporation, 11011 Richmond Avenue, Suite 650, Houston, Texas
77042-6720, Attention: W. Kirk Bosche.
12
<PAGE> 15
OTHER BUSINESS
The Board of Directors does not know of any matter to be brought before the
Meeting other than the matters specified in the Notice of Annual Meeting
accompanying this Proxy Statement. The persons named in the form of proxy by the
Board of Directors will vote all proxies which have been properly executed. If
any matters not set forth in the Notice of Annual Meeting are properly brought
before the Meeting, such persons will vote thereon in accordance with their
judgment.
By Order of the Board of Directors,
W. KIRK BOSCHE
Secretary
13
<PAGE> 16
(SIDE ONE)
GARNET RESOURCES CORPORATION
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Annual Meeting of Shareholders to be Held May 22, 1996
The undersigned shareholder of Garnet Resources Corporation, a
Delaware corporation (the "Company"), hereby appoints Montague H. Hackett, Jr.,
Douglas W. Fry and W. Kirk Bosche, or any of them, acting singly in the absence
of the others, attorneys and proxies, with full power of substitution and
revocation, to vote as designated below, all of the shares of Common Stock of
the Company which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of the Company to be held at the offices of Noel Group, Inc.,
667 Madison Avenue, 25th Floor, New York, New York, 10021 on May 22, 1996, at
10:00 a.m. (local time) or any adjournment or postponement thereof. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the meeting.
The proxy is solicited on behalf of the Board of Directors of the
Company and when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, it will be voted "FOR
all nominess" in Proposal No. 1.
(Continued and to be signed and dated on reverse side)
<PAGE> 17
(SIDE TWO)
Please mark your vote as shown. /x/
The Board of Directors recommends a vote "FOR all nominees" in Proposal 1.
1. Election of the following nominees as Directors: Messrs.: Cresci, Fry,
Hackett, Manson, Robinson and Tunney.
/ / FOR all Nominees listed / / WITHHELD FOR all nominees
(except as marked to the right)
Withheld for the following only: (Write the name(s) of the nominee(s) in the
space below.)
Please mark, date and sign as your name appears to the left and return
in the enclosed envelope. If the signer is a corporation, please sign the full
corporate name by authorized officer. If the signer is a partnership, please
sign in partnership name by an authorized person. If shares are held jointly,
each shareholder named should sign.
Sign, Date and Return the Proxy Card
Promptly Using the Enclosed Envelope.
Date , 1996 Signature(s)
