SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] 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
GMX RESOURCES INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
NOT APPLICABLE
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(Name of Person(s) Filing Proxy Statement if Other Than Registrant)
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
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GMX RESOURCES INC.
9400 NORTH BROADWAY, SUITE 600
OKLAHOMA CITY, OKLAHOMA 73114
(405) 600-0711
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 2005
TO THE SHAREHOLDERS OF GMX RESOURCES INC.:
The Annual Meeting of Shareholders of GMX RESOURCES INC. (referred
to herein as the "Company" or "GMX"), will be held on Tuesday, May 17, 2005, at
10:00 a.m. at the Company's principal corporate office, 9400 North Broadway,
Suite 600, Oklahoma City, Oklahoma 73114, for the following purposes:
1. To elect five directors to serve for the ensuing year or longer
periods for some directors, depending on whether the Company's
proposed amendment to its Certificate of Incorporation to create a
classified board of directors is approved by the shareholders, and
in each instance until their successors are elected and qualified.
2. To consider and act upon a proposed amendment to the Company's
Certificate of Incorporation to create a classified board of
directors.
3. To consider and act upon the proposed authorization of a shareholder
rights plan by the Company.
4. To ratify the selection of Smith, Carney & Co., P.C. as the
Company's independent registered public accounting firm for the year
ending December 31, 2005.
5. To transact such other business as may come before the meeting or
any adjournment thereof.
The meeting may be adjourned from time to time and, at any
reconvened meeting, action with respect to the matters specified in this notice
may be taken without further notice to the shareholders, unless required by
applicable law or the bylaws of the Company.
Only shareholders of record at the close of business on April 15,
2005, are entitled to notice of, and to vote at, the meeting. A list of such
shareholders will be available at the meeting and at the Company's principal
corporate office, 9400 North Broadway, Suite 600, Oklahoma City, Oklahoma 73114,
for ten days before the meeting.
All shareholders are cordially invited to attend the meeting in
person. Whether or not you expect to attend the meeting, please complete, date,
sign and return the enclosed proxy as promptly as possible in order to ensure
your representation at the meeting. A return envelope (which is postage prepaid
if mailed in the United States) is enclosed for that purpose. Even if
you have given your proxy, you may still vote in person if you attend the
meeting. Please note, however, that if your shares are held of record by a
broker, bank or other nominee and you wish to vote at the meeting, you must
bring to the meeting a proxy issued in your name by the record holder.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Ken L. Kenworthy, Sr.
---------------------------------
Ken L. Kenworthy, Sr., Secretary
Oklahoma City, Oklahoma
April 22, 2005
GMX RESOURCES INC.
9400 NORTH BROADWAY, SUITE 600
OKLAHOMA CITY, OKLAHOMA 73114
(405) 600-0711
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 17, 2005
The following information is furnished in connection with the Annual
Meeting of Shareholders (the "Annual Meeting") of GMX RESOURCES INC., an
Oklahoma corporation, to be held on Tuesday, May 17, 2005, at 10:00 a.m. at the
Company's principal corporate office, 9400 North Broadway, Suite 600, Oklahoma
City, Oklahoma 73114. This Proxy Statement will be mailed on or about April 22,
2005, to holders of record of common stock as of the record date.
The record date and time for determining shareholders entitled to
vote at the Annual Meeting have been fixed at the close of business on April 15,
2005. On that date, the Company had outstanding 8,201,587 shares of common
stock. Each outstanding share of common stock is entitled to one vote.
The enclosed proxy for the Annual Meeting is being solicited by the
Company's board of directors. The Company will bear the entire cost of such
solicitation of proxies, including preparation, assembly, printing and mailing
of this proxy statement, the proxy and any additional information furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
common stock beneficially owned by others to forward to such beneficial owners.
The Company may reimburse persons representing beneficial owners of common stock
for their costs of forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
telegram or personal solicitation by directors, officers or other regular
employees of the Company. No additional compensation will be paid to directors,
officers or other regular employees for such services.
Any person giving a proxy pursuant to this solicitation has the
power to revoke it at any time before it is voted. It may be revoked by filing
with the Secretary of the Company at the Company's principal corporate office,
9400 North Broadway, Suite 600, Oklahoma City, Oklahoma 73114, a written notice
of revocation or a duly executed proxy bearing a later date, or it may be
revoked by attending the Annual Meeting and voting in person. Attendance at the
Annual Meeting will not, by itself, revoke a proxy.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The board of directors has fixed the number of directors
constituting the board at five and has nominated the current five members of the
board for re-election. Currently directors are elected annually for a term of
one year. If the proposal to approve a classified board of directors is approved
at the Annual Meeting, directors will serve for a term of three years, except
for the initial terms of the Class I and the Class II directors (see Proposal
No. 2 - Amendment of Certificate of Incorporation to Provide for Classified
Board of Directors).
Each director, if elected, will hold office until the expiration of
his term and until his successor is duly elected and qualified, or until such
director's earlier death, resignation or removal. Each nominee has agreed to
serve if elected, and the Company has no reason to believe that any nominee will
be unable to serve. Should any of the nominees named below cease to be a nominee
at or prior to the Annual Meeting, the shares represented by the enclosed proxy
will be voted in favor of the remainder of the nominees named below and for such
substitute nominees, if any, as may be designated by the board of directors and
nominated by either of the proxies named in the enclosed proxy. Proxies cannot
be voted for a greater number of nominees than the number of nominees named
herein.
ELECTION THRESHOLD
The five nominees for directorships receiving a plurality of the
votes cast by shareholders at the Annual Meeting will be elected.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE NAMED NOMINEES.
The nominees for directors of the Company are as follows:
DIRECTOR OF
NAME AGE POSITION(S) CURRENTLY HELD GMX SINCE
- ---- --- -------------------------- ---------
Ken L. Kenworthy, Jr. 48 President, Chief Executive Officer 1998
and Director
Ken L. Kenworthy, Sr. 69 Executive Vice President, Secretary, 1998
Treasurer, Chief Financial Officer
and Director
T. J. Boismier 70 Director 2001
Steven Craig 48 Director 2001
Jon W. "Tucker" McHugh 60 Director 2005
For information with respect to the business backgrounds of each of
the Company's directors and certain familial relationships, please see Part III,
Item 9, in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, a copy of which is enclosed.
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BOARD COMMITTEES AND MEETINGS
BOARD OF DIRECTORS MEETINGS
During the year ended December 31, 2004, the board of directors held
six meetings. All directors in office at the time of such meetings attended all
of the meetings of the board of directors held during 2004.
COMPENSATION OF DIRECTORS
For information with respect to this matter, please see Part III,
Item 10, in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, a copy of which is enclosed.
BOARD COMMITTEES
The Company's board of directors has an Audit Committee, a
Compensation Committee and a Nominating Committee, each of which consisted of
Messrs. T. J. Boismier and Steven Craig during 2004. All committee members
attended all of the meetings of such committees held during 2004. Upon his
appointment to the board of directors in January 2005, Mr. Jon "Tucker" McHugh
was appointed to the Audit Committee, such that the Audit Committee presently
consists of three members as required by applicable SEC rules.
The Audit Committee's functions include approving the engagement of
the Company's independent registered public accounting firm, reviewing with such
firm the results and scope of its auditing engagement, establishing procedures
for the treatment of complaints regarding accounting, internal accounting
control or auditing matters, and various other matters. This committee met five
times in 2004. The Audit Committee operates under a formal written charter
adopted by the board of directors. The board of directors has determined that
all three of the Audit Committee members are independent under applicable NASDAQ
standards.
The Compensation Committee is responsible for establishing
compensation policies and levels for the Company's chief executive officer and
other senior officers. This committee makes recommendations to the board of
directors of the Company with respect to the various executive compensation
plans that have been or may be adopted by the Company, as well as the specific
compensation levels of executive officers. The Compensation Committee met two
times in 2004. The Compensation Committee operates under a formal written
charter adopted by the board of directors.
The Nominating Committee was formed in May 2004, and its function is
to assist the board in selecting and screening nominees for the board and to
oversee various corporate governance matters. The Nominating Committee operates
under a formal written charter adopted by the board of directors. This committee
met one time in 2004. The board of directors has determined that both of the
members of the Nominating Committee are independent under applicable NASDAQ
standards.
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CORPORATE GOVERNANCE
The Company adopted a Code of Business Conduct and Ethics in
December 2003. The Code of Business Conduct and Ethics is applicable to all
employees and directors, including the Company's principal executive, financial
and accounting officers. A copy of the Code of Business Conduct and Ethics as
well as the charters for the Audit, Compensation and Nominating Committees are
available at the Company's web site, www.gmxresources.com. The Company intends
to disclose amendments to, or waivers from, its Code of Business Conduct and
Ethics by posting to its web site.
NASDAQ rules require that the Company's independent directors meet
in executive session on a regular schedule. The Company provides the independent
directors with the opportunity to meet in executive session before or after
every board meeting. The Company presently has three independent directors,
Messrs. Boismier, Craig and McHugh. The board has adopted the independence
criteria of the NASDAQ corporate governance rules to determine the independence
of its directors. The board has determined that each of Messrs. Boismier, Craig
and McHugh are independent under such criteria. In addition, the board has
determined that Messrs. Boismier, Craig and McHugh meet the independence
requirements of the Securities and Exchange Commission ("SEC") and the NASDAQ
for service on the Audit Committee. The board has also determined that Mr.
McHugh qualifies as a "financial expert" as defined by the rules of the SEC
based on his experience and education.
The Company's Nominating Committee Charter provides that any person,
including any shareholder, desiring to communicate with, or make any concerns
known to, the Company, directors generally, non-management directors or an
individual director only, may do so by submitting them in writing to the
Company's Corporate Secretary, with information to identify the person
submitting the communication or concern, including the name, address, telephone
number and an e-mail address (if applicable), together with information
indicating the relationship of such person to the Company. The Company's
Corporate Secretary is responsible for maintaining a record of any such
communications or concerns and submitting them to the appropriate addressee(s)
for potential action or response. The Company will establish the authenticity of
any communication or concern before forwarding it to the addressee. Under the
Nominating Committee Charter, the Company is not obligated to investigate or
forward any anonymous submissions from persons who are not employees of the
Company.
The Company does not have a specific policy regarding board members'
attendance at annual meetings of shareholders, although, as a general rule, all
directors usually attend such meetings. At the 2004 annual meeting of
shareholders, all directors then serving on the board attended the meeting
except Messrs. Boismier and Craig.
The Company's Nominating Committee Charter provides that the
Nominating Committee is responsible for assessing the skills and characteristics
of board members and for screening potential board candidates. The criteria for
nomination of directors are set forth in the Nominating Committee Charter, and
the Charter does not address specific minimum qualifications or skills that a
nominee or board member must have. The process used by the Nominating Committee
for identifying and evaluating nominees for the Company's board
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consists of reviewing qualifications of candidates suggested by management,
other board members or shareholders.
Under the Nominating Committee Charter, the Nominating Committee
will consider recommendations from shareholders for nomination as a board
member. Any such recommendation should be addressed to the Company's Corporate
Secretary and should contain (i) the name, address and telephone number and
number of shares owned by the shareholder making the recommendation and a
statement that the shareholder has a good faith intent to remain as a
shareholder until the Company's next annual meeting of shareholders; (ii) the
information about the proposed nominee that would be required to be disclosed by
the applicable rules of the Securities and Exchange Commission if the nominee
were nominated; (iii) a description of any relationship between the nominee and
the shareholder making the recommendation; (iv) any additional information that
the shareholder desires to submit addressing the reasons that the nominee should
be nominated to the board; and (v) a consent of the nominee to be interviewed by
the Nominating Committee if requested and to serve on the board if nominated and
elected. Any recommendation should be submitted at least 120 days prior to the
first anniversary of the date of the proxy statement for the prior annual
meeting of shareholders. There are no specific minimum qualifications for
shareholder nominees. The Company has not previously received nominees from
common shareholders and, accordingly, is unable to determine whether the process
for evaluation of shareholder nominees differs from the process for evaluation
of other nominees.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee has met and held discussions with management and
the Company's independent registered public accounting firm. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America, and the Audit Committee has reviewed
and discussed the consolidated financial statements with management and the
Company's independent registered public accounting firm. The Audit Committee
discussed with the Company's independent registered public accounting firm
matters required to be discussed by Statement on Auditing Standards No. 61.
The Audit Committee has received from its independent registered
public accounting firm the written disclosures and the letter required by
Independence Standards Board Standard No. 1, relating to their independence, and
the Audit Committee discussed with such independent registered public accounting
firm that firm's independence.
Based on the Audit Committee's discussion with management and the
Company's independent registered public accounting firm and its review of the
representation of management and the report of such independent registered
public accounting firm to the Audit Committee, the Audit Committee recommended
that the board of directors include the audited financial statements in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004.
-- T. J. Boismier, Steven Craig and Jon "Tucker" McHugh, members of the
Audit Committee
5
INFORMATION CONCERNING INDEPENDENT ACCOUNTANTS
The Audit Committee has approved Smith, Carney & Co., P.C. ("Smith
Carney") as the Company's independent registered public accounting firm for the
year ending December 31, 2005. Smith Carney also served as the Company's
independent registered public accounting firm for the year ending December 31,
2004. Representatives of Smith Carney are not expected to be present at the
Annual Meeting, but they will be given the opportunity to make a statement if
they attend and so desire. Unless such representatives attend the Annual
Meeting, they will not be available to the shareholders to respond to
appropriate questions.
KPMG LLP ("KPMG") served as the Company's independent registered
public accounting firm for the year ending December 31, 2003. For information
with respect to the replacement of KPMG by Smith Carney, please see Part II,
Item 8, in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, a copy of which is enclosed.
AUDIT AND OTHER FEES
For information with respect to this matter, please see Part III,
Item 14, in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, a copy of which is enclosed.
PROPOSAL NO. 2
AMENDMENT OF CERTIFICATE OF INCORPORATION
TO PROVIDE FOR CLASSIFIED BOARD OF DIRECTORS
The board of directors has unanimously approved and recommended that
the shareholders approve an amendment of the Company's Certificate of
Incorporation to provide for the classification of the board of directors into
three classes of directors with staggered terms of office (the "Classified Board
Amendment"). A copy of the proposed Classified Board Amendment is attached to
this Proxy Statement as Appendix A. If approved, the Classified Board Amendment
will take effect immediately following the Annual Meeting and will be effective
with respect to the directors elected at the Annual Meeting, as described below.
DESCRIPTION OF PROPOSAL
Neither the Company's Certificate of Incorporation nor its bylaws
presently in effect specify a particular term of office for its directors.
Rather, the directors of the Company currently are elected to serve until their
successors are duly elected and have qualified. It has been the recent practice
of the Company to elect directors annually. However, the Oklahoma General
Corporation Act (the "Act") permits a corporation to have a classified board of
directors.
The proposed Classified Board Amendment provides that, immediately
upon approval, the Company's board of directors will be divided into three
classes of as nearly equal number as possible. One class of directors ("Class
I") would hold office initially for a term expiring at the Company's 2006 annual
meeting. Another class of directors ("Class II") would hold office initially for
a term expiring at the Company's 2007 annual meeting. Finally, another class of
directors ("Class III") would hold office initially for a term expiring at the
Company's 2008
6
annual meeting. At each successive annual meeting, commencing in 2006, the
successors to the directors whose terms expire at that annual meeting would be
elected for a term of office to expire on the third succeeding annual meeting
after their election and until their successors have been duly elected and
qualified.
Assuming the election of each of the nominees for director set forth
above in Proposal No. 1 - Election of Directors, upon approval of the Classified
Board Amendment, the Company's board of directors will automatically, without
further action by the shareholders, be classified as set forth below:
CLASS TERM DIRECTOR(S)
- ----- ---- -----------
Class I Term expiring at 2006 annual meeting T. J. Boismier
Class II Term expiring at 2007 annual meeting Steven Craig
Ken L. Kenworthy, Sr.
Class III Term expiring at 2008 annual meeting Jon W. "Tucker" McHugh
Ken L. Kenworthy, Jr.
The proposed Classified Board Amendment may significantly extend the
time required to effect a change in control of the board of directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the board of directors can be made by shareholders holding a plurality of the
votes cast at a single annual meeting. Unless the Company's Certificate of
Incorporation is further amended (see below), if the Company implements a
classifed board of directors, it could take at least two annual meetings even
for shareholders holding a majority of the votes cast at a single meeting to
make a change in control of the board of directors, because only a minority of
the directors will be scheduled for election at each annual meeting.
The Classified Board Amendment also provides that a director or the
entire board of directors of the Company may only be removed, whether with or
without cause, at a meeting of the shareholders called expressly for that
purpose by the affirmative vote of holders at least two-thirds of the Company's
outstanding shares then entitled to vote in an election of directors. In the
event a vacancy in the board of directors occurs for any reason, including but
not limited to the creation of new directorships or the removal or resignation
of an existing director, the Classified Board Amendment provides that such
vacancy may be filled only by the affirmative vote of at least two-thirds of the
directors then in office, although less than a quorum. Any director so appointed
to fill a vacancy on the board of directors will hold office until the next
election of the class to which he or she is appointed.
If the Classified Board Amendment is approved by the shareholders,
it can only be amended, repealed or otherwise altered by the affirmative vote of
the holders of at least two-thirds of the Company's outstanding shares then
entitled to vote in an election of directors.
ADVANTAGES OF A CLASSIFIED BOARD
The Company's board of directors believes that the staggered
three-year term of a classified board, with its election of approximately
one-third of the directors each year, will help to assure the continuity and
stability of the Company's long-term policies in the future, since a
7
majority of the directors at any given time will have prior experience as
directors of the Company. The board of directors believes that such continuity
and stability will facilitate long-term strategic planning and promote the
creation of long-term value for shareholders. In addition, the Company's board
of directors believes that having a classified board of directors in place will
enhance its ability to protect the interests of the Company's shareholders in
the event of an unsolicited offer for the Company by making an attempted
takeover of the Company more difficult. The proposal is not, however, in
response to any effort of which the Company is aware to accumulate the Company's
stock or to obtain control of the Company. Rather, the Company's board of
directors wishes to protect shareholder investments in the Company by ensuring
that unsolicited bidders will not be in a position to place undue pressure on
the Company's board of directors or shareholders and that the ability of the
board of directors to negotiate with any potential acquirer is from the
strongest practical position, which is in the interest of all shareholders. The
Company's board of directors believes that the existence of a classified board
will encourage any potential acquirer to negotiate directly with the board of
directors, thereby giving the board added leverage in such negotiations.
DISADVANTAGES OF A CLASSIFIED BOARD
Because of the additional time required to change control of the
Company's board of directors, a classified board of directors will tend to
perpetuate the present board of directors and will have the effect of making it
more difficult to remove directors from the board. Without the ability to obtain
immediate control of the Company's board of directors, a takeover bidder will
not be able to take action to remove other impediments to its acquisition of the
Company. Because a classified board will increase the amount of time required
for a takeover bidder to obtain control of the Company without the cooperation
of the Company's board of directors, even if the takeover bidder were to acquire
a majority of the Company's outstanding voting stock, it will tend to discourage
certain takeover bids, perhaps including some takeover bids which the
shareholders may believe would be in their best interests. This concern is
amplified by the existence of other takeover defenses, such as a shareholder
rights plan (see Proposal No. 3 - Authorization of Shareholder Rights Plan). A
classified board will also make it more difficult for the existing shareholders
to change the composition of the Company's board of directors, even if the
shareholders believe such a change would be desirable.
APPROVAL REQUIRED
To be effective, the Classified Board Amendment must be approved by
the holders of a majority of the Company's outstanding common stock at the
Annual Meeting.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE CLASSIFIED BOARD AMENDMENT.
8
PROPOSAL NO. 3
AUTHORIZATION OF SHAREHOLDER RIGHTS PLAN
The board of directors has determined to ask the shareholders for
authorization to adopt and implement a shareholder rights plan, commonly
referred to as a "poison pill," to provide for the issuance of certain rights to
the holders of shares of common stock of the Company within certain parameters
(the "Shareholder Rights Plan"). If authorized, the board of directors intends
to adopt and implement the Shareholder Rights Plan as soon as practicable
following the Annual Meeting. Set forth below is a summary of the principal
terms and conditions that such Shareholder Rights Plan would include.
Neither the Company's bylaws nor other governing documents or law
require shareholder authorization or approval of the Shareholder Rights Plan or
any similar arrangement. However, the board of directors has elected to request
shareholder authorization to adopt the Shareholder Rights Plan as a matter of
good corporate practice, consistent with the 2005 Corporate Governance Policy
issued by Institutional Shareholder Services.
DESCRIPTION OF PROPOSAL
The Shareholder Rights Plan is designed to protect the shareholders
of the Company from coercive or otherwise unfair proposals to take over the
Company by imposing a significant penalty on any person acquiring 20% or more of
the Company's outstanding common stock. As described in more detail below, the
Shareholder Rights Plan generally provides that upon the acquisition of common
stock by any person or group (other than certain exempt persons) resulting in
the person or group beneficially owning 20% or more of the Company's outstanding
common stock (an "Acquiring Person"), the holders of the Company's common stock
other than the Acquiring Person will have the right to acquire preferred or
common stock of the Company at a favorable price. The Shareholder Rights Plan
should not interfere with any merger or other business combination approved by
the board of directors, since the board may amend or terminate the Shareholder
Rights Plan or redeem the Rights for a nominal amount prior to a person or group
becoming an Acquiring Person.
If the Shareholder Rights Plan is authorized by the shareholders and
implemented by the Company, the Company's board of directors will declare a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock, par value $0.001 per share, of the Company, which as of
April 15, 2005, numbered 8,201,587 shares. The Company's outstanding common
stock will be modified in that each share of common stock (other than any shares
held by an Acquiring Person) will include a Right. However, the dividend, voting
and liquidation rights applicable to the Company's common stock will not be
affected by the issuance of the Rights. The Company is presently not obligated
to pay any dividends on its common stock, and thus the Company is not in arrears
with respect to any such dividends.
New Rights will also be issued in connection with any newly-issued
shares of common stock of the Company following the implementation of the
Shareholder Rights Plan. As of April 15, 2005, the Company had 41,798,413 shares
of authorized but unissued common stock, and thus up to 41,798,413 additional
Rights could be issued in connection with the issuance of additional shares of
common stock. In addition, to the extent additional shares of common stock
9
are authorized by the shareholders in the future, additional Rights would be
issuable upon the issue of any such additional shares.
The Company will receive no consideration in connection with the
issuance of Rights with respect to its presently outstanding common stock. As
for any Rights issued in the future in connection with any new issuances of
common stock, the Company will receive no additional consideration other than
that received for the newly-issued common stock itself. However, in the event
the Rights become exercisable in the future as described below, the Company will
receive cash for each one one-thousandth of a share of preferred stock issued
upon the exercise of a Right, subject to adjustment as described below. In the
event the Rights become exercisable and any Rights are exercised, the Company
anticipates that it will use the proceeds from the exercise of the Rights for
general working capital purposes.
Until the Rights are exercisable, they will trade with, and will be
inseparable from, the Company's common stock, and the Rights will be evidenced
only by certificates representing shares of such common stock. Any transfer of
shares of common stock will constitute a transfer of Rights. In addition, until
the Rights are exercisable, they will not create any rights in favor of their
holders.
The Rights will not become exercisable until ten days following a
public announcement that a person or group has become an Acquiring Person or, if
earlier, ten business days (or a later date determined by the board of directors
before any person or group becomes an Acquiring Person) after a person or group
begins or announces an intention to make a tender or exchange offer which, if
completed, would result in that person or group becoming an Acquiring Person.
Prior to exercise, the Rights do not give their holders any dividend, voting or
liquidation rights. After the date the Rights become exercisable, the Rights
will separate from the common stock and will be evidenced by Rights certificates
that will be mailed to all eligible holders of common stock. As described above,
any Rights held by an Acquiring Person are void and may not be exercised.
Once the Rights become exercisable, each Right will allow its holder
to purchase from the Company one one-thousandth of a share of the Company's
Series A Junior Participating Preferred Stock ("Preferred Stock") for a price
determined by the board of directors at the time the Shareholder Rights Plan is
adopted (the "Exercise Price"). This price will be established based on the
board's good faith estimate of what the fair market value of the Company's stock
may be in the ten-year life of the plan and as a general rule is expected to be
a multiple of three to six times the current market value of the Company's
common stock at the time of adoption of the Shareholder Rights Plan. The number
of shares of Preferred Stock issuable upon exercise of a Right and the Exercise
Price are subject to adjustment in certain circumstances. In addition, if a
person or group becomes an Acquiring Person, all holders of Rights except the
Acquiring Person may, for the Exercise Price, purchase Preferred Stock (or
common stock if the Company so determines) with a market value equal to twice
the Exercise Price, based on the market price of the common stock prior to such
acquisition. If the Company is later acquired in a merger or similar transaction
after the date the Rights become exercisable, all holders of Rights except the
Acquiring Person may, for the Exercise Price, purchase shares of the acquiring
corporation with a market value equal to twice the Exercise Price, based on the
market price of the acquiring corporation's stock prior to such merger or
similar acquisition. In this manner, the Acquiring
10
Person is thus penalized because the other Rights holders have the ability to
acquire common stock or Preferred Stock at favorable prices relative to the
market price at the time.
The board of directors may reduce the threshold at which a person or
group becomes an Acquiring Person from 20% to not less than 10% of the
outstanding common stock. In addition, Ken L. Kenworthy, Jr. and his spouse
Karen Kenworthy, who currently collectively own 20% of the Company's outstanding
common stock, will not be considered an Acquiring Person unless they
collectively acquire beneficial ownership of more than 30% of the Company's
outstanding common stock.
The terms of the Preferred Stock will be fixed in a Certificate of
Designations filed by the Company with the Secretary of State of the State of
Oklahoma pursuant to an existing "blank check" preferred stock authorization in
the Company's Certificate of Incorporation. The Preferred Stock will have the
following terms, among others, in the event any Preferred Stock is issued
pursuant to the Rights:
o The Preferred Stock will not be redeemable;
o The Preferred Stock will rank junior to any and all other
series of the Company's preferred stock and senior to the
Company's common stock;
o Each one one-thousandth of a share of Preferred Stock will
entitle holders to quarterly cumulative preferential dividend
payments of the greater of $1.00 or the per share dividend
declared on the Company's common stock;
o Upon liquidation of the Company, each one one-thousandth of a
share of Preferred Stock will entitle holders to receive the
greater of $1.00 or an amount equal to the payment made on one
share of common stock;
o Each one one-thousandth of a share of Preferred Stock will have
the same voting power as one share of common stock; and
o If shares of common stock are exchanged via merger,
consolidation or a similar transaction, each one one-thousandth
of a share of Preferred Stock will entitle holders to receive
the amount received per share of common stock.
Based on these rights, the value of one one-thousandth of a share of
Preferred Stock should approximate the value of one share of common stock.
The Rights will expire on the tenth anniversary of the adoption of
the Shareholder Rights Plan. Alternatively, the board of directors may redeem
the Rights for $0.01 per Right at any time before any person or group becomes an
Acquiring Person. If the board of directors redeems any Rights, it must redeem
all of the Rights. Once the Rights are redeemed, the only right the holders of
Rights will have will be to receive the redemption price of $0.01 per Right. The
redemption price will be adjusted if the Company effects a stock split or stock
dividend of its common stock.
11
After a person or group becomes an Acquiring Person, but before an
Acquiring Person owns 50% or more of the Company's outstanding common stock, the
board of directors may exchange the Rights, in whole or in part, at an exchange
ratio of one share of common stock or an equivalent security for each Right,
other than Rights held by an Acquiring Person.
The board of directors may adjust the Exercise Price, the number of
one one-thousandths of a share of Preferred Stock issuable upon the exercise of
a Right and the number of outstanding Rights to prevent dilution that may occur
from a stock dividend, a stock split or a reclassification of the Preferred
Shares or common stock. However, no adjustments to the Exercise Price of less
than 1% will be made.
The Shareholder Rights Plan may be amended or terminated by the
board of directors without the consent of the holders of the Rights. However,
the board may not amend the Shareholder Rights Plan to lower the threshold at
which a person or group becomes an Acquiring Person to below 10% of the
Company's outstanding common stock. In addition, the board may not cause a
person or group to become an Acquiring Person by lowering this threshold below
the percentage interest that such person or group already owns. After a person
or group becomes an Acquiring Person, the board may not terminate the
Shareholder Rights Plan or amend the Shareholder Rights Plan in a way that
adversely affects holders of the Rights.
The Company does not anticipate that the authorization of the
Shareholder Rights Plan by the shareholders or its implementation by the Company
will have any effect on the registration and listing of its common stock. Prior
to issuing the Rights, the Company intends to register the Rights with the SEC
pursuant to applicable securities laws and to list the Rights with NASDAQ to the
extent required. The Company also intends to register and list the Preferred
Stock issuable upon exercise of the Rights prior to the issuance of any such
Preferred Stock, but the Company does not anticipate that such registration or
listing of the Preferred Stock will be required for some time.
ADVANTAGES OF A SHAREHOLDER RIGHTS PLAN
The goal of a shareholder rights plan, commonly referred to as a
"poison pill," is typically to create a level of prospective dilution of any
person or group attempting to acquire a significant stake in the subject
corporation such that the acquisition by the person or group will not be
economically viable unless it is effected through negotiation with the
corporation's board of directors. It is important to note that a shareholder
rights plan does not prevent takeovers or other merger or similar transactions
involving the corporation. Instead, a shareholder rights plan reduces the risk
of coercive two-tier tender offers, "creeping acquisitions" and other tactics
which are perceived as unfair to the corporation's shareholders by effectively
requiring the prospective acquirer to negotiate the terms of a transaction with
the corporation's board of directors. If the board believes a proposed
acquisition is in the best interests of the corporation and its shareholders, it
can amend or terminate the shareholder rights plan or redeem the outstanding
rights for a nominal amount in order to permit the completion of the
transaction. Thus, a prospective bidder is more likely to propose a higher
takeover price, an offer for all shares of the corporation instead of a partial
offer, or otherwise more favorable terms than would generally be available in
the absence of a rights plan. If a rights plan is not in place, the board of
12
directors has less power to combat an offer by a prospective acquirer if the
board believe it is unfair.
In the context of a negotiation with a prospective acquirer of a
corporation, the enhanced bargaining leverage of the board of directors of a
company with a rights plan in place may produce a more favorable price for all
of the corporation's shareholders. The necessity of a prospective acquirer
negotiating with the board (as opposed, for example, to a prospective acquirer
commencing a hostile tender offer) means that the board of directors will have
suitable time to consider the prospective acquirer's offer and to evaluate
alternative transactions, which may result in more favorable terms.
As a practical matter, because the effect of rights plans is so
dilutive to potential acquirors, there are few, if any, instances in which
acquirors have taken actions that would result in the rights becoming
exercisable. Therefore, the Company does not expect that the Rights will ever be
exercised.
DISADVANTAGES OF A SHAREHOLDER RIGHTS PLAN
Unsolicited hostile takeover attempts do not always have unfavorable
consequences or effects and may provide all of the shareholders with
considerable value for their shares. Because a shareholder rights plan is
designed to deter hostile takeover offers, the adoption of a rights plan will
likely have the effect of discouraging or defeating certain takeover bids,
perhaps including some takeover bids which the shareholders may believe would be
in their best interests. This concern is amplified by the existence of other
takeover defenses, such as the proposed Classified Board Amendment (see Proposal
No. 2 - Amendment of Certificate of Incorporation to Provide for Classified
Board of Directors).
APPROVAL THRESHOLD
The board of directors intends to adopt and implement the
Shareholder Rights Plan if authorized by a majority of the votes cast by
shareholders at the Annual Meeting.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE AUTHORIZATION OF THE SHAREHOLDER RIGHTS PLAN.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has directed the Company to submit the selection
of Smith Carney as the Company's independent registered public accounting firm
for ratification by the shareholders at the Annual Meeting. Neither the
Company's bylaws nor other governing documents or law require shareholder
ratification of the selection of Smith Carney as the Company's independent
registered public accounting firm. However, the Audit Committee is submitting
the selection of Smith Carney to the shareholders for ratification as a matter
of good
13
corporate practice, consistent with the 2005 Corporate Governance Policy of
Institutional Shareholder Services. If the shareholders fail to ratify the
selection, the Audit Committee will reconsider whether or not to retain that
firm. Even if the selection is ratified, the Audit Committee may in its
discretion direct the appointment of a different independent registered public
accounting firm at any time during the year if it determines that such a change
would be in the best interests of the Company and its shareholders.
APPROVAL THRESHOLD
The selection of Smith Carney as the Company's independent
registered public accounting firm for the year ending December 31, 2005, will be
ratified if it is approved by a majority of the votes cast by shareholders at
the Annual Meeting.
RECOMMENDATION OF THE BOARD
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF SMITH CARNEY AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2005.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
For information with respect to the security ownership of certain
beneficial owners and management, please see Part III, Item 11, in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 2004, a copy of
which is enclosed.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
EXECUTIVE COMPENSATION;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
For information with respect to directors, executive officers,
executive compensation and compliance with Section 16(a) of the Securities
Exchange Act, please see Part III, Items 9 and 10, in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2004, a copy of which is
enclosed.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information with respect to this matter, please see Part III,
Item 12, in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2004, a copy of which is enclosed.
VOTING PROCEDURES
As described above, directors will be elected by a plurality of the
votes of the shares present in person or represented by proxy at the Annual
Meeting. The Classified Board Amendment will be adopted if it is approved by
holders of a majority of the Company's
14
outstanding common stock at the Annual Meeting. The authorization of the
Shareholder Rights Plan, the ratification of Smith Carney as the Company's
independent registered public accounting firm for the year ending December 31,
2005, and all other matters properly brought before the Annual Meeting will be
decided by a majority of the votes cast on the matter at the Annual Meeting,
unless otherwise required by law.
Shares represented by proxies that are marked "withhold authority"
with respect to the election of any one or more nominees for election as
directors will be counted for the purpose of determining the number of shares
represented by proxy at the meeting. Because directors are elected by a
plurality rather than a majority of the shares present in person or represented
by proxy at the Annual Meeting, proxies marked "withhold authority" with respect
to any one or more nominees will not affect the outcome of a nominee's election
unless the nominee receives no affirmative votes or unless other candidates are
nominated for election as directors.
Shares represented by limited proxies will be treated as represented
at the meeting only as to such matter or matters for which authority is granted
in the limited proxy. Shares represented by proxies returned by brokers where
the brokers' discretionary authority is limited by stock exchange rules will be
treated as represented at the Annual Meeting only as to such matter or matters
voted on in the proxies. Because the Classified Board Amendment requires the
approval of a majority of the Company's outstanding common stock, a lack of
voting direction with respect to the Classified Board Amendment will have the
effect of a "no" vote with respect to the Classified Board Amendment proposal.
Unless otherwise directed in the proxy, shares represented by valid
proxies will be voted FOR the election of the director nominees. With respect to
the approval of the Classified Board Amendment, the approval of the Shareholder
Rights Plan or the ratification of Smith Carney as the Company's independent
registered public accounting firm for the year ending December 31, 2005, shares
represented by proxies will be voted in accordance with the recommendations of
the board of directors. As to any other business which may properly come before
the Annual Meeting, shares represented by proxies will be voted in accordance
with the recommendations of the board of directors, although the Company does
not presently know of any such other business.
PROPOSALS OF SHAREHOLDERS
Each year the board of directors submits its nominations for
election of directors at the Annual Meeting of Shareholders. Other proposals may
be submitted by the board of directors or the shareholders for inclusion in the
Proxy Statement for action at the Annual Meeting. Any proposal submitted by a
shareholder for inclusion in the Proxy Statement for the Annual Meeting of
Shareholders to be held in 2006 must be received by the Company (addressed to
the attention of the Secretary) on or before December 23, 2005. Any shareholder
proposal submitted outside the processes of Rule 14a-8 under the Securities
Exchange Act of 1934 for presentation at the Company's 2006 annual meeting will
be considered untimely for purposes of Rule 14a-4 if notice thereof is received
by the Company after March 8, 2006. The proxy solicited by the board of
directors for the 2006 Annual Meeting will confer discretionary authority to
vote on any such shareholder proposal presented at the 2006 Annual Meeting
unless the Company is provided
15
with timely notice of the proposal. To be submitted at the meeting, any such
proposal must be a proper subject for shareholder action under the laws of the
State of Oklahoma.
OTHER MATTERS
As of the date of this Proxy Statement, the Company does not know of
any other matters to be presented for action at the Annual Meeting other than
those listed in the Notice of Meeting and referred to herein. Additional
business may properly be brought before the Annual Meeting by or at the
direction of the Company's board of directors.
ANNUAL REPORT
The Company's Annual Report to the Securities and Exchange
Commission on Form 10-KSB for the year ended December 31, 2004, including
audited financial statements, is enclosed with this Proxy Statement. Item 8 of
Part II and Items 9, 10, 11, 12 and 14 of Part III of the Annual Report are
referenced in, and are a part of, this Proxy Statement.
COPIES OF THE EXHIBITS OMITTED FROM THE ENCLOSED ANNUAL REPORT ON
FORM 10-KSB ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO
KEN L. KENWORTHY, SR., 9400 NORTH BROADWAY, SUITE 600, OKLAHOMA CITY, OKLAHOMA
73114.
16
APPENDIX A TO PROXY STATEMENT OF GMX RESOURCES INC.
================================================================================
PROPOSED CLASSIFIED BOARD AMENDMENT
AMENDED CERTIFICATE OF INCORPORATION
OF
GMX RESOURCES INC.
The undersigned officers of GMX RESOURCES INC., an Oklahoma
corporation (the "Corporation"), hereby file this Amended Certificate of
Incorporation to reflect an amendment to the Corporation's Certificate of
Incorporation as set forth below:
ELEVENTH. Notwithstanding anything contained in the
Certificate of Incorporation or the Bylaws of the Corporation to the contrary:
(1) Number, Election and Terms. The Board of
Directors of the Corporation shall consist of not less than three
members with the exact number to be fixed from time to time by the
Board of Directors. Upon the adoption of this Article ELEVENTH, the
Board of Directors shall divide the directors of the Corporation
into three classes, designated Class I, Class II, and Class III, as
nearly equal in number as possible, with the term of office of the
Class I directors to expire at the 2006 annual meeting of
shareholders, the term of office of the Class II directors to expire
at the 2007 annual meeting of shareholders, and the term of office
of the Class III directors to expire at the 2008 annual meeting of
shareholders. At each annual meeting of shareholders following such
initial classification and election, the number of directors equal
to the number of directors of the class whose term expires at the
time of such meeting shall be elected to hold office until the third
succeeding annual meeting of shareholders. Each director shall hold
office until his or her successor is elected and qualified, or until
his or her earlier resignation or removal.
(2) Newly Created Directorships and
Vacancies. Newly created directorships resulting from any increase
in the authorized number of directors and any vacancies in the Board
of Directors resulting from death, resignation, retirement,
disqualification, removal from office or other cause may be filled
only by the affirmative vote of at least two-thirds of the directors
then in office, although less than a quorum, and directors so chosen
shall hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which they have been
elected expires and until their respective successors are elected
and qualified.
(3) Removal. At a meeting of shareholders
called expressly for that purpose, any director, or the entire Board
of Directors, may be removed from office at any time, with or
without cause, only by the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the Corporation then
entitled to be voted in an election of directors.
A-1
(4) Amendment, Repeal, etc. The affirmative
vote of the holders of at least two-thirds of the outstanding shares
of the Corporation then entitled to be voted in an election of
directors shall be required to alter, amend or repeal, or to adopt
any provision inconsistent with, this Article ELEVENTH.
The undersigned officers certify that the foregoing amendment was
adopted in accordance with the procedures set forth in Section 1077 of the
Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the undersigned officers have executed this
Amended Certificate of Incorporation this ____ day of _______________, 2005.
GMX RESOURCES INC.
By:
---------------------------------
Ken L. Kenworthy, Jr., President
ATTEST:
- ------------------------------------
Ken L. Kenworthy, Sr., Secretary
A-2
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GMX RESOURCES INC.
9400 NORTH BROADWAY, SUITE 600
OKLAHOMA CITY, OKLAHOMA 73114
(405) 600-0711
The undersigned hereby appoints Ken L. Kenworthy, Sr. and Amber
Croissant, and each of them, as proxies (the "Proxies"), each with the power to
appoint his substitute, and hereby authorizes them to represent and to vote, as
designated below, all of the shares of common stock of GMX RESOURCES INC. held
of record by the undersigned on the record date at the Annual Meeting of
Shareholders to be held on May 17, 2005, or any reconvention thereof.
Please mark your votes as indicated in this example: [X]
ITEM 1. ELECTION OF DIRECTORS FOR WITHHELD FOR ALL
Nominees: [ ] [ ]
Ken L. Kenworthy, Jr.
Ken L. Kenworthy, Sr.
T. J. Boismier
Steven Craig
Jon W. "Tucker" McHugh
WITHHELD FOR (Write nominee name(s) in the space provided): ___________________
ITEM 2. AMENDMENT OF CERTIFICATE OF INCORPORATION TO PROVIDE FOR CLASSIFIED
BOARD OF DIRECTORS
FOR AGAINST
[ ] [ ]
ITEM 3. AUTHORIZATION OF SHAREHOLDER RIGHTS PLAN
FOR AGAINST
[ ] [ ]
ITEM 4. RATIFICATION OF SELECTION OF SMITH, CARNEY & CO., P.C. AS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR AGAINST
[ ] [ ]
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting. If any other business is
presented at the Annual Meeting, this Proxy shall be voted in accordance with
the recommendations of the board. As to Items 1 through 4, this Proxy will be
voted as directed, but if no directions are indicated, it will be voted FOR the
nominees listed in Item 1 and FOR the approval of all other Items.
Signature(s)
-------------------------------
Date
---------------------------------------
NOTE: Please sign as name appears hereon. Only one joint owner is required to
sign. When signing as attorney, administrator, trustee or guardian, please
give full title as such.
APPENDIX TO PROXY STATEMENT OF GMX RESOURCES INC. CONTAINING SUPPLEMENTAL
INFORMATION REQUIRED TO BE PROVIDED TO THE SECURITIES AND EXCHANGE COMMISSION
The following is information required to be provided to the
Securities and Exchange Commission in connection with the definitive proxy
materials of GMX RESOURCES INC. (the "Company") relating to the 2005 Annual
Meeting of Shareholders of the Company. This information is not deemed to be
part of the Proxy Statement and will not be provided to shareholders in
connection with the Proxy Statement.
I. The Company anticipates that definitive proxy materials will be mailed to
shareholders on or about April 22, 2005.