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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
(Name of Person(s) Filing Proxy Statement if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] 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: ___________________________.
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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 22, 2007
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 22, 2007, 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 and until their
successors are elected and qualified.
2. 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, 2007.
3. To approve the amendment of the Company's Stock Option Plan to
increase the maximum number of shares of Common Stock in respect of
which options may be granted under the Stock Option Plan from 550,000
shares to 850,000 shares.
4. 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 20, 2007, 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
-------------------------------------
Ken L. Kenworthy, Sr., Secretary
Oklahoma City, Oklahoma
April 30, 2007
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 22, 2007
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 22, 2007, 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 30,
2007, 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 20, 2007.
On that date, the Company had outstanding 13,267,886 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.
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 and their respective business
backgrounds are as follows:
DIRECTOR OF
NAME AGE POSITION(S) CURRENTLY HELD GMX SINCE
- ---- --- -------------------------- ---------
Ken L. Kenworthy, Jr. 50 President, Chief Executive Officer and Director 1998
Ken L. Kenworthy, Sr. 71 Executive Vice President, Secretary, Treasurer, 1998
Chief Financial Officer and Director
T. J. Boismier 72 Director 2001
Steven Craig 50 Director 2001
Jon W. "Tucker" McHugh 62 Director 2005
KEN L. KENWORTHY, JR. is a co-founder of GMX and has been President and a
director since the Company's inception in 1998. In 1980, he founded OEXCO Inc.,
a privately held oil and gas company, which he managed until 1995 when its
properties were sold for approximately $13 million. During this period OEXCO
operated 300 wells and drilled and discovered seven fields and dozens of new
zones. During this same period, he formed and managed a small gas gathering
system. From 1995 until he founded GMX in 1998, Mr. Kenworthy was a private
investor. From 1980 to 1984, he was a partner in Hunt-Kenworthy Exploration
which was formed to share drilling and exploration opportunities in different
geological regions. Prior to 1980, he held various geology positions with Lone
Star Exploration, Cities Service Gas Co., Nova Energy, and Berry Petroleum
Corporation. He also served as a director of Nichols Hills Bank, a commercial
bank in Oklahoma City, Oklahoma for ten years before it was sold in 1996 to what
is now Bank of America. He is a member of the American Association of Petroleum
Geologists and Oklahoma City Geological Society.
KEN L. KENWORTHY, SR. is a co-founder of GMX and has been Executive Vice
President, Chief Financial Officer and a director since the Company's inception
in 1998. From 1993 to 1998, he was principal owner and Chairman of Granita Sales
Inc., a privately-held frozen beverage manufacturing distribution company. Prior
to that time, he held various financial positions with private and public
businesses, including from 1970 to 1984, as vice
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president, secretary-treasurer, chief financial officer and a director of CMI
Corporation, a New York Stock Exchange listed company which manufactures and
sells road-building equipment. He has held several accounting industry positions
including past president of the Oklahoma City Chapter National Association of
Accountants, past vice president of the National Association of Accountants and
past officer and director of the Financial Executives Institute.
T. J. BOISMIER is founder, President and Chief Executive Officer of T. J.
Boismier Co., Inc., a privately held mechanical contracting company in Oklahoma
City, Oklahoma, which designs and installs plumbing, heating, air conditioning
and utility systems in commercial buildings, a position he has held since 1961.
He became a director in February 2001 simultaneously with the completion of the
Company's initial public offering.
STEVEN CRAIG is the Chief Energy Analyst for Elliott Wave International, a
securities market research and advisory company located in Gainesville, Georgia,
which is one of the world's largest independent providers of market research and
technical analysis. As Chief Energy Analyst, Mr. Craig provides in-depth
analysis and price forecasts of the major NYMEX energy markets to an
institutional clientele that spans the gamut of the energy industry. Prior to
joining Elliott Wave International in January 2001, he provided risk management
services to Central and South West, one of the largest natural gas consumers in
the U.S. prior to its merger with American Electric Power in June 2000 and
independent oil and gas producer Kerr-McGee. He became a director in August
2001.
JON W. "TUCKER" MCHUGH became a director of the Company in January 2005.
Since 1997, Mr. McHugh has been Senior Vice President Commercial Lending at
First Commercial Bank, Edmond, Oklahoma.
Ken Kenworthy, Sr. is the father of Ken Kenworthy, Jr.
CORPORATE GOVERNANCE MATTERS
The board of directors uses the independence standards of the NASDAQ Stock
Market ("NASDAQ") corporate governance rules for determining whether directors
are independent. The board additionally follows the rules of the Securities and
Exchange Commission ("SEC") in determining independence for Audit Committee
members. The board has determined that each of Messrs. Boismier, Craig and
McHugh are independent under both of the NASDAQ and SEC rules for purposes of
service on the board and on the Audit, Compensation and Nominating Committees.
Members of each committee are elected annually by the board and serve one-year
terms and until their successors are elected and qualified.
During the year ended December 31, 2006, the board of directors met or
acted by unanimous consent four times. All directors in office at the time of
such meetings attended all of the meetings of the board of directors held during
2006. 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 2006 annual meeting of
shareholders, all directors then serving on the board attended the meeting.
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, Steven Craig, and. Jon "Tucker" McHugh during 2006. All committee
members attended all of the meetings of such committees held during 2006.
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 or
acted by unanimous consent four times in 2006. The board has determined that Mr.
McHugh qualifies as a "financial expert" as defined by the rules of the SEC
based on his experience and education.
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The Nominating Committee's function is to assist the board in selecting and
screening nominees for the board and to oversee various corporate governance
matters as described in more detail below. This committee met or acted by
unanimous consent one time in 2006.
The board has also established a Compensation Committee. During 2006, the
Compensation Committee met or acted by consent two times. The board has
authorized the Compensation Committee to annually review and approve corporate
goals and objectives relevant to the compensation of our chief executive officer
("CEO"), evaluate the performance of the CEO in light of these goals and
objectives and approve the amounts and individual elements of total compensation
for the CEO based on this evaluation. In addition to determining the total
compensation of the CEO, the Compensation Committee approves the compensation of
the other executive officers. Our CEO and our Chief Financial Officer ("CFO")
make recommendations to the Compensation Committee with respect to their own
compensation as well the compensation of other executive officers, but the final
decisions with respect to such compensation is made by the Committee.
In addition to its role in determining the compensation of our CEO and our
other executive officers, the Compensation Committee has the authority to:
o periodically evaluate, in conjunction with the CEO, and make
recommendations to the board regarding the terms and
administration of our annual and long-term incentive plans to
assure that they are structured and administered in a manner
consistent with our compensation objectives as to participation,
annual incentive awards, corporate financial goals, actual awards
paid to our executive officers, and total funds reserved for
payment under the compensation plans, if any;
o periodically evaluate, in conjunction with the CEO, existing
equity-related executive compensation plans as well as potential
equity-related plans and make recommendations to the board based
on the committee's evaluation; and
o periodically evaluate and make recommendations to the board
regarding annual retainer and meeting fees for the board and
committees of the board and the terms and awards of any stock
compensation to members of the board.
If the board so approves, the Compensation Committee has the sole authority
to retain or terminate consultants, including the authority to approve the
consultants' fees and other retention terms. The Compensation Committee did not
retain any consultants in 2006.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As stated above, Messrs. Boismier, Craig and McHugh were the members of our
Compensation Committee in 2006. None of these individuals has ever been an
officer or employee of the Company or any subsidiary. Additionally, none of our
executive officers serves on the compensation committee of any entity that has
one or more of such entity's executive officers serving on our board.
CORPORATE GOVERNANCE GUIDELINES AND COMMUNICATIONS WITH THE BOARD
The Company has adopted a Code of Business Conduct and Ethics. 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.
4
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'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 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.
DIRECTOR COMPENSATION
The following table summarizes the compensation of non-employee directors
in 2006.
All Other
Fees Earned or Option Compensation
Name Paid in Cash($)(1) Awards($)(2) ($) Total ($)
- ------------------------- ------------------ ------------ ------------ ---------
T. J. Boismier $12,000 $18,400 - $30,400
Steven Craig $13,500 $18,400 - $31,900
Jon W. "Tucker" McHugh $13,750 $16,302 - $30,052
(1) Standard compensation for nonemployee directors in 2006 consisted of
payments of $2,000 for each board of directors meeting, $1,500 for each audit
committee meeting and $500 for each compensation and nominating committee
meeting. In addition, the chairman and secretary of the audit committee received
$500 and $400, respectively, for each audit committee meeting which they
attended. Directors who are also our employees receive no additional
compensation for their services as directors.
(2) Board members are eligible to receive grants of options to purchase shares
of our common stock pursuant to our stock option plan. Awards made to directors
are made on the same terms as those described below in "In-Service Compensation:
Short and Long-Term Incentive Compensation" and "Post-Employment Compensation:
Effect of Termination Events on Elements of In-Service Compensation." No stock
options were granted to any director in
5
2006. The amount set forth is the amount of compensation cost recognized by the
Company during 2006 attributable to options granted to the named directors under
Statement of Financial Accounting Standard No. 123(R), SHARE-BASED PAYMENT,
("SFAS 123(R)") by reason of previously granted options that vested during the
year.
As of December 31, 2006, directors had options outstanding as follows:
--------------------------- -----------------------------------------------------
Option Awards
--------------------------- -----------------------------------------------------
Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised
Option Option
--------------------------- ------------ -------------- -------- ----------
Name Exerciseable Unexerciseable Option Option
Exercise Expiration
Price Date
--------------------------- ------------ -------------- -------- ----------
T. J. Boismier 0 5,000 3.00 01/11/2014
--------------------------- ------------ -------------- -------- ----------
2,500 5,000 6.10 12/12/2014
--------------------------- ------------ -------------- -------- ----------
Steven Craig 2,500 0 5.00 09/09/2011
--------------------------- ------------ -------------- -------- ----------
2,500 5,000 3.00 01/11/2014
--------------------------- ------------ -------------- -------- ----------
5,000 5,000 6.10 12/12/2014
--------------------------- ------------ -------------- -------- ----------
Jon W. "Tucker" McHugh 2,500 7,500 8.00 01/19/2015
--------------------------- ------------ -------------- -------- ----------
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, 2007. Smith Carney also served as the Company's independent
registered public accounting firm for the years ending December 31, 2005 and
2006. 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.
AUDIT AND OTHER FEES
The following table sets forth the fees billed by our independent auditor,
Smith, Carney & Co., p.c. for 2005 and 2006:
FEES BILLED
--------------------
TYPE 2005 2006
---- -------- --------
Audit fees $ 54,168 $135,525
Audit related fees -- --
Tax fees 15,000 18,827
All other fees 14,763 47,929
-------- --------
Total $ 83,931 $202,281
======== ========
The Audit Committee pre-approved all audit and non-audit services, if any,
performed by our independent auditors. All other fees in 2005 and 2006 related
to non-prohibited consulting services provided by our independent auditors.
6
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-K for the year ended December 31, 2006.
-- T. J. Boismier, Steven Craig and Jon "Tucker" McHugh, members of the
Audit Committee
PROPOSAL NO. 2
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 corporate
practice, consistent with the 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, 2007, 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, 2007.
7
PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO INCREASE SHARES UNDER STOCK OPTION PLAN
The Company's Stock Option Plan (the "Plan") is intended as an incentive to
managerial and other key employees of the Company and its subsidiaries. Its
purposes are to retain employees with a high degree of training, experience, and
ability, to attract new employees whose services are considered unusually
valuable, to encourage the sense of proprietorship of such persons, and to
stimulate the active interest of such persons in the development and financial
success of the Company. The Plan was originally adopted in January 2001. In
February 2001, the Plan was amended to increase the number of shares authorized
under the Plan from 300,000 to 550,000 shares. As of March 2007, 458,251 of the
shares authorized had been issued pursuant to exercises of options or were
subject to outstanding options, leaving 91,749 shares available for future
grants. The Plan expires on October 30, 2010.
The board has adopted, subject to shareholder approval, an amendment to the
Plan to increase the maximum number of shares of Common Stock in respect of
which options may be granted under the Plan from 550,000 shares to 850,000
shares. The amendment was adopted in order to ensure that the Company will
continue to have appropriate equity incentive compensation opportunities for its
directors, officers, employees and other service providers. The board considers
the Company's ability to offer competitive compensation opportunities, including
long-term equity based compensation in the form of stock options, as an
important component of the Company's management retention strategy.
DESCRIPTION OF THE PLAN
ADMINISTRATION. The Plan is administered by the board of directors of the
Company. The board has the authority to appoint a committee ("Committee") of not
less than two members of the board to administer the Plan and to make
determinations concerning the granting of options thereunder. The board may
appoint and remove members of the Committee as it sees fit from time to time.
The Board or Committee has sole authority to determine the persons who shall
participate in the Plan and the extent of their participation and to construe
and interpret provisions of the Plan and any option granted thereunder. No
member of the board or Committee will be liable for any action or determination
made in good faith, and such members will be entitled to indemnification and
reimbursement in the manner provided in the Company's Certificate of
Incorporation, or as otherwise permitted by law. The Board has appointed the
Compensation Committee to approve the grant of options for executive officers,
and the Compensation Committee has authorized the Chief Executive or Chief
Financial Officer to approve grants of options to non executive officers.
SHARES SUBJECT TO THE PLAN. The maximum number of shares of Common Stock
reserved for issuance under the Plan and in respect of which options may be
granted pursuant to the terms of the Plan will be increased by the proposed
amendment from 550,000 shares to 850,000 shares. These shares consist of
authorized but unissued shares or treasury shares held by the Company. This
number is subject to appropriate equitable adjustment in the event of any
subdivision or consolidation of shares or other capital adjustment, or the
payment of a stock dividend or other increase or decrease in such shares,
effected without receipt of consideration by the Company. In the event that any
outstanding option under the Plan for any reason expires or is terminated prior
to the end of the period during which options may be granted, the shares of
Common Stock allocable to the unexercised portion of such option may again be
subject to options granted under the Plan.
ELIGIBILITY. Persons eligible to participate in the Plan consist of
managerial and other key employees of the Company and/or its subsidiaries who
hold positions of significant responsibilities or whose performance or potential
contribution, in the sole judgment of the Committee, will benefit the future
success of the Company as the board or Committee may determine from time to
time. In addition, all Non-Employee Directors of the Company shall be eligible
to participate in the Plan. There is no limit to the total number of eligible
persons to whom options may be granted under the Plan. The board or Committee
will determine in accordance with the Plan the persons to whom option awards are
granted, the size of any option awards and the conditions applicable thereto.
EXERCISE OF OPTIONS. Options shall become exercisable at the rate of 25% of
the total shares subject to the option on each of the first four (4) anniversary
dates of the date of grant, unless otherwise provided by the board or Committee
at the time the option is granted. The board or Committee shall also be entitled
to accelerate the date any outstanding option becomes exercisable at any time.
After becoming exercisable, options granted under the Plan
8
may be exercised, in whole or in part, at any time prior to the expiration or
termination of the options. The exercise price of options granted under the Plan
is determined by the board or the Committee, but may not be less than the fair
market value of the Common Stock on the date of grant of the option. The
exercise price of options granted under the Plan must be paid upon the exercise
of the option and may be paid in cash or with stock of the Company or a
combination thereof.
NONTRANSFERABILITY. Options granted under the Plan are not assignable or
transferable by the optionee except by will or by the laws of descent and
distribution, and are exercisable during the optionee's lifetime only by the
optionee.
EFFECT OF DEATH, TERMINATION OF EMPLOYMENT AND RETIREMENT. If an optionee
dies while employed by the Company at a time when the optionee is entitled to
exercise an option granted pursuant to the Plan, then at any time or times
within 12 months after the optionee's death the options may be exercised by the
optionee's estate, personal representative, beneficiary or other person upon
whom such right devolves by will or the laws of descent and distribution, and
except as so exercised, will expire at the end of such 12-month period. If the
optionee's employment is terminated for cause, the optionee's options whether or
not then exercisable will terminate immediately. If the termination is for a
reason other than death or for cause, the optionee will have the right to
exercise his or her vested options at any time within three (3) months after
such termination, unless the optionee continues to serve as a director of the
Company as provided below. However, in any event, no option may be exercised
more than ten (10) years after the date of its grant.
OPTION AWARDS TO NON-EMPLOYEE DIRECTORS. Each member of the board of
directors who is not an employee of the Company (a "Non-Employee Director") is
eligible to receive option grants under the Plan on the same basis as other
eligible persons. The purchase price for each share placed under an option grant
for a Non-Employee Director is equal to 100% of the fair market value of such
share on the date the option is granted. No options will be granted to a
Non-Employee Director after any date that the Non-Employee Director ceases to be
a director of the Company. All stock options granted to a Non-Employee Director
shall consist of options that do not qualify as incentive stock options under
Section 422 of the Internal Revenue Code.
Unless otherwise determined by the Committee at the time of grant, all
options shall become exercisable at the rate of 25% of the total shares subject
to the option on each of the first four (4) anniversary dates of the date of
grant. The Committee shall also be entitled to accelerate the date any
outstanding option becomes exercisable at any time. The period during which a
Non-Employee Director option may be exercised shall be ten (10) years from the
date of grant.
RECAPITALIZATION OR REORGANIZATION. In the event of any change in
capitalization affecting the common stock of the Company, such as a stock
dividend, stock split, recapitalization, merger, consolidation, split-up,
combination or exchange of shares or other form of reorganization, liquidation,
or any other change affecting the common stock, such proportionate adjustments
shall be made with respect to the aggregate number and type of securities for
which options may be granted under the Plan, the number of shares covered by
each outstanding option and the price of each outstanding option will be
proportionately adjusted.
If the Company dissolves, liquidates, or is reorganized in a manner which
results in a change in control of the Company, or in the event of a tender or
exchange offer which results in a change in control of the Company, all options
outstanding on the date of such change in control shall become immediately and
fully exercisable, and an optionee will be permitted to surrender for
cancellation within sixty (60) days after such change in control, any option or
portion of such option to the extent not yet exercised and the optionee will be
entitled to receive a cash payment in an amount equal to the excess, if any, of
(A) the fair market value on the date preceding the date of surrender, of the
shares subject to the option or portion thereof surrendered, over (B) the
aggregate exercise price for the shares under the option or portion thereof
surrendered.
MODIFICATION AND TERMINATION OF THE PLAN. The Committee may at any time
amend, alter or discontinue the Plan in such manner as it may deem advisable.
Any such amendment or alteration may be effected without the approval of the
shareholders of the Company, except to the extent such approval may be required
by applicable laws or by the rules of any securities exchange upon which the
Company's outstanding shares are admitted to listed trading. Additionally, no
amendment may affect any then outstanding options or unexercised portions
thereof
9
without the consent of the optionee. No options shall be granted pursuant to
this Plan after October 30, 2010, except with respect to awards then
outstanding.
SPECIAL PROVISIONS APPLICABLE TO INCENTIVE STOCK OPTIONS. The Committee
will determine at the time of any option grant whether such option will be an
incentive stock option intended to qualify under Section 422 of the Internal
Revenue Code or a nonstatutory stock option. Options granted to Non-Employee
Directors and other non-employee service providers will not qualify as incentive
stock options. Incentive stock options granted pursuant to the Plan will comply
with all the previously mentioned provisions of the Plan modified by the
following special terms and conditions:
1. ELIGIBILITY. Persons eligible to receive incentive stock options are
employees (including officers and directors who are employees) of the
Company or its subsidiaries only.
2. LIMITATIONS ON AGGREGATE VALUE OF SHARES SUBJECT TO INCENTIVE STOCK
OPTIONS. The aggregate fair market value as of the date of the grant
of shares with respect to which incentive stock options are
exercisable for the first time by an optionee during any calendar year
will not exceed $100,000.
3. TERM OF INCENTIVE STOCK OPTIONS. Each incentive stock option granted
under the Plan will not be exercisable more than 10 years from the
date the option is granted.
4. LIMITATIONS FOR CERTAIN SHAREHOLDERS. Any person who owns, directly or
indirectly, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or its
subsidiaries may not receive an incentive stock option under the Plan,
unless at the time the option is granted to such person the exercise
price is at least 110% of the fair market value of the shares covered
by the option and the option is not exercisable after the expiration
of five years from the date of the grant.
FEDERAL INCOME TAX CONSEQUENCES. An optionee receiving an option qualifying
as an "incentive stock option" under Section 422 of the Internal Revenue Code
will not recognize taxable income upon the grant or exercise of the option. Upon
disposition of the shares acquired, the optionee will recognize a capital gain
or loss based on the difference between the amount realized and the option
price, assuming certain holding period requirements are satisfied and the shares
are held as a capital asset. However, alternative minimum tax may be applicable.
The Company will not receive any tax deduction in connection with the grant or
exercise of an incentive stock option or, assuming the holding period
requirements are satisfied, sale of the shares by an optionee.
An optionee receiving a nonstatutory stock option will not recognize
taxable income on the grant of an option, but will be deemed to have received
ordinary income on the exercise of an option equal in amount to the difference
between the fair market value of the shares acquired as of the date of exercise
and the option price. The Company will be entitled to a tax deduction at the
same time in the same amount. An optionee's tax basis in the shares acquired
will be equal to the fair market value of the shares as of the date of exercise
for purposes of measuring any gain or loss on subsequent disposition of the
shares.
NEW PLAN BENEFITS
Provided that the shareholders approve the proposed amendment of the Plan,
the increased number of shares will be available for awards to all eligible
participants in the Plan. The board has not at this time considered or approved
any future awards under the Plan, and, as a result, the identity of future award
recipients and the size and terms of future awards are not known at this time.
CONSEQUENCES OF NON-APPROVAL
If the shareholders do not approve the proposed amendment of the Plan, no
further awards will be made pursuant to the Plan after the maximum number of
shares of Common Stock reserved for issuance under the Plan are subject to an
option grant.
10
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSED AMENDMENT TO INCREASE THE NUMBER OF SHARES UNDER THE STOCK OPTION PLAN.
EXECUTIVE OFFICERS, COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
Our current executive officers are named below:
Name Age Position
- ------------------------- ------------- --------------------------------------
Ken L. Kenworthy, Jr. 50 President and Chief Executive Officer
Executive Vice President, Secretary,
Ken L. Kenworthy, Sr. 71 Treasurer, and Chief Financial Officer
Gary D. Jackson 56 Vice-President, Land
For description of the business background and other information concerning
Mr. Ken L. Kenworthy, Jr. and Mr. Ken L. Kenworthy, Sr., see "Election of
Directors" above. All executive officers and significant employees serve at the
discretion of the board.
GARY D. JACKSON became Vice President of Land for the Company in 2005.
During 2004 and 2005 prior to joining the Company, he was an independent
petroleum landman, performing and directing contract land services for other oil
and gas companies for CLS Group, Edmond, OK Prior to that time, he was President
of for SAI Consulting, which provided professional services for oil and gas and
natural resources asset acquisition and management.
SIGNIFICANT EMPLOYEES
The following individuals are significant employees:
KEITH LEFFEL, age 57, has been employed as our natural gas marketer and
pipeline operations manager since November 2001. Since 1986, Mr. Leffel formed
and operated GKL Energy Services Company, a company that assists producers with
gas marketing services.
RICK HART, JR., age 50, was hired in January 2004 as Operations Manager. He
has 27 years of experience in all aspects of operations, including specific
expertise in drilling, completion and production in the East Texas reservoirs.
Immediately before coming to work for GMX, he worked with Focus Energy for nine
years and had responsibility for 319 producing wells.
COMPENSATION DISCUSSION AND ANALYSIS
Our compensation philosophy and the objectives of our compensation
programs:
o Are designed to provide salary and bonus compensation to our
chief executive officer ("CEO") and chief financial officer
("CFO") in amounts we consider to be below amounts paid to
individuals fulfilling similar roles with companies we consider
to be our competitors, considering their significant equity
positions in the Company; and
o Are designed to provide any other executive officers the Company
may employ from time to time compensation primarily consisting of
an annual salary competitive in the local market and in amounts
recognizing relative levels of responsibility and secondarily
consisting of equity incentive
11
compensation in the form of options to purchase shares of our
common stock to align these other executive officers' interests
with the interests of our CEO, CFO and other shareholders.
To maintain simplicity in our compensation programs, we have not
historically adopted long-term incentive compensation plans other than our stock
option plan. While the Compensation Committee has the authority and discretion
to grant options to our CEO and CFO pursuant to this plan, no such options have
ever been granted. However, it is possible that options could be granted to the
CEO and CFO in the future.
Additionally, we do not enter any written employment agreements with any of
our executive officers. Each executive officer serves in his position at the
discretion of the board.
The Compensation Committee has not engaged in any formal benchmarking or
peer group comparisons in connection with any compensation decisions because of
the limited number of executive officers and the general availability of peer
group compensation information.
The elements of our compensation for named executive officers vary,
depending on their position, and are described below. All of these elements,
other than those for which the Company is contractually obligated, are subject
to change if the Compensation Committee believes a change is appropriate.
INDIVIDUAL ELEMENTS OF COMPENSATION
- -----------------------------------
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
---------------------------------------------------
ANNUAL SALARY. The primary element of compensation paid by us to our CEO
and our CFO consists of an annual salary, which is currently $275,000, to each
such officer. The Committee maintains discretion to increase or decrease the
salaries of our CEO and CFO if the Committee believes such an adjustment is
necessary. In 2006, the salaries of our CEO and CFO were increased twice, and
these increased salary amounts were reviewed and approved by our Compensation
Committee pursuant to its established procedures and were granted to the
officers based on the Committee's evaluation of the recent performance of the
Company under the officers' direction. As stated previously, the Company
believes base salaries of our CEO and CFO are lower than salaries paid to
executive officers serving in similar roles for companies we consider to be our
competitors. We follow this policy in light of the significant equity positions
in the Company maintained by our CEO and CFO.
INCENTIVE COMPENSATION. Incentive compensation provided to our CEO and CFO
historically consists solely of discretionary bonuses awarded by the Company
after review and approval of the Compensation Committee. No formula is applied
when awarding these payments, no advance communication is made to the CEO or CFO
regarding potential payments for a select period of time and such payments are
made solely at the discretion of the Compensation Committee.
POST EMPLOYMENT COMPENSATION. Our CEO and CFO are entitled to post
employment compensation under our defined contribution qualified retirement plan
in which they participate on the same basis as all other employees.
OTHER NAMED EXECUTIVE OFFICERS
------------------------------
ANNUAL SALARY. The base salary amount paid to our other executive officer,
currently consisting of our Vice President of our Land Department ("Vice
President"), is established by our Chief Executive Officer in consultation with
the Compensation Committee, such discussion last occurring when the Vice
President was hired in 2005, and is based on his level of responsibility and an
assessment of his performance and potential contribution to our financial and
operational objectives. Salary is the more significant component of our Vice
President's cash compensation and represented 49% of his total compensation in
2006.
INCENTIVE COMPENSATION. Incentive compensation provided to our Vice
President consists of long-term incentive compensation in the form of options to
purchase shares of our common as described below in "Stock Options."
12
POST EMPLOYMENT COMPENSATION. Our Vice President is entitled to post
employment compensation under our defined contribution qualified retirement plan
in which he participates on the same basis as all other employees.
PERSONAL BENEFITS AND PERQUISITES
- ---------------------------------
The wives of Mr. Ken L. Kenworthy, Jr. and Mr. Ken L. Kenworthy, Sr. often
accompany them on business related travel. The cost attributable to the wives'
travel is paid by the Company, is included in each executive's taxable wages and
is reflected in the summary compensation table below. The Company also pays the
cost of country and golf club membership dues and food expenses for Mr.
Kenworthy, Jr. and Mr. Kenworthy, Sr. The cost attributable to their personal
use is included in the summary compensation table below. The Company also pays
the premiums on life insurance policies on Mr. Kenworthy, Jr, and Mr. Kenworthy,
Sr. of which their wives are their respective beneficiaries. The cost of the
premiums on these policies is included in Mr. Kenworthy, Jr.'s and Mr.
Kenworthy, Sr.'s taxable income and is reflected in the summary compensation
table. We also provide an automobile allowance (including fuel, maintenance and
insurance) to each of Mr. Kenworthy, Jr. and Mr. Kenworthy, Sr. The cost
attributable to their personal use based on business miles versus personal miles
is included in their taxable wages and is reflected in the summary compensation
table below. Also reflected in the summary compensation table is the cost
attributable to Mr. Jackson's personal use, based on business miles versus
personal miles, of an automobile owned by the Company.
IMPACT OF REGULATORY REQUIREMENTS ON EXECUTIVE COMPENSATION DECISIONS
- ---------------------------------------------------------------------
Section 422 of the Internal Revenue Code provides favorable tax treatment
to the recipient of stock options that meet certain requirements imposed by the
section to qualify as "incentive stock options" as defined by the section. The
Compensation Committee has considered the effect of Section 422 on our stock
option plan, and the terms of the plan were designed to be responsive to the
favorable tax treatment provided by Section 422. However, in certain
circumstances it may be in one of our executive's best interests to receive
options not subject to Section 422 restrictions, so therefore, options granted
under our plan may be either incentive stock options or options that do not
qualify as such.
COMPENSATION COMMITTEE REPORT
In accordance with its written charter adopted by the Board of Directors
("Board"), the Compensation Committee of the Board is responsible for
establishing the compensation of our chief executive officer, Mr. Kenworthy, Jr.
and overseeing the compensation process as it relates to our other executive
officers to assure they are compensated in a manner consistent with our overall
objectives. The Compensation Committee is also obligated to communicate to
shareholders information regarding the Company's compensation policies and the
reasoning behind such policies.
The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis ("CD&A") with management. Based on this review and
discussions, the Compensation Committee recommended to the Board that the CD&A
be included in this proxy statement and the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, for filing with the Securities and
Exchange Commission.
The preceding report is presented by the members of the Compensation
Committee.
-- T. J. Boismier, Steven Craig and Jon "Tucker" McHugh, members of the
Compensation Committee
13
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by us for services
rendered during the year ended December 31, 2006 to such individuals referred to
herein as the "named executive officers."
Option All Other
Salary Bonus Awards Compensation
Name Year ($)(1) ($)(2) ($)(3) ($)(4) Total ($)
- ------------------------- ------ ------------ ------------ ------------ ---------------- ---------
Ken L. Kenworthy, Jr. 2006 $233,333 $100,000 -- $48,448 $381,781
Ken L. Kenworthy, Sr. 2006 $233,333 $100,000 -- $40,908 $374,241
Gary D. Jackson 2006 $127,435 $25,000 $106,563 $8,301 $267,299
(1) On March 29, 2006, the Company adjusted the compensation of Ken L.
Kenworthy, Jr. and Ken L. Kenworthy, Sr. to provide annual salary increases of
$50,000 from $175,000 per year to $225,000 per year, effective as of January 1,
2006. Additionally, on November 7, 2006, the Company adjusted the compensation
of Ken L. Kenworthy, Jr. and Ken L. Kenworthy, Sr. to provide annual salary
increases of $50,000 from $225,000 per year to $275,000 per year, effective as
of November 1, 2006. The increased annual salary amounts were reviewed and
approved by the Company's Compensation Committee pursuant to its established
procedures and were granted to the officers based on the Committee's evaluation
of the recent performance of the Company under the officers' direction.
(2) On November 7, 2006, the Company awarded Ken L. Kenworthy, Jr. and Ken L.
Kenworthy, Sr. discretionary bonuses in the amount of $100,000 with $50,000
being paid to each individual in 2006 and the remaining $50,000 being paid to
each individual in 2007. The bonus awards were reviewed and approved by the
Company's Compensation Committee pursuant to its established procedures and were
granted to the officers based on the Committee's evaluation of the recent
performance of the Company under the Officers' direction.
(3) The amount set forth is the amount of compensation cost recognized by the
Company during 2006 attributable to options granted to the named executive
officers under SFAS 123(R) by reason of previously granted options that vested
during the year.
(4) All Other Compensation for Mr. Kenworthy, Jr. includes $4,471 relating to
the cost of his wife's travel expenses when she accompanies him on business
related travel, $14,134 for personal use of country and golf club dues, and
expenses paid by the Company, $10,000 relating to life insurance premiums paid
by the Company, $7,812 automobile related cost attributable to personal use
based on business miles versus personal miles and also includes $12,031
representing contributions by the Company to Mr. Kenworthy's 401(k) account.
All Other Compensation for Mr. Kenworthy, Sr. includes $8,107 relating to the
cost of his wife's travel expenses when she accompanies him on business related
travel, $10,408 for personal use of country and golf club dues and expenses paid
by the Company, $2,550 relating to life insurance premiums paid by the Company,
$7,812 automobile related cost attributable to personal use based on business
miles versus personal miles and also includes $12,031 representing contributions
by the Company to Mr. Kenworthy's 401(k) account.
All Other Compensation for Mr. Jackson includes $695 relating to the cost
attributable to Mr. Jackson's personal use, based on business miles versus
personal miles, of an automobile owned by the Company and also includes $7,606
representing contributions by the Company to Mr. Jackson's 401(k) account.
STOCK OPTIONS
For a description of our Stock Option Plan, see "Proposal No. 3 APPROVAL OF
AMENDMENT TO INCREASE SHARES UNDER STOCK OPTION PLAN" above.
Historically, stock option awards have not been granted to our CEO or CFO
due to their significant equity positions in the Company. Howver, it is possible
that the Compensation Committee could approve grants to these
14
officers in the future. Grants of stock options to our Vice President are made
by the Compensation Committee, which has the discretion to consider whether such
a grant is appropriate given the officer's performance and current annual
salary. We did not grant any options to our Vice President in 2006.
The Committee does not have an established procedure regarding the timing
of stock option award grants in relation to the release of any nonpublic
information, but historically, the Committee has not granted options in
conjunction with any such information. Additionally, the Committee does not have
an established policy regarding the back dating of stock option award grants for
the purpose of affecting executive officer compensation. However, no grants of
stock options have been back dated, and it is not anticipated that any future
grants will be dated in such a manner.
OUTSTANDING EQUITY AWARDS
The following table reflects outstanding options held by our executive
officers as of December 31, 2006. There were no options exercised by named
executive officers in 2006.
Option Awards
------------------------------------------------------------------------------
Number of Number of
Securities Securities
Underlying Underlying
Unexercised Unexercised
Option Option
---------------- ---------------------
Option Exercise Option
Name Exerciseable Unexerciseable (1) Price Expiration Date
---------------------- ---------------- --------------------- ------------------ -----------------
Gary D. Jackson 6,250 18,750 $20.01 9/14/2015
(1) Mr. Jackson was granted 25,000 options to purchase our common stock on
September 15, 2005. The options vest in four separate increments of 6,250 with
the first such vesting date being September 15, 2006. Future vesting dates will
be September 15 in the years 2007, 2008 and 2009.
DEFINED CONTRIBUTION PLAN
The Company offers a tax qualified defined contribution "401K" plan to all
of its employees, including its executive officers, to provide a benefit payable
to an employee or his heirs upon retirement, total disability, or death. Under
the terms of the plan and subject to limitations of federal law, each of our
employees can elect to defer a portion of his compensation and direct such
deferrals to the investments offered under the plan, generally consisting of
mutual funds in various asset classes as well as our common stock. Subject to
the terms of the plan, the Company makes discretionary matching contributions to
the plan on behalf of the participant employees. Participants are immediately
vested in their deferred contributions, but Company contributions are subject to
certain vesting requirements. Executive officers participate in the plan on the
same basis as all other employees. The Company's 2006 contributions to the plan
for the account of the named executive officers is included in the Summary
Compensation Table set forth above.
OTHER POTENTIAL PAYMENTS UPON A CHANGE IN CONTROL
There are no special benefits payable to the named executive officers by
reason of a change in control other than as described under "Stock Options."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 29, 2007, by (i) each of our
directors; (ii) each of our executive officers and the spouse of our Chief
Executive Officer; and (iii) all of our directors and executive officers as a
group. As of March 29, 2007, there were
15
13,267,136 shares of common stock outstanding. Except as otherwise listed below,
each named beneficial owner has sole voting and investment power with respect to
the shares listed.
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
- -------------------------------------- ------------------ ------------------
Ken L. Kenworthy, Jr. (1) (2) 820,841 6.2%
Karen Kenworthy(2)(3) 683,288 5.2%
Ken L. Kenworthy, Sr.(2) (8) 868,324 6.5%
T. J. Boismier (4) 27,500 *
Steven Craig(5) 12,500 *
Gary D. Jackson (6) 6,250 *
Jon W. McHugh(7) 6,000 *
All executive officers and directors
as a group (6 persons) 1,741,415 13.1%
* Less than 1%
(1) Shares owned by Mr. Kenworthy, Jr. exclude 670,252 shares owned by his wife
as to which he disclaims beneficial ownership and includes 13,036 shares of
which he and his wife, Karen M. Kenworthy, share voting power.
(2) The business address of Messrs. Kenworthy, Jr. and Kenworthy, Sr. and Karen
M. Kenworthy is 9400 North Broadway, Oklahoma City, Oklahoma 73114.
(3) Shares owned by Karen Kenworthy exclude 807,805 shares owned by her husband
Ken L. Kenworthy, Jr., as to which she disclaims beneficial ownership and
include 13,036 shares of which he and her husband, Ken L. Kenworthy, Jr. share
voting power. Karen Kenworthy is included in this table as a beneficial owner of
more than 5% of our common stock and not as a member of the Company's
management. Therefore, Mrs. Kenworthy's ownership of the Company's common stock
is not included in the calculation regarding the ownership of our directors and
officers as a group.
(4) Includes 5,000 shares Mr. Boismier has the right to acquire on exercise of
options exercisable within 60 days.
(5) Includes 12,500 shares Mr. Craig has the right to acquire on exercise of
options exercisable within 60 days.
(6) Includes 6,250 shares Mr. Jackson has the right to acquire on exercise of
options exercisable within 60 days.
(7) Includes 5,000 shares Mr. McHugh has the right to acquire on exercise of
options exercisable within 60 days.
(8) Shares owned by Mr. Kenworthy, Sr. includes 59,403 shares held in trust for
the benefit of his children. 300,000 shares beneficially owned by Mr. Kenworthy,
Sr. are pledged to the Royal Bank of Canada as security for a line of credit
extended in May 2006.
The following table sets forth certain information regarding the beneficial
ownership of our common stock by persons known to beneficially own more than 5%
of our outstanding stock as of the latest date such persons have filed reports
of beneficial ownership with the Securities & Exchange Commission This
information is based on filings made by such persons with the Securities &
Exchange Commission in reference to the 13,267,136 outstanding shares of our
common stock on March 9, 2007. Except as otherwise indicated, each beneficial
owner has sole voting and investment power with respect to the shares voted.
16
BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF TOTAL
- ------------------------------------- ------------------ ------------------
Centennial Energy Partners, L.L.C., 2,279,464 17.18%
Centennial Energy Partners, L.P.,
and Peter Seldin(1)
Newton Family Group ((2)) 900,000 6.78%
Morgan Stanley and Morgan Stanley
Investment Management, Inc.((3)) 790,663 5.96%
(1) Determined from Form 4 filed by Peter Seldin on March 13, 2007. Centennial
Energy Partners, L.L.C. is the general partner of Centennial Energy Partners,
L.P., and Peter Seldin is the managing member of Centennial Energy Partners,
L.L.C. Neither Centennial Energy Partners, L.L.C. nor Peter Seldin directly own
shares of our common stock, but both are beneficial owners of the shares owned
directly and beneficially by Centennial Energy Partners, L.P., Hoyt Farm
Partners, L.P., Quadrennial Partners, L.P. and Centennial Energy Partners V,
L.P. The business address of Centennial Energy Partners, L.L.C., Centennial
Energy Partners, L.P., and Peter Seldin is 575 Lexington Avenue, 33rd Floor, New
York, New York 10022.
(2) Determined from Schedule 13G/A filed on February 14, 2006. The Newton Family
Group consists of William C. Newton and Gloria A. Newton, husband and wife, and
Newton Investment Partners, as to which William C. Newton is the managing
partner. William C. Newton and Gloria A. Newton have beneficial ownership of
900,000 shares, which includes 875,000 shares beneficially owned by Newton
Investment Partners. The business address of the Newton Family Group is c/o
Notwen Corporation, 660 East Broadway, Jackson Hole, Wyoming 83001.
(3) Determined from Schedule 13G/A filed on February 14, 2007. Morgan Stanley
Investment Management, Inc. is a wholly owned subsidiary of Morgan Stanley and
holds common stock in various discretionary accounts which it manages. The
address of Morgan Stanley is 1585 Broadway, New York, NY 10036, and of Morgan
Stanley Investment Management, the address is 1221 Avenue of the Americas, New
York NY 10020.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
EXECUTIVE COMPENSATION;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires our
directors and executive officers and persons who beneficially own more than 10%
of our common stock to file reports of ownership and changes in ownership of our
common stock with the Securities and Exchange Commission. We are required to
disclose delinquent filings of reports by such persons.
Based on a review of the copies of such reports and amendments thereto
received by us, or written representations that no filings were required, we
believe that all Section 16(a) filing requirements applicable to our executive
officers, directors and 10% shareholders were met during 2006, except as
follows: (i) T.J. Boismier filed one late report relating to two transactions
consisting of an award of stock options and the exercise of options; (ii) Gary
Jackson filed one late report relating to his initial appointment as an officer
of the Company and an option to purchase shares of common stock; and (iii) Jon
McHugh filed one late report regarding the acquisition of shares of common stock
in the open market.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company requires that any situation, transaction or relationship that
gives rise to an actual or potential conflict of interest for our executive
officers must be disclosed to the Board in writing. The Company may permit the
conflicted transaction only if full disclosure is made and the Company's
interests are fully protected. The Company considers conflicted transactions to
consist of any transaction in which the executive (1) causes the Company to
engage in business transactions with relatives or friends or companies
controlled or owned by our executives; (2) uses nonpublic Company or other
information for personal gain by the executive, his relatives or his friends
(including securities transactions based on such information); (3) has more than
a nominal financial interest
17
in any entity with which the Company does business or competes; (4) receives a
loan, or guarantee of obligations, from the Company or a third party as a result
of his position at the Company; (5) competes, or prepares to compete, with the
Company while still employed by the Company; or (6) has a financial interest or
potential for gain in any transaction with the Company (other than Company
approved compensation arrangements).
The preceding policy and examples of conflicted transactions are provided
in the Company's written Code of Business Conduct and Ethics and is available on
the Company's website at www.gmxresources.com.
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 ratification of Smith Carney as the Company's independent registered public
accounting firm for the year ending December 31, 2007, 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.
Unless otherwise directed in the proxy, shares represented by valid proxies
will be voted FOR the election of the director nominees, FOR the ratification of
Smith Carney as the Company's independent registered public accounting firm for
the year ending December 31, 2007, and FOR the approval of the increase in
number of shares under the Stock Option Plan. 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. The board of directors will
consider properly presented proposals of shareholders intended to be presented
for action at the Annual Meeting. Such proposals must comply with the applicable
requirements of the SEC and our bylaws. Under our bylaws, a notice of intent of
a shareholder to bring any matter before a meeting shall be made in writing and
received by our Secretary not more than 150 days and not less than 90 days in
advance of the annual meeting or, in the event of a special meeting of
shareholders, such notice shall be received by our Secretary not later than the
close of the fifteenth day following the day on which notice of the meeting is
first mailed to shareholders. Every such notice by a shareholder shall set
forth: (a) the name and address of the shareholder who intends to bring up any
matter; (b) a representation that the shareholder is a registered holder of our
voting stock and intends to appear in person or by proxy at the meeting to bring
up the matter specified in the notice; (c) with respect to notice of an intent
to make a nomination, a description of all understandings among the shareholder
and each nominee and any other person (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the shareholder and
such other information regarding each nominee proposed by the shareholder as
would have been required to be included in a proxy statement filed pursuant to
the proxy rules of the SEC had each nominee been nominated by our board of
directors; and (d) with respect to notice of an intent to bring up any other
matter, a description of the matter, and any material interest of the
shareholder in the matter. Notice of intent to make a nomination shall be
accompanied by the written consent of each nominee to serve as one of our
directors, if
18
elected. All shareholder proposals should be sent to our Secretary at 9400 North
Broadway, Suite 600, Oklahoma City, Oklahoma 73114.
A shareholder proposal submitted pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 and intended to be included in our proxy
statement relating to the 2008 Annual Meeting must be received no later than
January 1, 2008. To be considered for presentation at the 2008 Annual Meeting,
although not included in the Proxy Statement for such meeting, a proposal must
be received within the time period set forth in our bylaws as described above.
In addition, the proxy solicited by the board of directors for the 2008 Annual
Meeting will confer discretionary authority to vote on any such shareholder
proposal presented at the 2008 Annual Meeting unless we are provided with notice
of such proposal no later than ninety days prior to the date of the 2008 annual
meeting.
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-K for the year ended December 31, 2006, including audited financial
statements, is enclosed with this Proxy Statement.
COPIES OF THE EXHIBITS OMITTED FROM THE ENCLOSED ANNUAL REPORT ON FORM 10-K
ARE AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO KEN L.
KENWORTHY, SR., 9400 NORTH BROADWAY, SUITE 600, OKLAHOMA CITY, OKLAHOMA 73114.
19
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 Croisant,
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 22, 2007, 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. RATIFICATION OF SELECTION OF SMITH, CARNEY & CO., P.C. AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
FOR AGAINST
[_] [_]
ITEM 3. AMENDMENT TO THE STOCK OPTION PLAN
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 3, 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 2007 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 30, 2007.