SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e) (2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(C) or Rule 14a-12
PENDARIES PETROLEUM LTD.
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(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PENDARIES PETROLEUM LTD.
8 Greenway Plaza, Suite 910
Houston, Texas 77046
Notice of Annual and Special Meeting of Shareholders
to be held on June 11, 1999
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting (the
"Meeting") of the shareholders of Pendaries Petroleum Ltd. ("Pendaries" or the
"Company") will be held in The Houston City Club, Nine Greenway Plaza, Houston,
Texas, on Friday, the 11th day of June, 1999 at 9:00 o'clock in the morning
(Houston time) for the following purposes:
1. To receive the financial statements of the Company for the year ended
December 31, 1998, together with the auditor's report thereon;
2. To elect the board of directors of the Company;
3. To amend the Company's 1997 Stock Option Plan;
4. To amend the Company's articles of continuance to provide for the
creation of Class A Preferred Shares;
5. To reappoint Arthur Andersen LLP as the independent auditor of the
Company for the fiscal year ending December 31, 1999 and to authorize
the directors to fix the auditor's remuneration; and
6. To transact such other business as may properly be brought before the
Meeting or any adjournment thereof.
The specific details of the matters proposed to be put before the
Meeting are set forth in the Proxy Statement accompanying and forming part of
this Notice.
Shareholders of Pendaries who are unable to attend the Meeting in
person are requested to date and sign the enclosed Proxy and to mail it to or
deposit with the Company's transfer agent, CIBC Mellon Trust Company, Proxy
Dept., Queen's Quay East, Unit 6, Toronto, Ontario M5A 4K9. In order to be valid
and acted upon at the Meeting, forms of proxy must be returned to the aforesaid
address not less than 48 hours (excluding Saturdays, Sundays and holidays)
before the time for the holding of the Meeting or any adjournment thereof.
Shareholders are cautioned that the use of the mail to transmit proxies
is at each shareholder's risk.
The Board of Directors of Pendaries has fixed the record date for the
Meeting at the close of business on April 28, 1999 (the "Record Date"). Only
shareholders of Pendaries of record as at that date are entitled to receive
notice of the Meeting. Shareholders of record will be entitled to vote those
shares included in the list of shareholders entitled to vote at the Meeting
prepared as at the Record Date.
BY ORDER OF THE BOARD OF DIRECTORS
Charles R. Erickson
Corporate Secretary
April 19, 1999
<PAGE>
PENDARIES PETROLEUM LTD.
8 Greenway Plaza, Suite 910
Houston, Texas 77046
Proxy Statement
Annual and Special Meeting of Shareholders
to be held on Friday, June 11, 1999
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
by management of Pendaries Petroleum Ltd. ("Pendaries" or the "Company") to be
used at the Company's Annual and Special Meeting of Shareholders (the "Meeting")
to be held at the time and place and for the purposes set forth in the Notice of
Annual and Special Meeting accompanying this Proxy Statement. The approximate
date of mailing of this Proxy statement and the accompanying instrument of proxy
is April 28, 1999. The costs of such solicitation will be borne by the Company.
The solicitation will be primarily by mail. Directors, officers and regular
employees of the Company may also solicit proxies by telephone, facsimile, or in
person.
The persons specified in the enclosed form of proxy are directors and
officers of the Company. Each shareholder has the right to appoint a person (who
need not be a shareholder) other than the persons designated in the enclosed
form of proxy to attend and act for the shareholder and on the shareholder's
behalf at the Meeting or any adjournment thereof. This right may be exercised by
inserting the name of the shareholder's nominee in the space provided, or by
completing another appropriate form of proxy. In either case, the proxy form
should be dated and must be executed by the shareholder, or his or her attorney
authorized in writing, and returned to the Company at its executive office, 8
Greenway Plaza, Suite 910, Houston, Texas 77046, or to CIBC Mellon Trust
Company, 393 University Avenue, 5th Floor, Toronto, Ontario M5G 2M7, at least 48
hours prior to the time of the Meeting or any adjournment thereof.
VOTING BY PROXIES AND EXERCISE OF DISCRETION
The common shares (the "Shares") of the Company represented by proxies
in favor of Management will be voted or withheld from voting by the persons
named in the form of proxy in accordance with the directions of the shareholder
appointing them. In the absence of any direction to the contrary, it is intended
that the Shares represented by proxies in favor of management will be voted: (A)
FOR the election of the directors nominated as set forth below; (B) FOR the
amendment to the Company's 1997 Stock Option Plan; (C) FOR the amendment to the
Company's articles of continuance regarding the creation of a Class A Preferred
class of stock; and (D) FOR the reappointment of the auditors; all as described
in this Proxy Statement. The enclosed form of proxy confers discretionary
authority upon the persons named therein with respect to matters not
specifically mentioned in the Notice of Annual and Special Meeting but which may
properly come before the Meeting or any adjournment thereof. Management knows of
no such amendments, variations or other matter to come before the Meeting other
than the matters referred to in the Notice of Annual and Special Meeting and
routine matters incidental to the conduct of the Meeting. If any further or
other matter is properly brought before the Meeting, the persons designated in
the enclosed form of proxy will vote thereon in accordance with their best
judgment pursuant to the discretionary authority conferred by such proxy with
respect to such matter.
REVOCABILITY OF PROXIES
A proxy given to this solicitation may be revoked, as to any motion on
which a vote has not already been cast pursuant to the authority conferred by
it, by instrument in writing, including another proxy bearing a later date,
executed by the shareholder or by his or her attorney authorized in writing or,
if the shareholder is a corporation, by any officer or attorney thereof duly
authorized, and deposited either at the registered office of the Company at any
time up to and including the last business day preceding the day of the Meeting,
or any adjournment thereof, or with the Chairman of the Meeting on the day of
the Meeting, or any adjournment thereof, or in any other manner permitted by
law.
VOTING SHARES AND QUORUM
The holders of record of Shares as at the close of business on April
28, 1999 (the "Record Date") are entitled to receive notice of the Meeting and
will be entitled to vote at the Meeting, except that a transferee of such Shares
acquired after the Record Date shall be entitled to vote the transferred Shares
at the Meeting if the transferee produces properly endorsed certificates for
such Shares or otherwise establishes that the transferee owns such Shares and
demands by written request, delivered to the Company at its executive office, 8
Greenway Plaza, Suite 910, Houston, Texas 77046, no later than ten days before
the Meeting, that his or her name be included in the list of shareholders
entitled to vote at the Meeting. Abstentions are included in the determination
of the number of Shares present and voting and are counted as abstentions in
tabulating the votes cast on nominations or proposals presented to shareholders.
Broker non-votes are not included in the determination of the number of Shares
present and voting or as a vote with respect to such nominations or proposals.
On the Record Date there were 8,829,470 Shares issued and outstanding.
A majority of such shares present in person, or represented by proxy, is
necessary to constitute a quorum. Each Share entitles the holder thereof to one
vote. For information concerning beneficial ownership of the Shares by (i) any
shareholders known to the Company to beneficially own more than 5% of the issued
and outstanding Shares, and (ii) all executive officers and directors
individually and as a group, refer to the "Principal Shareholders" information
on page 18.
ITEM A: ELECTION OF DIRECTORS
Directors elected at the Meeting will serve until the next annual
meeting of shareholders or, subject to the Company's by-laws and to applicable
laws, until their successors are elected or appointed. It is the intention of
the persons named in the enclosed form of proxy, unless instructed otherwise, to
vote FOR the election of each proposed nominee listed below as a director.
The Company's governing statute, the Business Corporations Act (New Brunswick)
(the "Act"), provides for cumulative voting for the election of directors such
that each shareholder entitled to vote for the election of directors has the
right to cast a number of votes equal to the number of votes attached to the
Shares held by such shareholder multiplied by the number of directors to be
elected, and may cast all such votes in favor of one candidate or distribute
them among the candidates in any manner. For this proxy, the shareholder will
cast the number of votes equal to the number of Shares held by the shareholder
multiplied by 6. The distribution of votes among the nominees shall be
designated on the proxy instrument. A vote in favor of the election of more than
one nominee without an indication as to how the votes are to be distributed
among the nominees shall mean that the votes are to be distributed equally among
all nominees voted for by the shareholder. If no specification is made for any
nominee, it shall mean that the proxy nominees are instructed to vote FOR all of
the following nominees with the votes distributed equally among all nominees.
There is no condition precedent to exercise the right to vote cumulatively. The
Act further provides that a separate vote of shareholders shall be taken with
respect to each proposed director unless a resolution is passed unanimously
permitting two or more persons to be elected by a single resolution. It is
expected that at the Meeting a motion will be made in favor of such a resolution
in order to permit the election of directors by way of a single resolution.
Management does not expect that any of the proposed nominees will be
unable to serve as a director. However, if any of the proposed nominees are for
any reason unable to serve as a director, the persons named in the enclosed form
of proxy will use their best judgment in voting for an alternative nominee.
Consistent with the Company's stated objective of reducing general and
administrative costs, the size of the board of directors is being reduced from
ten directors to six directors. The following table indicates the names of the
proposed nominees, their present principal occupations or employment, all other
positions and offices with the Company now held by them, if any, and the period
or periods during which they have served as directors and the number of Shares
beneficially owned, or over which control or discretion is exercised by them.
NOMINEES FOR BOARD OF DIRECTORS
<TABLE>
<CAPTION>
Name and Principal Occupation Director Number of Shares
Municipality of Residence and Business Since Beneficially Owned(5)
- ------------------------- ------------ ----- ---------------------
<S> <C> <C> <C>
Directors
Robert E. Rigney(1) Chairman and Chief Executive 1996 567,039
Houston, Texas Officer of the Company
Ben F. Barnes Businessman - 149,494
Austin, Texas
Paul H. Farrar(2)(3) Chairman, Adelaide Capital 1996 68,901
Toronto, Ontario Corporation
Bobby J. Fogle(3) Vice-President, Finance 1997 87,066
Houston, Texas of the Company
Shingyi Ho Vice-President of the Company 1996 256,219
Beijing, China
James C. Roe(2)(3)(4) Businessman 1996 126,531
Sugar Land, Texas
<FN>
(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of Finance Committee
(4) Member of Corporate Governance Committee
(5) For the basis on which beneficial ownership is determined see"Principal
Shareholders" on page 18.
</FN>
</TABLE>
The Company does not have an executive committee of the Board of Directors.
Directors of the Company
Information as to the names, ages, positions and offices with Pendaries
and its subsidiary, Sino-American Energy Corporation ("Sino-American"), terms of
office, periods of service, business experience during the past five years and
certain other directorships held by each current director of Pendaries is set
forth below:
Robert E. Rigney, 67, is Chairman, Chief Executive Officer and a
Director of the Company and Sino-American since inception in 1996, and prior
thereto, of Setsco, since its inception in 1994. Mr. Rigney has been a diplomat,
oil company executive and consultant in Asia for over 20 years. Mr. Rigney has
been responsible for obtaining oil concessions in China, Indonesia and other
Asian countries. He has also assisted various Chinese oil and gas enterprises to
train their employees in the use of Western oil and gas technology and
applications.
Ben F. Barnes, 61, has been a Director of Sino-American since 1996. Mr.
Barnes has been active in politics in Texas for more than thirty years. Since
1973, Mr. Barnes has been employed as a business consultant working with
organizations such as MARTA Technologies (dealing in energy and environmental
technology), and Ranger Insurance. He served as Lieutenant Governor of Texas
from 1969 to 1973.
Paul H. Farrar, 64, has been a Director of the Company since 1996.
Since 1994 he has served as Chairman of Adelaide Capital Corporation, a finance
services corporation, and a director of various other companies. Mr. Farrar was
a Senior Vice-President of a Canadian chartered bank prior to 1994.
Bobby J. Fogle, 53, serves as Director and Vice-President, Finance of
the Company, and Director and Chief Financial Officer of Sino-American. Prior
to joining Sino-American in 1996, Mr. Fogle was employed by The Keplinger
Companies, Inc. from 1976 to 1996 in various capacities including controller,
vice-president, treasurer, executive vice-president and director.
Shingyi Ho, 53, has been Vice-President and a Director of the Company
and Sino-American since 1996. Prior to 1996 Mr. Ho worked for the predecessor
company, Setsco, for two years. Mr. Ho is the Company's senior executive in its
Beijing office and is the principal liaison with the Chinese ministries,
governmental authorities and agencies. He has worked for more than 15 years in
the energy business in China representing a variety of western companies such as
Input-Output, Kerr-McGee, Valero Energy and Landmark Graphics.
James C. Roe, 69, has been a Director of the Company and Sino-American
since 1996. Mr. Roe was Vice-President/Owner of Delta-X Corporation from 1973
until the sale of that corporation in February of 1997. Delta-X is engaged in
the design, manufacture, and sale of high technology automation systems used in
oil producing operations. Mr. Roe has spent his entire career in various sales
and management positions in the oil services industry prior to joining Delta-X
Corporation in 1973.
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Statement of Executive Compensation
For the purpose of reporting executive remuneration paid in 1998, there
was one individual, besides the Chief Executive Officer, employed as an
executive officer of the Company during the year who received salary and bonus
in excess of $100,000 (collectively with the Chief Executive Officer, the "Named
Executive Officers"). The aggregate cash compensation paid to the Named
Executive Officers by the Company and its subsidiaries for services rendered
during 1998 was $313,332.
Summary Compensation Table
The following table sets out a summary of executive compensation for
the Named Executive Officers for each of the Company's last three completed
fiscal years.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Shares Restricted
Under Shares or
Other Options/SARs Restricted LTIP All Other
Name and Principal Position Year Salary Bonuses Compensation(1) Granted Share Units Payouts Compensation
- --------------------------- ---- ------ ------- --------------- ------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Robert E. Rigney 1998 $184,999 $ - $ 5,775 25,000 - - -
Chief Executive Officer 1997 127,003 5,000 13,824 12,500 - - -
1996 76,665 10,952 12,412 25,000 - - -
Bobby J. Fogle 1998 $118,333 $ - $ 4,535 15,000 - - -
Vice President - Finance 1997 93,274 5,000 6,243 50,000 - - -
1996 34,000 8,000 14,121 - - - -
<FN>
(1) Includes car allowances.
</FN>
</TABLE>
Stock Options
The Company has in effect the 1997 Stock Option Plan (the "Plan")
pursuant to which stock options may be granted to full and part-time employees,
officers, directors, and consultants of the Company and its subsidiaries, from
time to time, as the board of directors of the Company may determine. The Plan
allows the granting of non-qualified stock options. Under the terms of the Plan,
there currently remains 84,800 Shares available for issuance out of the 750,000
Shares originally authorized for issuance under the Plan. The terms of options
granted under the Plan are determined by the Board of Directors, provided that
no option may be granted for a period exceeding 10 years from the date of the
grant, or such lesser period of time as permitted, from time to time, by the
applicable rules of The Toronto Stock Exchange (the "TSE") and the American
Stock Exchange (the "AMEX"). The purchase price of any Shares purchased pursuant
to the exercise of any option under the Plan is fixed by the board of directors
but may not be less than the lowest purchase price permitted under the rules of
the TSE and AMEX. All options granted under the Plan must be in accordance with
the policies and procedures of the TSE and AMEX.
As of December 31, 1998, the Company had granted to the Named Executive
Officers pursuant to the Plan, non-qualified stock options which, in the
aggregate, represented rights to acquire 127,500 Shares. These options are
exercisable at prices ranging from Cdn. $10.75 to Cdn. $19.00, with a weighted
average exercise price of Cdn. $14.80. Of the total outstanding options held by
the Named Executive Officers, all 127,500 options were exercisable as of
December 31, 1998.
Option Exercises and Holdings
The following table sets forth information with respect to the Named
Executive Officers concerning unexercised options held as of December 31, 1998.
None of the options are "in-the-money." Options are "in-the-money" if the market
price of a Share exceeds the exercise price of the option.
<TABLE>
Aggregated Option/SAR Exercises in 1998
And Fiscal-Year End Option/SAR Values
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Aggregate Options at In-The-Money
Shares Value December 31, 1998 Options at
Acquired on Exercise Realized Exercisable Unexercisable(*) Decemeber 31, 1998
-------------------- -------- ----------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Robert E. Rigney - - 62,500 - -
Bobby J. Fogle - - 65,000 - -
<FN>
(*) All options vest and are exercisable immediately upon grant.
</FN>
</TABLE>
Stock Option Grants
The following table contains information concerning the grant of stock
options during 1998 to the Named Executive Officers under the Company's 1997
Stock Option Plan:
Option/SAR Grants in Last Fiscal Year
<TABLE>
Individual Grants Grant Date Value
<CAPTION>
----------------- ----------------
Number of % of Total
Shares Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees Base Price Expiration Present Value
Name Granted (#)(1) In Fiscal Year (Cdn.$/Share) Date (U.S.$)(2)
---- -------------- -------------- ------------- ---- ----------
<S> <C> <C> <C> <C> <C>
Robert E. Rigney 25,000 31.4% $10.75 01/08/2003 $63,425
Bobby J. Fogle 15,000 18.8% $10.75 01/08/2003 $38,055
<FN>
(1) The options were granted on January 8, 1998 and became exercisable
immediately upon grant.
(2) Estimated present values are based on the Black-Scholes Model,a complicated
mathematical formula used to value exchange-traded options. The stock
options granted by the Company are long term and non-transferable, while
exchange - traded options are short term and can be exercised or sold
immediately in a liquid market. The Black-Scholdes Model considers a
number of factors, including the expecte volatility of the stock, interest
rates, and the estimated time period until exercised of the option. In
calculating the grant date present values set forth in the table, the
following ranges of assumptions were used: daily volatility for Shares
of 25.74%, risk-free rate of return of 5.36% and an estimated time period
of 5 years until exercise. In each case, the risk-free rate was based on a
5 year government note as of the grant date and no dividend yield. No
adjustments were made for non-transferability or risk of forfeiture. The
ultimate value of the option will depend on the future market price of the
Company's Shares, which cannot be forecast with reasonable accuracy.
</FN>
</TABLE>
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During 1998, the compensation committee of the Company consisted of Messrs.
Robert E. Rigney, John T. Evans and Robert W. Martin with Messrs. Evans and
Martin being independent directors. Mr. Rigney serves as the Chairman of the
Board and Chief Executive Officer of the Company and its subsidiaries. To the
Company's knowledge, there are no other inter-relationships involving members of
the Compensation Committee or other directors of the Company requiring
disclosure.
Board Compensation Committee Report on Executive Compensation
The Compensation Committee of the board of directors (the "Committee")
is responsible for making recommendations to the board of directors regarding
the general compensation policies of the Company, the compensation plans and
specific compensation levels for officers and certain other managers. The
Committee also administers the Company's stock option and stock compensation
plans for all officers, directors, and employees.
The basic policy adopted by the board of directors is to ensure that
salary levels and compensation incentives are designed to attract and retain
qualified individuals in key positions commensurate with the level of executive
responsibility, the type and scope of the Company's operations, and the
Company's financial condition and performance. The overall compensation
philosophy is (i) that the Company pay base salaries which are high enough to
attract capable people, around the median salaries of comparable companies, (ii)
that the main focus of compensation be on long-term incentives, (iii) that all
employees be encouraged to be shareholders, and (iv) that all employees be
compensated for team effort more than individual performance. The components of
this philosophy consist of (i) competitive base salaries and (ii) stock options
for employees.
Because the Company is in its development stage and does not yet have
any material revenues, the Committee has not yet established quantitative
criteria on which to base its evaluation of individual executive performance. It
is the Committee's intent to change this policy once the Company has revenues
from its China properties. In determining both salary and other compensation,
the Committee weighs individual performance, the executive's position and
responsibility in the organization, the executive's experience and expertise and
compensation for comparable positions at comparable companies, Company results,
and his or her contributions made to the effectiveness of the management team.
The Committee's approach is subjective. It takes into account published salary
surveys of other peer exploration and production companies located in Houston
and south Texas to determine comparable salaries. In making recommendations, the
Committee exercises subjective judgement using no specific weights for these
factors and also relies heavily on the recommendations of the Chief Executive
Officer with regard to individual performance. With respect to the Chief
Executive Officer, the independent members of the Committee review his
performance and determine his compensation. This also is a subjective
determination.
Section 162(m) of the Internal Revenue Code. The Compensation Committee
does not propose to adopt any particular policy with respect to Section 162(m)
of the Internal Revenue Code, which was adopted by Congress in 1993 and limits
the deductibility of compensation paid to any individual in excess of $1 million
per year. The Company has not paid and does not anticipate paying compensation
at these levels, and even including the unrealized value of unexercised stock
options granted in any given year, does not believe that these provisions will
be relevant to the Company's executive compensation levels for the foreseeable
future.
The foregoing report has been furnished by the following members of the
Committee. Mr. Rigney is a current officer of the Company.
The Compensation Committee
Robert E. Rigney
John T. Evans
Robert W. Martin
Compensation of Directors
The Company does not have a standard arrangement for the compensation
of the directors. Board members are reimbursed for travel and other
out-of-pocket expenses incurred in attending board of director meetings. Of the
Company's related directors, Robert E. Rigney was awarded options to purchase
25,000 Shares, Marvin Yontef and Bobby J. Fogle were each awarded options to
purchase 15,000 Shares and Shingyi Ho was awarded options to purchase 6,000
Shares in 1998 under the Company's Stock Option Plan. In some cases, the awards
of options and Shares were made during 1998 in respect of service during 1997.
On March 9, 1999 non-related directors, Paul Farrar, Robert Martin and James Roe
were awarded options to purchase 13,400 Shares, and John Evans was awarded
options to purchase 9,200 Shares in lieu of cash payments for service during
1998 on the board of directors and its committees. At that time Marvin Yontef
was awarded options to purchase 25,900 Shares under the Company's Stock Option
Plan. Further, Marvin Yontef was also issued 10,000 Shares and directors John
Evans, Paul Farrar, Bob Martin and James Roe were each issued 7,500 Shares under
the Company's Share Compensation Plan for services rendered in 1998 and 1999.
Directors' and Officers' Insurance and Indemnification
The Company purchased liability insurance for the directors and
officers of the Company and will pay the premium for such insurance. The by-laws
of the Company also provide for the indemnification of the Company's directors
and officers from and against any liability and cost in respect of any action or
suit against them in connection with the execution of their duties of office,
subject to the limitations contained in the Company's governing statute.
CORPORATE GOVERNANCE
Statement of Corporate Governance Practices
This statement of corporate governance practices is made pursuant to
the policies and guidelines (the "Guidelines") of the TSE. The Guidelines
address matters such as the constitution and independence of corporate boards,
the functions to be performed by boards and their committees, and the
effectiveness and education of board members.
The Company's board or directors and senior management consider
effective corporate governance to be central to the proper operation of the
Company and the interests of its shareholders and other stakeholders. This
disclosure statement has been prepared by the Corporate Governance Committee of
the board and has been approved by the board of directors.
Mandate of the Board
The board of directors has explicitly acknowledged responsibility for
the management of the business and affairs of, and to act with a view to the
best interests of, the Company. The mandate of the board to deal with this
responsibility is expressed to include, among other matters:
(a) the adoption of a strategic planning process;
(b) the identification on a regular basis of the principal risks
of the Company's business and the establishment of appropriate
systems to manage these risks;
(c) the assessment of management performance, considering
succession planning, and taking responsibility for appointing,
training and monitoring senior management;
(d) establishing a policy to facilitate communications with share-
holders and others involved with the Company;
(e) addressing the integrity of the Company's internal control and
management information systems; and
(f) considering, from time to time, matters that pertain to
the Company operating in a foreign country or countries.
Board Meetings and Attendance
The board of directors met six times during the year ended December
31,1998, including by way of telephone conference. Al incumbent directors,
except for Mr. Ho, attended at least 75% of the meetings. The board took all
other actions during 1998 by unanimous written consent. In addition, all
directors attended at least 75% of all meetings of each of the committees on
which they served.
Board Composition and Independence from Management
The board believes that three of the nominated directors are "unrelated
directors" and that the remainder may be considered to be "related directors"
within the meaning of the Guidelines. An "unrelated director" under the
Guidelines is a director who is independent of management and free from any
interest, business or other relationship which could, or could reasonably be
perceived to, materially interfere with the director's ability to act other than
interests arising from shareholding. In defining an "unrelated director", the
Guidelines plan emphasis on the ability of a director to exercise objective
judgement.
In deciding whether a particular director was a "related director" or
an "unrelated director" for purposes of the Guidelines, the board of directors
examined the factual circumstances of each director and considered them in the
context of other relevant factors. Its determination was made based solely with
regard to the language of the Guidelines. The board also concluded that no
director would be unable to be sensitive to potential conflicts of interest, to
act objectively and to perform his duties in the best interests of the Company.
To the knowledge of the board of directors, the Company does not have a
significant shareholder, as such term is defined in the Guidelines.
The board has considered the Guidelines' recommendations regarding
additional structures or procedures to ensure the board of directors'
independence from management and concluded that the existing state was
sufficient. All directors are expected to exercise prudent business judgement at
all times.
The current directors are all the same as those elected at the Annual
and Special Meeting the Shareholders of the Company held on May 7, 1998. The
board has not required a non-management chairman or a "lead director".
The board has encouraged management to identify opportunities for the
Company and expects to assess and respond to risks associated in cooperation
with management. These expectations have been met to date.
Decisions Requiring Board Approval
The board of directors does not have a formal policy setting out which
matters must be brought by management to the board for approval. There is a
clear understanding between management and the board that all transactions and
other matters of a material nature should be presented for consideration and, if
appropriate, approval by the board, including the hiring or termination of any
member of senior management. It is recognized that, from time to time, it may be
appropriate for an individual director, or group of them, to engage an outside
advisor at the expense of the Company. Such engagement would be subject to the
approval of the board of directors.
Board Committees
The board of directors has four committees: the Audit Committee, the
Compensation Committee, the Finance Committee and the Corporate Governance
Committee. The committees and their mandates are outlined below:
(i) Audit Committee: The Audit Committee is responsible for
reviewing the scope and audit plan of the independent
auditor's examinations of the Company's financial statements
and receiving and reviewing the reports of the independent
auditor. The Audit Committee also meets with the independent
auditor, conducts internal audits and investigations, receives
recommendations or suggestions for changes in accounting
procedures and initiates or supervises any special
investigations it may choose to undertake. The Audit Committee
met four times during 1998 and was comprised of Messrs.
Bennett, Farrar, and Roe with Mr. Farrar acting as Chairman.
(ii) Compensation Committee: In 1998, the Compensation Committee
was comprised of Messrs. Rigney, Evans, and Martin, with Mr.
Rigney acting as its Chairman. The Compensation Committee
makes recommendations to the Company's board of directors with
respect to the nature and amount of all compensation of the
Company's officers, including recommendations on the Company's
Stock Option Plan and Stock Compensation Plan. The
Compensation Committee met twice during 1998.
(iii) Finance Committee: The Finance Committee is responsible for
making recommendations to the board of directors in connection
with, and reporting and coordinating efforts to ensure,
financing for the Company's operations. In 1998, the Finance
Committee was comprised of Messrs. Farrar, Roe, and Yontef,
with Mr. Roe acting as Chairman.
(iv) Corporate Governance Committee: In 1998, the Corporate
Governance Committee was comprised of Messrs. Evans, Roe, and
Yontef, with Mr. Yontef acting as Chairman. The Corporate
Governance Committee is responsible for reviewing and
determining corporate governance duties and procedures and,
where necessary, making recommendations to the board of
directors on changes to corporate governance policies and
procedures. The Corporate Governance Committee did not meet in
1998.
Shareholder Relations and Feedback
All inquiries from shareholders and the investment community are
referred initially to the Company's Chief Executive Officer, who ensures that
the Company provides a satisfactory rely to the inquiry. The Company believes
that its communications are sufficient and responsive.
Recruitment of New Directors and Assessment of Board Performance
The board has not had to identify new board members to recruit in the
last two years and has no formalized recruitment process. Further, the board
does not formally review individual board members or committee assignments and
their respective contributions. Although the Company does not have a formal
process of orientation or education for new board members, senior management and
the other directors spend a sufficient amount of time with new directors to help
them become acquainted with the Company and its operations. This includes
reviewing financial reports, projections, budgets, geological data and other
related items.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and the rules
thereunder require the Company's executive officers and directors, and persons
who own more than ten percent (10%) of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the SEC, the TSE and AMEX, and to furnish the Company with copies. The Company
first became subject to Section 16(a) on November 15, 1998. As of December 31,
1998 there were no persons, corporations or entities holding more than ten
percent (10%) of the registered class of the Company's equity securities. Based
solely on the Company's review of the copies of such forms received by it and
written representations that no other reports were required, during the year
ended December 31, 1998, all Section 16(a) filing requirements applicable to its
directors, officers, and beneficial owners of more than 10 percent (10%) of its
Shares were complied with, except that Robert W. Martin filed late an amended
Form 3 concerning his initial statement of beneficial share ownership to include
the Shares held indirectly by his spouse.
ITEM B: APPROVAL OF AMENDMENT TO 1997 STOCK OPTION PLAN
On April 19, 1999, the board of directors of the Company, subject to
approval by the shareholders of the Company, approved an amendment to increase
the number of Shares which are to be made available for distribution under the
1997 Stock Option Plan (the "Plan"). The amendment would provide for a total of
1,000,000 Shares to be issuable, an increase of 250,000 Shares from the
previously approved 750,000 Shares initially reserved for issuance. This
increase will enable the Company to proceed with the purpose of the Plan to
retain persons of training, experience and ability as independent directors,
qualified employees and consultants in order to encourage the sense of
proprietorship of such persons and to stimulate the active interests of such
persons in the development and financial success of the Company. The Plan was
originally adopted and approved by the Company's shareholders in 1997, thereby
superseding and replacing the Option Plan adopted by the board of directors on
November 29, 1996 in all respects.
Accordingly, at the Meeting the following resolution to approve the
amendment to the Plan will be presented:
BE IT RESOLVED, as an ordinary resolution of the shareholders
of the Corporation, that the maximum number of Common Shares
reserved for issuance under the 1997 Stock Option Plan of the
Corporation be increased by 250,000 Common Shares to 1 million
and that the same is hereby ratified, approved and authorized.
If approved by the Shareholders at the annual meeting, the first
sentence of Section 4 of the Plan will be amended to provide as follows (change
indicated italics):
Number of Shares. (1) The total number of Shares so
reserved by the Board shall not exceed one million (1,000,000)
Shares and the total number of Shares so reserved for issuance
to any one Optionee (whether under this Plan or otherwise at
any time) shall not exceed five percent (5%) of the then
Outstanding Issue.
The remaining language of Section 4 and the remainder of the Plan will
not be changed and the only effect of the amendment will be to increase the
number of Shares reserved for option grants under the Plan.
Copies of the 1997 Stock Option Plan as filed with the SEC may be
obtained by Shareholders without charge by writing to the Company at 8 Greenway
Plaza, Suite 910, Houston, Texas 7746, Attention: Charles R. Erickson or calling
713-355-2900.
Increase in the Options Reserved
The board of directors is proposing to increase the number of Shares for
which options may be granted under the Plan. Unless the number of Shares
reserved for issuance is increased, the Company could be limited in its ability
to make further option grants, and hence could be precluded from providing the
appropriate continuing incentives to its valued directors, employees and
consultants.
Summary of the 1997 Stock Option Plan
Under the Plan, the board may, in its sole discretion, grant options to
purchase Shares ("Options") to any director, officer, employee or consultant of
the Company, Sino-American or any of their subsidiaries ("Eligible Persons").
There are approximately 12 persons that fall into the Eligible Persons category.
The administration of the Plan is the responsibility of the officers designated
by the board.
The Plan indicates that criteria for granting Options may consist of the
current and potential contributions of an Eligible Person towards the success of
the Company and any other factors which the board may deem relevant or proper.
The Plan provides for the grant of every Option to be made by written agreement
between the Company and an option grantee ("Optionee") and for the provisions of
such agreements to conform to the provisions of the Plan and satisfy the board
in its sole discretion.
The exercise of an Option will be contingent upon the Company's receipt
of payment of the full exercise price of such Option. To be considered a holder
of any Share subject to an Option, such Share must have been fully paid for and
issued upon the exercise of the Option. The Options granted to an Optionee may
be exercised by the Optionee at the Optionee's discretion, provided that all
Options not exercised by the Optionee cease to be exercisable and expire upon
the earliest of: (i) thirty days following the termination for cause of
employment of the Optionee with the Company, Sino-American or any of their
subsidiaries; (ii) the fifth anniversary of the date on which the Options are
granted; (iii) the third anniversary of normal retirement or death of an
Optionee while an Eligible Person; and (iv) the end of the ninetieth day next
following the termination of employment of the Optionee with, or resignation or
removal of the Optionee from, his Company affiliation for any reason other than
those referenced in (i), (ii) and (iii) hereof, except where the board
determines that such termination, resignation or removal resulted from the
Optionee's disability.
Shares Subject to the Plan. The number of Shares approved by the board
of directors, subject to approval by the shareholders of the Company, with
respect to which Options may be granted under the Plan is 1,000,000 Shares, an
increase of 250,000 Shares from the previously approved 750,000 Shares initially
reserved for issuance. The number of Shares with respect to which Options may be
granted is subject to adjustment in the event of a reorganization, stock split,
stock dividend, merger, consolidation or other change in the capitalization of
the Company. No Options or any rights thereunder are assignable or transferrable
except upon death of the optionee, to his beneficiaries. During the lifetime of
an optionee, Options are exercisable only by the Optionee or his legal
representative.
Change of Control. In the event of a change of control of the Company
as a result of a take-over bid, the Company will immediately notify each
Optionee currently holding an Option of the offer, whereupon such Option may be
exercised by the Optionee, permitting the Optionee to tender the Shares received
upon such exercise pursuant to the offer. In the event of a change of control of
the Company as a result of a business combination or other events described in
the Plan, any outstanding Options shall remain options to purchase shares of any
successor corporation to the Company and an equitable adjustment shall be made
to any Options then outstanding and the exercise price (or prices) in respect of
such Options.
Amendment. Subject to obtaining the consent of regulatory authorities,
if applicable, and shareholder approval, if required by any such regulatory
authority, the board may amend, modify or terminate the Plan at any time in its
sole discretion. The board may not amend, modify or terminate the Plan with
respect to any Option then outstanding under the Plan.
Board of Directors Recommendation
The affirmative vote of a majority of the Shares represented at the
1999 Annual and Special Meeting of the Shareholders in person or by proxy will
be needed to approve the amendment to the Plan. The board believes that
increasing the number of Shares reserved under the Plan is important in helping
the Company to continue to retain qualified directors, employees and
consultants. All of the executive officers and directors of the Company have
expressed their intent to vote in favor of the amendment to the Plan. At April
28, 1999, the record date for the annual meeting, such executive officers and
directors owned approximately 15% of the Company's issued and outstanding
Shares. The adoption of the proposed amendment to the Plan is viewed as
appropriate in light of the Company's goal to retain qualified directors,
employees and consultants. One million Shares proposed to be reserved for option
grants under the Plan represent less than 12% of the Company's issued and
outstanding Shares as of the date hereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVING THE
AMENDMENT TO THE 1997 STOCK OPTION PLAN.
ITEM C: AMENDMENT OF ARTICLES OF CONTINUANCE TO PROVIDE FOR ISSUANCE OF A
PREFERRED CLASS OF SHARES
Under the Company's articles of continuance, the current authorized
share capital consists of an unlimited number of common shares, referred to in
this proxy statement as the "Shares". Management believes that it is in the best
interests of the Company to amend the Company's articles of continuance to
create an unlimited number of Class A Preferred Shares. The Class A Preferred
Shares will be issuable in series and shall have such rights, privileges,
restrictions, conditions and designations as the directors shall determine by
resolution prior to issuance (as indicated below).
At the meeting, the shareholders will be asked to pass the following
special resolution to amend the Company's articles of continuance:
BE IT RESOLVED, as a special resolution of the shareholders of the
Corporation, that the Corporation's articles of continuance be amended
to increase the authorized capital of the Corporation by the creation
of an unlimited number of Class A Preferred Shares which shall have the
following share provisions:
Class A Preferred Share Provisions
----------------------------------
The Class A Preferred Shares shall, as a class, carry and be subject to
the rights, privileges, restrictions, conditions and designations
hereinafter set forth:
1.01 Issuable in Series
The Class A Preferred Shares may be issued from time to time in one or
more series composed of such number of shares and with such preferred,
deferred or other special rights, privileges, restrictions, conditions
and designations attached thereto as shall be fixed hereby or
from time to time before issuance by any resolution or resolutions
providing for the issue of the shares of any series which may be
passed by the directors of the Corporation and confirmed and declared
by articles of amendment, including without limiting the generality of
the foregoing:
(i) the rate, amount or method of calculation of dividends, if any,
and whether such rate, amount or method of calculation shall be
subject to change or adjustment in the future, the currency or
currencies of payment, the date or dates and place or places of
payment thereof and the date or dates from which any such
dividends shall accrue, provided always that dividends on each
series of Class A Preferred Shares shall be non-cumulative;
(ii) any right to convert the Class A Preferred Shares into fully-paid
and non-assessable common shares of the Corporation and terms and
conditions of any such right;
(iii) any right of redemption and/or purchase and the redemption or
purchase prices and terms and conditions of any such right;
(iv) any right of retraction vested in the holders of Class A
Preferred Shares of such series and the prices and terms and
conditions of any such rights;
(v) any voting rights; and
(vi) any other provisions attached to any such series of Class A
Preferred Shares.
1.02 Priority
No rights, privileges, restrictions or conditions attached to any
series of Class A Preferred Shares shall confer upon the shares of
such series a priority over any other series of Class A Preferred
Shares in respect of dividends or distribution of assets or return of
capital in the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, any other series of
class Preferred Shares, and any series of Class A Preferred Shares
shall rank on a parity with the Class A Preferred Shares of every
other series and be entitled to a preference and priority over the
common shares and over any other shares of the Corporation ranking
junior to the Class A Preferred Shares.
1.03 Notices and Voting
Subject to the rights, privileges, restrictions and conditions that
may be attached to a particular series of Class A Preferred Shares by
the directors of the Corporation in accordance with section 1.01 of
the conditions attaching to the Class A Preferred Shares, the holders
of a series of Class A Preferred Shares shall not, as such, be
entitled to receive notice of or to attend any meeting of the
shareholders of the Corporation and shall not be entitled to vote at
any such meeting (except where holders of a specified class or series
of shares are entitled to vote separately as a class as provided in
the New Brunswick Business Corporations Act).
1.04 Purchase for Cancellation
Subject to the rights, privileges, restrictions and conditions that
may be attached to a particular series of Class A Preferred Shares by
the directors of the Corporation in accordance with section 1.01 of
the conditions attaching to the Class A Preferred Shares, the
Corporation may at any time or from time to time purchase for
cancellation the whole or any part of the Class A Preferred Shares
outstanding. In the case of the purchase for cancellation by private
contract, the Corporation shall not be required to purchase Class A
Preferred Shares from all holders of series of Class A Preferred
Shares or to offer to purchase the shares of any other class or any
series of shares before proceeding to purchase from any one holder of
Class A Preferred Shares nor shall it be required to make purchases
from holders of Class A Preferred Shares on a pro rata basis.
1.05 Redemption
Subject to the rights, privileges, restrictions and conditions that
may be attached to a particular series of Class A Preferred Shares by
the directors of the Corporation in accordance with section 1.01 of
the conditions attaching to the Class A Preferred Shares, the
Corporation may, at its option, redeem all or from time to time any
part of the outstanding Class A Preferred Shares on payment to the
holders thereof, for each share to be redeemed, of the redemption
price per share, together with all dividends declared thereon and
unpaid. Before redeeming any Class A Preferred Shares the Corporation
shall mail to each person who, at the date of such mailing, is a
registered holder of shares to be redeemed, notice of the intention of
the Corporation to redeem such shares held by such registered holder;
such notice shall be mailed by ordinary prepaid post addressed to the
last address of such holder as it appears on the records of the
Corporation or, in the event of the address of any such holder not
appearing on the records of the Corporation, then to the last known
address of such holder, at least 30 days before the date specified for
redemption; such notice shall set out the date on which redemption is
to take place and, if part only of the shares held by the person to
whom it is addressed is to be redeemed, the number thereof so to be
redeemed; on or after the date so specified for redemption the
Corporation shall pay or cause to be paid the redemption price
together with all dividends declared thereon and unpaid to the
registered holders of the shares to be redeemed, on presentation and
surrender of the certificates for the shares so called for redemption
at such place or places as may be specified in such notice, and the
certificates for such shares shall thereupon be cancelled, and the
shares represented thereby shall thereupon by redeemed. In case a part
only of the outstanding Class A Preferred Shares is at any time to be
redeemed, the shares to be redeemed shall be selected, at the option
of the directors, either by lot in such a manner as the directors in
their sole discretion shall determine or as nearly as may be pro rata
(disregarding fractions) according to the number of Class A Preferred
Shares held by each holder. In case a part only of the Class A
Preferred Shares represented by any certificate shall be redeemed, a
new certificate for the balance shall be issued at the expense of the
Corporation. From and after the date specified for redemption in such
notice, the holders of the shares called for redemption shall cease to
be entitled to dividends and shall not be entitled to any rights in
respect thereof, except to receive the redemption price together with
all dividends declared thereon prior to the date specified for
redemption and unpaid, unless payment of the redemption price and such
dividends shall not be made by the Corporation in accordance with the
foregoing provisions, in which case the rights of the holders of such
shares shall remain unimpaired. On or before the date specified for
redemption, the Corporation shall have the right to deposit the
redemption price of the shares called for redemption together with all
dividends declared thereon prior to the date specified for redemption
together with all dividends declared thereon prior to the date
specified for redemption and unpaid, in a special account with any
chartered bank or trust company in Canada named in the notice of
redemption, such redemption price and dividends to be paid to or to
the order of the respective holders of such shares called for
redemption upon presentation and surrender of the certificates
representing the same and, upon such deposit being made, the shares in
respect whereof such deposit shall have been made shall be redeemed
and the rights of the several holders thereof, after such deposit,
shall be limited to receiving, out of the monies so deposited, without
interest, the redemption price together with all dividends declared
thereon prior to the date specified for redemption and unpaid,
applicable to their respective shares against presentation and
surrender of the certificates representing such shares.
1.06 Liquidation, Dissolution and Winding-up
Subject to the rights, privileges, restrictions and conditions that
may be attached to a particular series of Class A Preferred Shares by
the directors of the Corporation in accordance with section 1.01 of
the conditions attaching to the Class A Preferred Shares, in the event
of the liquidation, dissolution or winding-up of the Corporation,
whether voluntary or involuntary, the holders of the Class A Preferred
Shares shall be entitled to receive, before any distribution of any
part of the assets of the Corporation among the holders of any shares
ranking subordinate to the Class A Preferred Shares, for each Class A
Preferred Share, an amount equal to the redemption price of such share
and any dividends declared thereon and unpaid and no more.
Board of Directors' Recommendation
The board of directors believes that it is important to increase the
Company's flexibility to raise additional capital through the creation of the
Class A Preferred Shares. All of the Company's directors and senior officers
have expressed their intention to vote in favour of the amendment to the
articles. The special resolution to amend the Company's articles of continuance
must be passed by a majority of not less than 2/3 of the votes cast by the
shareholders who vote in respect of the special resolution.
In certain circumstances, preferred shares with provisions such as
those attaching to the Class A Preferred Shares may constitute a means by which
directors of a reporting issuer could implement various take-over bid defensive
tactics. The Ontario Securities Commission has issued a notice indicating that
such use of preferred shares during the course of a bid will be reviewed under
Rule 62-202 (formerly National Policy 38).
If approved, the proposed amendment would allow the Company to issue
"blank check" preferred stock with such designations, rights and preferences as
the board of directors determined from time to time and without requiring
further approval or action by the Company's shareholders. Although the board of
directors believes that the Class A Preferred Shares would allow the Company
enhanced flexibility in obtaining financing for the Company's operations on the
best possible terms, any particular issued or series of Class A Preferred Shares
could have preferences, voting powers, conversion rights, qualifications,
special or relative rights, and privileges that could adversely affect the
voting power or other rights of holders of Shares. Class A Preferred Shares
could be issued with voting, conversion or other rights that could discourage
possible acquirers of the Company from making a tender offer or other attempt to
gain control of the Company, even if such transaction was generally favorable to
the Company's shareholders. Satisfaction of any dividend preferences on
outstanding Class A Preferred Shares would also reduce the amount of funds
available for the payment of dividends on the Shares. In addition, the holders
of Class A Preferred Shares would normally be entitled to receive a preference
payment in the event of any liquidation, dissolution or winding-up of the
Company before any payment is made to the holders of the Shares. The board of
directors has no present plans or understandings for the issuance of any Class A
Preferred Shares and does not intend to issue any Class A Preferred Shares
except on terms which the board deems to be in the best interest of the Company
and its shareholders.
The board of directors believes that authorizing Class A Shares is in
the best interests of the Company and its stockholders.
The board of directors recommends that the shareholders vote for
approving the amendment to the articles of continuance.
PRINCIPAL SHAREHOLDERS
The following sets forth information, as of March 15, 1999, concerning
beneficial ownership of the Shares by: (i) any shareholders known to the Company
to beneficially own more than 5% of the issued and outstanding Shares, and (ii)
all current executive officers, directors, and director nominees individually
and as a group. Except as otherwise indicated and except for those shares that
are listed as being beneficially owned by more than one shareholder, each
shareholder identified in the table has sole voting and investment power with
respect to their shares.
Unless otherwise indicated, the beneficial owners of more than 5% of
Shares information is based on Schedule 13G Reports filed with the SEC and the
records of the Company.
<TABLE>
<CAPTION>
Shares of Common Stock
Beneficially Owned at
March 15, 1999(1)
-----------------
Percent of
Class
Name of Person or Group Position Number Outstanding
- ----------------------- -------- ------ -----------
<S> <C> <C> <C>
Robert E. Rigney Chairman of the Board
8 Greenway Plaza, Suite 910 Chief Executive Officer 567,039(2) 6.4%
Houston, Texas 77046
Fred A. Tietz President 46,079 *
Bobby J. Fogle Vice-President Finance,
Director 87,066 *
Philip R. Henry Vice-President 70,632 *
Charles R. Erickson Secretary 64,479 *
Paul H. Farrar Director 68,901 *
Shingyi Ho Vice President,
Director 256,219 2.9%
Ben F. Barnes Director, Sino-American 149,494 1.7%
James C. Roe Director 126,531 1.6%
All of the executive officers
and directors as a group (9 persons) 1,436,440 14.0%
State Street Research & Management Company 479,400(3) 5.4%
One Financial Center, 30th Floor
Boston, MA 02111-2690
Filland International Ltd. 600,000(4) 6.8%
19th Floor Evergo House
38 Gloucester Road
Wanchai, Hong Kong
<FN>
(1) Unless otherwise indicated in the footnotes below, the number of Shares
held and the percent outstanding are as of March 15, 1999. Unless otherwise
indicated in the footnotes below, the persons named have sole voting and
investment power over the number of Shares beneficially owned by them. The
table includes the following shares that were acquirable within 60 days
following March 15, 1999 by exercise of options granted under the Company's
stock option plans: Mr. Robert E. Rigney - 62,500; Mr. Frederic A. Tietz -
32,500; Mr. Bobby J. Fogle - 65,000; Mr. Philip R. Henry - 27,500; Mr.
Charles R. Erickson - 25,000; Mr. Paul H. Farrar - 53,400; Mr. Shingyi Ho -
143,500; Mr. Ben Barnes - 9,200; and Mr. James C. Roe - 68,400.
(2) Based on a Schedule 13G filed with the SEC December 3, 1998.
(3) Based on a Schedule 13G dated February 11, 1999 filed with the SEC,
State Street Research & Management Company,an investment adviser registered
under Section 203 of the Investment Advisors Act of 1940, is deemed to be
the beneficial owner of 479,400 Shares as a result of acting as an invest-
ment advisor to several clients.
(4) Based on Company records only as Filland is a foreign corporation not
subject to SEC filing requirements.
* Less than 1%.
</FN>
</TABLE>
Executive Officers of the Company
The executive officers of the Company are appointed annually by the
board of directors. Information regarding Robert E. Rigney, Chief Executive
Officer and Chairman of the Board, Bobby J. Fogle, Vice President-Finance, and
Shingyi Ho, Vice President, is set forth above under "Directors of the Company."
Set forth below is certain information as of the date hereof, concerning the
other executive officers of the Company.
Frederic A. Tietz, 67, has served as President of the Company and
Sino-American since 1996. From 1991 to 1996, Mr. Tietz worked as an independent
consultant to McDermott International and Axem Resources. Mr. Tietz is a
Certified Petroleum Geologist and has over 35 years of oil and gas exploration
and production experience including serving as President of Monsanto Oil Company
and as President of BHP Petroleum (Americas) Inc.
Philip R. Henry, 45, joined the Company in 1996 serving as
Vice-President, Operations of the Company and Vice-President of Sino-American.
Mr. Henry was a partner with Klenda Financial Services, Inc., a financial
services company based in Denver, Colorado, from 1988 until 1996.
Charles R. Erickson, 44, has served as Secretary and Legal Counsel to
the Company and Sino-American since 1998. Prior to joining the Company in 1998,
Mr. Erickson served Triton Engineering Services Company and its subsidiaries for
12 years in various capacities including Director, Executive Vice-President,
General Counsel and Corporate Secretary.
INTERESTS OF INSIDERS IN MATERIAL TRANSACTIONS
There are no material interests, direct or indirect, of any director,
officer or any shareholder of the Company who beneficially owns, directly or
indirectly, or exercises control or direction over more than five percent (5%)
of the outstanding Shares, or any known family member, associate or affiliate of
such persons, participating in any transaction within the last three years or in
any proposed transaction that has materially affected or would materially affect
the Company or any of its subsidiaries.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
Management of the Company is not aware of any indebtedness outstanding
by directors or officers of the Company to the Company or its subsidiaries at
any time during the year ended December 31, 1998.
SHARE PERFORMANCE TABLE
[Graphic Omitted]
The following table illustrates changes over the three year period
ended December 31, 1998 in cumulative total shareholder return, assuming an
initial investment of $100 on December 31, 1996 measured against the cumulative
total return of the TSE 300 Index. Since the Company has only been traded on the
AMEX since June 24, 1998, the Company used the share performance on the TSE for
its comparison.
---------------------------------------------------------------------------
12/12/96 12/31/96 12/31/97 12/31/98
----------------------------------------------------------
PDR 100 100 96 6
TSE 300 100 104 119 117
TSE O&G 100 106 110 77
---------------------------------------------------------------------------
OTHER BUSINESS TO BE CONDUCTED AT THE MEETING
Receipt of the Consolidated Financial Statements and Auditor's Report
At the Meeting, shareholders will receive and consider the consolidated
financial statements of Pendaries for the year ended December 31, 1998 and the
auditor's report thereon, but no vote by the shareholders with respect thereto
is required or proposed to be taken.
ITEM D: REAPPOINTMENT OF AUDITOR
Unless otherwise directed, it is management's intention to vote the
proxies FOR the resolution to reappoint Arthur Andersen LLP, Houston, Texas, to
serve as auditor of Pendaries until the next annual meeting of the shareholders
and to authorize the directors to fix the auditor's remuneration. Arthur
Andersen has been Pendaries' auditors since 1996. A representative from Arthur
Andersen will be present at this year's meeting of shareholders and is expected
to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Pursuant to various rules promulgated by the SEC, a shareholder that
seeks to include a proposal in the Company's proxy statement and form of proxy
card for the annual meeting of the Shareholders of the Company to be held in
2000 must timely submit such proposal in accordance with SEC Rule 14a-8 to the
Company addressed to Charles R. Erickson, the Secretary of the Company, at 8
Greenway Plaza, Suite 910, Houston, Texas 77046, no later than December 31,
1999. Further, pursuant to SEC Rule 14a-4(c), if the Company does not receive
notice of a shareholder proposal at least by March 15, 2000, the Company will
have discretionary authority to vote shareholder proxies regarding the proposal.
OTHER MATTERS
Management knows of no amendment or other matters to come before the
Meeting other than the matters referred to in the Notice of Annual and Special
Meeting. However, if any other matter properly comes before the Meeting, the
accompanying proxy will be voted on such matter in accordance with the best
judgment of the person or persons voting the proxy.
All information contained in this Proxy Statement relating to the
occupations, affiliations and securities holdings of directors and officers of
the Company and their relationship and transactions with the Company is based
upon information received from the individual directors and officers. All
information relating to any beneficial owner of more than five percent (5%) of
the Shares is based upon information contained in reports filed by such owner
with the SEC.
THE CORPORATION HAS PROVIDED TO EACH PERSON WHOSE PROXY IS SOLICITED
HEREBY A COPY OF THE CORPORATION'S 1998 ANNUAL REPORT WHICH INCLUDES A COPY OF
ITS ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS) TO THE SEC FOR THE YEAR ENDED
DECEMBER 31, 1998.
BY ORDER OF THE BOARD OF DIRECTORS
Charles R. Erickson
Corporate Secretary
Houston, Texas
April 19, 1999
