<PAGE>
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 [_]
Filed by a Party other than the Registrant [X]
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 Rule 14a-11(c) or Rule 14a-12
PENDARIES PETROLEUM LTD.
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
Notes:
<PAGE>
PENDARIES PETROLEUM LTD.
8 Greenway Plaza, Suite 910
Houston, Texas 77046
Notice of Annual Meeting of Shareholders
to be held on April 14, 2000
NOTICE IS HEREBY GIVEN that the Annual 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 14th day of April, 2000 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, 1999, together with the auditors' report thereon;
2. To elect the board of directors of the Company;
3. To reappoint Arthur Andersen LLP as the independent auditor of the Company
for the fiscal year ending December 31, 2000 and to authorize the directors to
fix the auditors' remuneration; and
4. 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 are requested to date and sign the enclosed Proxy
even if you plan to attend the meeting and to mail it to or deposit with the
Company's transfer agent, CIBC Mellon Trust Company, Proxy Dept., 200 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 received at the aforesaid address by
9:00 o'clock in the morning on April 12, 2000.
The Board of Directors of Pendaries has fixed the record date for the
Meeting at the close of business on March 3, 2000 (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 owned by them as of the Record Date.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Philip R. Henry
Philip R. Henry
Corporate Secretary
March 10, 2000
<PAGE>
PENDARIES PETROLEUM LTD.
8 Greenway Plaza, Suite 910
Houston, Texas 77046
Proxy Statement
Annual Meeting of Shareholders
to be held on Friday, April 14, 2000
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by management of Pendaries Petroleum Ltd. ("Pendaries" or the "Company")
to be used at the Company's Annual Meeting of Shareholders (the "Meeting") to be
held at the time and place and for the purposes set forth in the Notice of
Annual Meeting accompanying this Proxy Statement. The approximate date of
mailing of this Proxy statement and the accompanying instrument of proxy is
March 10, 2000. 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 without additional
compensation 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's transfer
agent CIBC Mellon Trust Company, Proxy Dept., 200 Queen's Quay East, Unit 6,
Toronto, Ontario M5A 4K9, 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 resolution, if proposed at the Meeting, permitting two or
more director nominees to be elected by a single resolution and vote; (B) FOR
the election of the directors nominated as set forth below; and (C) 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 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 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 their discretion
pursuant to the discretionary authority conferred by such proxy with respect to
such matter.
2
<PAGE>
REVOCABILITY OF PROXIES
A proxy 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 March 3,
2000 (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 8,879,470 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.
Provided a quorum is present, the election of each director and the appointment
of the auditors each require the affirmative vote of a majority of the shares
represented in person or by proxy at the Meeting and entitled to vote thereon.
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 12.
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 six. 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 nominees with the votes
3
<PAGE>
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 all six 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 discretion 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 was reduced at the 1999
Annual and Special Meeting from ten directors to six directors. The following
table indicates the names of the 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
Municipality of Residence and Business Since Age
- ------------------------- -------------------------- ------- ---
<S> <C> <C> <C>
Directors
---------
Robert E. Rigney/(1)(4)/ Chairman and Chief Executive 1996 68
Houston, Texas Officer of the Company
Ben F. Barnes/(2)/ Businessman June 1999/(5)/ 61
Austin, Texas
Paul H. Farrar/(1)(2)(3)(4)/ Chairman, Adelaide Capital 1996 65
Toronto, Ontario Corporation
Bobby J. Fogle/(3)/ Vice-President, Finance 1997 54
Houston, Texas of the Company
Shingyi Ho Vice-President of the Company 1996 53
Beijing, China
James C. Roe/(1)(2)(3)(4)/ Businessman 1996 70
Sugar Land, Texas
</TABLE>
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
(3) Member of Finance Committee.
(4) Member of Corporate Governance Committee.
(5) Mr. Barnes has served as a director of Sino-American Energy Corporation
since its inception in 1996.
The Company does not have an executive committee of the Board of Directors.
4
<PAGE>
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, 68, is Chairman, Chief Executive Officer and a Director
of the Company and Sino-American since its 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 21 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 the Company since 1999 and 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, 65, 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 currently serves as a director of AFC Enterprises and
Anchor Glass Container Corp in the U.S. and serves as director and Chairman of
Canadian Airlines Corporation as well as a director of Consumers Packaging Inc.
in Canada. Mr. Farrar was a Senior Vice-President of a Canadian chartered bank
prior to 1994.
Bobby J. Fogle, 54, 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 16 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, 70, 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.
5
<PAGE>
REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
Statement of Executive Compensation
All compensation amounts are expressed in U.S. dollars. For the purpose of
reporting executive remuneration paid in 1999, there were four individuals,
besides the Chief Executive Officer, employed as an executive officer of the
Company during the year who received salary and bonus in excess of Cdn. $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 1999 was $492,500.
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
-------------------------------------- ----------------------
Other Securities Underlying
Annual Options/SARs
Name and Principal Position Year Salary Bonuses Compensation/(1)/ Granted #
--------------------------- ---- -------- ------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Robert E. Rigney 1999 $155,500 $ - $ - 20,000
Chief Executive Officer 1998 184,999 - 5,775 25,000
1997 127,003 5,000 13,824 12,500
Bobby J. Fogle 1999 $105,500 $ - $ - 15,000
Vice President - Finance 1998 118,333 - 4,535 15,000
1997 93,274 5,000 6,243 50,000
Charles R. Erickson/(2)/ 1999 $ 87,500 $ - $ - -
Legal Counsel 1998 89,171 - 2,767 -
1997 - - - -
Philip R. Henry 1999 $ 73,500 $ - $ - 10,000
Vice President, Corp. Secretary 1998 76,333 - 2,335 7,500
1997 75,549 5,000 3,050 20,000
Shingyi Ho 1999 $ 72,000 $ - $ - 10,000
Vice President, Beijing 1998 69,000 - 3,462 6,000
1997 - - - 12,500
</TABLE>
(1) Includes car allowances.
(2) Mr. Erickson was hired in 1998 and left the Company effective October 1999.
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 only non-qualified stock options. Under the terms of the Plan,
there currently remains 285,500 Shares available for issuance out of the
1,000,000 Shares 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
6
<PAGE>
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, 1999, 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 253,500 Shares. These options are
exercisable at prices ranging from U.S. $.9375 to U.S. $13.16, with a weighted
average exercise price of U.S. $8.53. Of the total outstanding options held by
the Named Executive Officers, all 253,500 options were exercisable as of
December 31, 1999.
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, 1999.
Of the total outstanding options held by the Named Executive Officers, 55,000
options were "in the money" as of December 31, 1999. Options are "in-the-
money" if the market price of a Share exceeds the exercise price of the option.
Aggregated Option/SAR Exercises in 1999
And Fiscal-Year End Option/SAR Values
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised In-The-Money
Aggregate Options at Options at
Shares Value December 31, 1999 (#) December 31, 1999 (#)
------------------------------- --------------------------------
Acquired on Exercise Realized Exercisable Unexercisable/(1)/ Exercisable Unexercisable/(1)/
-------------------- --------- ----------- ------------------ ------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Robert E. Rigney - - 82,500 - $48,750 -
Bobby J. Fogle - - 80,000 - $36,562 -
Philip R. Henry - - 37,500 - $24,375 -
Shingyi Ho - - 53,500 - $24,375 -
</TABLE>
(1) All options vest and are exercisable immediately upon grant.
7
<PAGE>
Stock Option Grants
The following table contains information concerning the grant of stock
options during 1999 to the Named Executive Officers under the Company's 1997
Stock Option Plan:
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
--------------------------------------------------------------------- ----------------
Number of % of Total
Shares Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees Base Price Expiration Present Value
Name Granted (#)/(1)/ In Fiscal Year (Cdn.$/Share) Date (U.S.$)/(2)/
---- ----------------- -------------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Robert E. Rigney 20,000 10.5% $.9375 10/04/2004 $17,620
Bobby J. Fogle 15,000 7.9% $.9375 10/04/2004 $13,215
Philip R. Henry 10,000 5.2% $.9375 10/04/2004 $ 8,810
Shingyi Ho 10,000 5.2% $.9375 10/04/2004 $ 8,810
</TABLE>
______________
(1) The options were granted on October 4, 1999 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-Scholes Model
considers a number of factors, including the expected volatility of the
stock, interest rates, and the estimated time period until the exercise 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 161.49%, risk-free rate of return of 6.11% 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.
EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
During 1999, the compensation committee of the Company consisted of Messrs.
Robert E. Rigney, Paul H. Farrar and James C. Roe with Messrs. Farrar and Roe
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
8
<PAGE>
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, Chair
Paul H. Farrar
James C. Roe
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 20,000
shares, Bobby J. Fogle was awarded options to purchase 15,000 shares and Shingyi
Ho was awarded options to purchase 10,000 shares in 1999 under the Company's
Stock Option Plan.
9
<PAGE>
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 of directors and senior management considers 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 shareholders
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 four times during the year ended December 31,
1999, including by way of telephone conference. All incumbent directors
attended at least 75% of the meetings. The board took all other actions during
1999 by unanimous written consent. In addition, all directors attended at
10
<PAGE>
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 place 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
Meeting of Shareholders of the Company held on June 11, 1999. 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:
11
<PAGE>
(i) Audit Committee: The Audit Committee is responsible for
reviewing the scope and audit plan of the independent auditors'
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 1999 and was comprised of Messrs. Barnes,
Farrar and Roe with Mr. Farrar acting as Chairman.
(ii) Compensation Committee: In 1999, the Compensation Committee was
comprised of Messrs. Rigney, Farrar and Roe, 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 1999.
(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 1999, the Finance
Committee met one time and was comprised of Messrs. Farrar, Roe
and Fogle, with Mr. Roe acting as Chairman.
(iv) Corporate Governance Committee: In 1999, the Corporate
Governance Committee was comprised of Messrs. Rigney, Barnes
and Farrar, with Mr. Barnes 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
1999.
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 reply 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.
PRINCIPAL SHAREHOLDERS
The following sets forth information, as of February 15, 2000, 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
12
<PAGE>
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
February 15, 2000/(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 649,539 7.2%
Houston, Texas 77046
Fred A. Tietz President 56,079 *
Bobby J. Fogle Vice-President Finance,
Director 102,066 1.1%
Philip R. Henry Vice-President 80,632 *
Paul H. Farrar Director 78,901 *
Shingyi Ho Vice President,
Director 216,219 2.4%
Ben F. Barnes Director, Sino-American 159,494 1.8%
James C. Roe Director 119,031 1.3%
All of the executive officers
and directors as a group (9 persons) 1,399,461 13.6%
State Street Research & Management Company 479,400/(2)/ 5.4%
One Financial Center, 30th Floor
Boston, MA 02111-2690
Filland International Ltd. 600,000/(3)/ 6.8%
19th Floor Evergo House
38 Gloucester Road
Wanchai, Hong Kong
</TABLE>
(1) Unless otherwise indicated in the footnotes below, the number of Shares
held and the percent outstanding are as of February 15, 2000 and 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 February 15, 2000 by exercise
of options granted under the Company's stock option plans: Mr. Robert E.
Rigney - 82,500; Mr. Frederic A. Tietz - 42,500; Mr. Bobby J. Fogle -
80,000; Mr. Philip R. Henry - 37,500; Mr. Paul H. Farrar - 63,400; Mr.
Shingyi Ho - 53,500; Mr. Ben F. Barnes - 19,200; and Mr. James C. Roe -
63,400.
(2) 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
13
<PAGE>
to be the beneficial owner of 479,400 Shares as a result of acting as an
investment advisor to several clients.
(3) Based on Company records only as Filland is a foreign corporation not
subject to SEC filing requirements.
* Less than 1%.
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, 68, 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, 46, 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.
SHARE PERFORMANCE GRAPH
The following graph illustrates changes over the three year period ended
December 31, 1999 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 and the TSE Oil and Gas 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.
[CHART APPEARS HERE]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
12/12/96 12/31/96 12/31/97 12/31/98 12/31/99
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PDR 100 100 96 6 39
TSE 300 100 104 119 117 155
TSE O&G 100 106 110 77 98
- --------------------------------------------------------------------------------------------------
</TABLE>
ITEM B: 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 auditors' remuneration. Arthur
14
<PAGE>
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.
15
<PAGE>
OTHER BUSINESS TO BE CONDUCTED AT THE MEETING
Receipt of the Consolidated Financial Statements and Auditors' Report
At the Meeting, shareholders will receive and consider the consolidated
financial statements of Pendaries for the year ended December 31, 1999 and the
auditors' report thereon, but no vote by the shareholders with respect thereto
is required or proposed to be taken.
SHAREHOLDER PROPOSALS
All shareholder proposals for the 2001 Annual Meeting must be submitted in
writing to Phil Henry and received by the Company no later than December 5, 2000
in order to have the proposal included in the Company's proxy materials for that
meeting. Any shareholder proposal submitted other than for inclusion in the
Company's proxy materials must be delivered to the Company no later than January
22, 2001, or such proposal will be considered untimely. If a shareholder
proposal is received after January 22, 2001, the persons voting the proxies may
vote in their discretion as to the proposal off of the shares for which they
have received proxies for the 2001 Annual Meeting.
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 Meeting.
However, if any other matter properly comes before the Meeting, the accompanying
proxy will be voted on such matter at the discretion 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 COMPANY HAS PROVIDED TO EACH PERSON WHOSE PROXY IS SOLICITED HEREBY A
COPY OF THE CORPORATION'S 1999 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, 1999. YOU MAY REQUEST A COPY OF ANY EXHIBIT TO THE FORM 10-K LISTED IN ITEM
14.3. OF THE FORM 10-K BY WRITING TO PHIL HENRY AT THE COMPANY. YOU WILL BE
RESPONSIBLE FOR THE COMPANY'S REASONABLE EXPENSES IN FURNISHING SUCH EXHIBIT.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Philip R. Henry
Philip R. Henry
Corporate Secretary
Houston, Texas
March 10, 2000
16
<PAGE>
PENDARIES PETROLEUM LTD.
PROXY SOLICITED BY MANAGEMENT
For use at the Annual Meeting of Shareholders to be held on Friday, the 14/th/
day of April, 2000
The undersigned holder of common shares of Pendaries Petroleum Ltd. (the
"Company") hereby nominates and appoints ROBERT E. RIGNEY, Chairman of the board
of directors and Chief Executive Officer of the Company, or failing him, PHILIP
R. HENRY, Vice-President of the Company, or instead of either of the foregoing,
____________________________________ as the true and lawful attorney and proxy
of the undersigned to attend and act for and on behalf of the undersigned at the
Annual Meeting of Shareholders of the Company to be held on Friday, the 14/th/
of April, 2000 (the "Meeting") at 9:00 a.m. (Houston time), at The Houston City
Club, One City Club Drive, Nine Greenway Plaza, Houston, Texas 77046 to the
extent and with the same power as if the undersigned were present at the Meeting
or at such adjournment or adjournments thereof and, without limiting the
generality of the power hereby conferred, the proxy designated above is
specifically directed, on any ballot that may be called for, to vote the common
shares registered in the name of the undersigned as specified below (see Note
1):
(a) VOTE FOR [_]; AGAINST [_] or ABSTAIN [_] (if no specification is made, VOTE
FOR) the resolution, if proposed at the Meeting, permitting two or more
director nominees to be elected by a single resolution and vote as opposed
to electing each director nominee by way of a separate resolution and vote;
(b) Election of Directors - The undersigned casts the number of votes equal to
the number of common shares held by the undersigned multiplied by 6: The
distribution of votes among the nominees is as indicted below. 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
undersigned. 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;
<TABLE>
<CAPTION>
Nominee Vote Nominee Vote
------- ---- ------- ----
<S> <C> <C> <C>
Robert E. Rigney ________ FOR ________ WITHHOLD Bobby J. Fogle ________ FOR ________ WITHHOLD
Ben F. Barnes ________ FOR ________ WITHHOLD Shingyi Ho ________ FOR ________ WITHHOLD
Paul H. Farrar ________ FOR ________ WITHHOLD James C. Roe ________ FOR ________ WITHHOLD
</TABLE>
(c) VOTE FOR [_]; AGAINST [_] or ABSTAIN [_] (if no specification is made, VOTE
FOR) the reappointment of Arthur Andersen LLP as auditor of the Company and
authorize the directors to fix the auditor's remuneration;
all as described in the Proxy Statement of the Company delivered to the
shareholders of the Company in connection with the Meeting.
If any amendments or variations to the matters referred to above or to any other
matters identified in the notice of the Meeting are proposed at the Meeting or
any adjournment or adjournments thereof or if any other matters which are not
now known to management of the Company should properly come before the Meeting
or any adjournment or adjournments thereof, this proxy confers discretionary
authority on the proxy nominee to vote on such amendments or variations of such
other matters in the discretion of the proxy nominee.
This proxy is solicited on behalf of management of the Company. Shareholders of
the Company have the right to appoint a person other than the nominees
designated above to attend and act on their behalf at the Meeting and may
exercise such right by inserting the name of their nominee in the blank space
provided for that purpose above or by completing another proper form of proxy
and, in either case, by returning the completed proxy to the Company's registrar
and transfer agent, CIBC Mellon Trust Company, Proxy Dept., 200 Queen's Quay
East, Unit 6, Toronto, Ontario M5A 4K9 not less than 48 hours prior to the
Meeting or any adjournment thereof.
<TABLE>
<S> <C> <C>
DATED the _____ day of ____________, 2000. ________________________________ ______________________________
Signature of Shareholder Name of Shareholder
(Please Print)
</TABLE>
NOTES:
1. The shares represented by this proxy will be voted or withheld from voting
on any ballot that may be called for in accordance with the foregoing
directions and, if the shareholder specifies a choice with respect to any
matter to be acted upon, the shares will be voted accordingly. In the event
that no specification has been made with respect to voting FOR, AGAINST or
to WITHHOLD from voting in respect of any of the resolutions described
above, the proxy is instructed to vote the shares represented by the proxy
FOR such resolutions.
2. This proxy form must be signed and dated by the shareholder or his attorney
authorized in writing or, if the shareholder is a corporation, by any
officer or attorney of the corporation duly authorized. If the proxy form
is not dated in the space provided, it is deemed to be dated on the date on
which it is mailed by Company.
