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 Section 240.14a-11(c) or
Section 240.14a-12
KESTREL ENERGY, INC.
(Name of Registrant as Specified in Its Charter)
Gorsuch Kirgis L.L.C.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
2) 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):
A. Proposed maximum aggregate value of transaction:
B. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
KESTREL ENERGY, INC.
999 18th Street, Suite 1100
Denver, Colorado 80202
(303) 295-0344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held December 12, 1995
10:00 a.m.
To Our Shareholders:
We strongly encourage your attendance and participation at the Annual
Meeting of Shareholders of Kestrel Energy, Inc., which will be held at
10:00 a.m. on Tuesday, December 12, 1995 in the Management Briefing Center
at First Interstate Bank of Denver, N.A., North Tower, 4th Floor, 633 17th
Street, Denver, Colorado 80270 for the following purposes:
1. To elect five directors to the Board;
2. To approve and ratify the selection of KPMG Peat Marwick as the
Company's independent certified public accountants and auditors for the
fiscal year ending June 30, 1996;
3. To approve an amendment to the 1993 Nonqualified Stock Option
Plan to increase the number of shares reserved under the Plan; and
4. To transact such other business as may properly come before the
meeting.
A Proxy Statement explaining the matters to be acted upon at the
meeting is enclosed.
The Board of Directors has designated October 24, 1995 as the record
date for determining shareholders entitled to notice of and to vote at the
Annual Meeting.
THE BOARD OF DIRECTORS WOULD LIKE TO EMPHASIZE THE IMPORTANCE OF
EXERCISING YOUR RIGHTS AS SHAREHOLDERS TO VOTE ON THE ISSUES DESCRIBED IN
THE ENCLOSED PROXY STATEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF DIRECTORS, APPROVE THE
SELECTION OF KPMG PEAT MARWICK, AND APPROVE THE AMENDMENT TO THE
NONQUALIFIED STOCK OPTION PLAN.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
IN THE ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
October 27, 1995 Timothy L. Hoops
President
Mark A. Boatright
Secretary
<PAGE>
KESTREL ENERGY, INC.
999 18th Street, Suite 1100
Denver, Colorado 80202
PROXY STATEMENT
Annual Meeting of Shareholders
To Be Held December 12, 1995
10:00 a.m.
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF KESTREL
ENERGY, INC., A COLORADO CORPORATION (THE "COMPANY"), FOR USE AT THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD IN THE MANAGEMENT BRIEFING
CENTER AT FIRST INTERSTATE BANK OF DENVER, N.A., NORTH TOWER, 4TH FLOOR,
633 17TH STREET, DENVER, COLORADO ON TUESDAY, DECEMBER 12, 1995 AT 10:00
A.M., MOUNTAIN STANDARD TIME, AND AT ANY ADJOURNMENT THEREOF. It is
anticipated that this Proxy Statement and the accompanying Proxy will be
mailed to the Company's shareholders on or about October 27, 1995.
The expense of the Board of Directors' Proxy solicitation will be
borne by the Company. In addition to solicitation of Proxies by use of
the mails, some of the Company's officers and directors may solicit
Proxies by telephone, telegraph or personal interview without any
additional compensation to them. The Company will reimburse brokers,
nominees, custodians and other fiduciaries for expenses in forwarding
Proxy materials to their principals.
Any shareholder giving a Proxy on the enclosed form may revoke it at
any time prior to the exercise thereof by advising the Secretary of the
Company in writing at the above address, by properly executing a later
dated Proxy or by appearing in person and voting at the Annual Meeting.
VOTING OF SHARES
Only holders of the Company's outstanding shares of common stock, no
par value ("Common Stock"), of record at the close of business on October
24, 1995, will be entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment thereof. On that date, there were
1,901,850 shares of Common Stock outstanding.
Cumulative voting in the election of directors is allowed. Under
cumulative voting, each shareholder is entitled to cast a number of votes
in the election of directors equal to the number of directors to be
elected multiplied by the number of shares being voted. The shareholder
may cast his vote for one nominee or may distribute the votes among
nominees in any manner. Unless directed otherwise, the enclosed Proxy
gives discretionary authority to cumulate votes in the election of
directors. On all matters other than the election of directors, each
shareholder will be entitle to one vote per share. The election of
directors requires that the five candidates having the highest number of
votes cast in favor of their election are elected to the Board of
Directors. The approval of the amendment to the Stock Plan requires an
affirmative vote of a majority of the shares of Common Stock represented
in person or by Proxy at the Annual Meeting. THE BOARD OF DIRECTORS URGES
EACH SHAREHOLDER TO MARK, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE
RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth, as far as is known to the Board of
Directors or the management of the Company, the only persons owning on
September 30, 1995 more than five percent of the outstanding shares of the
Company's Common Stock. For purposes of this disclosure, the amount of
the Company's Common Stock beneficially owned is the aggregate number of
shares of the Common Stock outstanding on such date plus an amount equal
to the aggregate amount of Common Stock which could be issued upon the
exercise of stock options within 60 days of such date.
<TABLE>
<CAPTION>
Number of Shares of Common Stock
Beneficially Owned
Voting and Investment Power
Name and Address Direct Indirect
<S> <C> <C>
Victoria International 1,166,221 --
Petroleum N.L.
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
Victoria Petroleum N.L. -- 1,166,221<FN2>
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
Timothy L. Hoops 113,544<FN3> 1,166,221<FN4>
P.O. Box 1079
Denver, CO 80201-1079
Robert J. Pett 62,500<FN5> 1,166,221<FN6>
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
John T. Kopcheff 84,000<FN7> 1,166,221<FN8>
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
<CAPTION>
Number of Shares of Common Stock
Beneficially Owned
Name and Address Total Shares Percent Owned
Owned
<S> <C> <C>
Victoria International 1,166,221<FN1> 61.3%
Petroleum N.L.
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
Victoria Petroleum N.L. 1,166,221 61.3%
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
Timothy L. Hoops 1,279,765 63.8%
P.O. Box 1079
Denver, CO 80201-1079
Robert J. Pett 1,228,721 62.8%
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
John T. Kopcheff 1,250,221 63.1%
4th Flr., Griffin Centre
28 The Esplanade
Perth 6000
Western Australia
<FN>
<FN1> Does not include unvested options to purchase 1,285,353 shares
if certain undeveloped properties are successfully developed
into proved producing properties. See CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS.
<FN2> Victoria International Petroleum N.L. ("VIP"), the record holder
of the shares, is a wholly owned subsidiary of Victoria
Petroleum N.L. ("VP"), which is therefore deemed to be another
beneficial owner of the shares. Resolute Samantha Limited, a
publicly held Australian mining and natural resources company
("Resolute"), owns 29.77% of VP. Resolute disclaims beneficial
ownership of the shares.
<FN3> Includes 8,544 shares owned jointly by Mr. Hoops and his wife,
Linda Sue Hoops. Includes vested options to purchase up to
105,000 shares granted to Mr. Hoops by the Compensation
Committee of the Board of Directors pursuant to the Company's
Nonqualified Stock Option Plan. See EXECUTIVE COMPENSATION.
<FN4> Mr. Hoops is a director of VIP and of VP. As a result, all
shares held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Hoops.
<FN5> Includes vested options to purchase up to 52,500 shares granted
to Mr. Pett by the Compensation Committee of the Board of
Directors pursuant to the Company's Nonqualified Stock Option
Plan. See EXECUTIVE COMPENSATION.
<FN6> Mr. Pett is the Chairman and a director of VIP and a director of
VP. As a result, all shares held by VIP directly and VP
indirectly are listed as indirectly held by Mr. Pett.
<FN7> Includes vested options to purchase up to 80,000 shares granted
to Mr. Kopcheff by the Compensation Committee of the Board of
Directors pursuant to the Company's Nonqualified Stock Option
Plan. See EXECUTIVE COMPENSATION.
<FN8> Mr. Kopcheff is a director of VIP and VP. As a result, all
shares held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Kopcheff.
</FN>
</TABLE>
The following table sets forth the number of shares beneficially
owned on September 30, 1995 by the Company's executive officers and
directors, and by all of the executive officers and directors as a group.
For purposes of this disclosure, the amount of the Company's Common Stock
beneficially owned is the aggregate number of shares of the Common Stock
outstanding on such date plus an amount equal to the aggregate amount of
Common Stock which could be issued upon the exercise of stock options
within 60 days of such date.
<TABLE>
<CAPTION>
Shares of
Common Stock
Beneficially
Name and Address Position(s) Owned and
With the Options Percent
Company Granted Owned
<S> <C> <C> <C>
Timothy L. Hoops President, Chief 1,279,765 63.8%
P.O. Box 1079 Executive Officer <FN1><FN2>
Denver, CO 80201-1079 and Director
Robert J. Pett Chairman of 1,228,721 62.8%
4th Floor the Board and <FN3><FN4>
Griffin Centre Director
28 The Esplanade
Perth 6000
Western Australia
Mark A. Boatright Vice President 12,000 *
9200 W. Cross Drive -Finance, Chief <FN5>
Suite 250 Financial Officer
Littleton, CO 80123 and Director
John T. Kopcheff Vice President 1,250,221 63.1%
4th Floor -International <FN5><FN6>
Griffin Centre and Director
28 The Esplanade
Perth 6000
Australia
Kenneth W. Nickerson Director 13,000 *
12431 W. Alameda Dr. <FN5>
Lakewood, CO 80228
All Directors and
Executive Officers
as a Group (5 persons) 1,450,765 67.1%
* Less than one percent (1.0%)
<FN>
<FN1> Mr. Hoops is a director of Victoria International Petroleum N.L.
("VIP") and of Victoria Petroleum N.L. ("VP"). As a result, all
shares held by VIP directly and by VP indirectly are listed as
indirectly held by Mr. Hoops.
<FN2> Includes 8,544 shares owned jointly by Mr. Hoops and his wife,
Linda Sue Hoops. Includes vested options to purchase up to
105,000 shares granted to Mr. Hoops by the Compensation
Committee of the Board of Directors pursuant to the Company's
Nonqualified Stock Option Plan. See EXECUTIVE COMPENSATION.
<FN3> Mr. Pett is the Chairman and a director of VIP and a director of
VP. As a result, all shares held by VIP directly and VP
indirectly are listed as indirectly held by Mr. Pett.
<FN4> Includes vested options to purchase up to 52,500 shares granted
to Mr. Pett by the Compensation Committee of the Board of
Directors pursuant to the Company's Nonqualified Stock Option
Plan. See EXECUTIVE COMPENSATION.
<FN5> Includes vested options to purchase up to 11,500 shares, 80,000
shares and 13,000 shares granted to Messrs. Boatright, Kopcheff
and Nickerson, respectively, pursuant to the Company's
Nonqualified Stock Option Plan. See EXECUTIVE COMPENSATION.
<FN6> Mr. Kopcheff is a director of VIP and VP. As a result, all
shares held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Kopcheff.
</FN>
</TABLE>
EFFECT OF PRINCIPAL SHAREHOLDERS' VOTE
The beneficial owners of five percent or more of the Company's Common
Stock, together with the Company's executive officers and directors, have
effective voting control over 1,450,765 shares, or 52.4%, of the
outstanding Common Stock on a fully diluted basis. Accordingly, these
principal shareholders and management could exercise voting control of the
election of directors (subject to the effects of cumulative voting), the
ratification of the selection of auditors and the amendment to the Stock
Option Plan.
ELECTION OF DIRECTORS
Five directors are to be elected to serve until the 1996 annual
meeting of shareholders and until each of their successors shall have been
elected and qualified. IT IS INTENDED THAT THE ENCLOSED PROXIES, UNLESS
DIRECTED OTHERWISE, WILL BE VOTED FOR THE FOLLOWING NOMINEES, ALL OF WHOM
ARE PRESENTLY DIRECTORS OF THE COMPANY AND HAVE BEEN NOMINATED FOR RE-
ELECTION BY THE BOARD OF DIRECTORS.
There is no arrangement or understanding between any of the nominees
and any other person or persons pursuant to which he was or is to be
selected as a director or nominee. The names of and certain information
with respect to the persons nominated for election as directors are as
follows:
TIMOTHY L. HOOPS, age 39, was appointed President, Chief Executive
Officer and Director on June 1, 1992. Mr. Hoops is a petroleum geologist
with 14 years experience in the continental USA and Australia. Mr. Hoops
has been Vice President and a Director of the Company's wholly owned
subsidiary, Victoria Exploration, Inc., an independent oil and gas
producer, since 1987. He has also been a Director of Victoria
International Petroleum N.L. and of Victoria Petroleum N.L. since 1987.
Mr. Hoops was Exploration Manager for Royal Resources Corporation, a
publicly held Denver based company engaged in the exploration and
development of oil and gas, from 1984 to 1987. Prior to 1984, Mr. Hoops
was employed by Amoco Production, Cities Service and Santa Fe Energy.
Mr. Hoops is a 1979 graduate of the Colorado School of Mines, with a
degree in geology. Mr. Hoops is the brother-in-law of Mr. Boatright.
ROBERT J. PETT, age 48, was appointed as a Director on June 1, 1992
and Chairman of the Board on January 16, 1995. Mr. Pett served as
Secretary from June 1, 1992 until December 16, 1992, as Vice President
from November 1, 1992 until January 16, 1995, and as Treasurer from
January 4, 1993 to January 16, 1995. Mr. Pett has been a director of
Victoria International Petroleum N.L. since 1986. Mr. Pett has been
Chairman of Victoria Petroleum N.L. for 11 years. He is currently
Chairman of Resolute Samantha Limited, an Australian mining and natural
resources company, which provides office facilities and administrative
services to Victoria Petroleum N.L. on a pro-rata reimbursement of
expenses basis. He is a Director of Sapphire Mines N.L., an Australian
precious gem mining company, and President and a Director of Victoria
Exploration, Inc., an independent oil and gas producer which is a wholly
owned subsidiary of the Company. Mr. Pett holds a Masters Degree in
Economics (Queens University, Canada).
MARK A. BOATRIGHT, age 38, was appointed a Director on October 18,
1993, and as Vice President - Finance, Chief Financial Officer, Treasurer
and Secretary on January 16, 1995. Mr. Boatright is President of
Boatright and Associates, P.C., Certified Public Accountants.
Mr. Boatright has over 16 years experience in financial accounting and
specializes in oil and gas accounting and international taxation.
Mr. Boatright currently acts as a consultant in international taxation and
accounting for various oil and gas companies. He also is a certified
financial planner for Regatta Financial Services, a registered investment
advisory firm, and serves as a director of Irons Brewing Company. Prior
to establishing his own accounting practice, Mr. Boatright was the tax
manager for Bradley, Allen & Associates, P.C., Certified Public
Accountants. Mr. Boatright is a 1979 cum laude graduate of the University
of Colorado with a degree in finance. Mr. Boatright has been providing
accounting and financial services to the Company since June, 1992. Mr.
Boatright is the brother-in-law of Mr. Hoops.
JOHN T. KOPCHEFF, age 47, was appointed as Vice President -
International and a Director of the Company on January 16, 1995. Mr.
Kopcheff is a geologist with 25 years experience in petroleum in
Australia, Southeast Asia, United States, South America and the North Sea,
both in field geological operations and management. Mr. Kopcheff has been
a Director and Secretary of Victoria Exploration, Inc. since 1986, a
Director of Victoria International Petroleum N.L. since 1986, and a
Director of Victoria Petroleum N.L. since 1984. Prior to his appointment,
he provided various services to the Company relating to the Company's
international exploration activities on a consulting basis. He received a
Bachelor of Science degree with honors from the University of Adelaide in
1970.
KENNETH W. NICKERSON, age 75, is an independent petroleum and mineral
geologist with over 47 years experience. He was appointed as a director
of the Company on December 16, 1992. From 1981 until 1988, Mr. Nickerson
served as President, Director and Chief Operating Officer of Royal
Resources Corporation, a publicly held Denver based company engaged in the
exploration and development of oil and gas. Since then Mr. Nickerson has
worked as a consulting geologist for various energy companies.
Mr. Nickerson is a 1948 graduate of the Colorado School of Mines with a
degree in geological engineering.
In the event any one or more of the nominees shall be unable to serve
as a director, votes will be cast, pursuant to the authority granted in
the enclosed Proxy, for such person or persons as may be designated by the
Board of Directors. The Board of Directors at this time is not aware of
any nominee who is or will be unable to serve as director, if elected.
None of the nominees are directors of any other company having a
class of equity securities registered under the Securities Exchange Act of
1934, or any company registered under the Investment Company Act of 1940.
The Board of Directors met two times during the fiscal year ended
June 30, 1995, and also acted six times by unanimous written consent. The
Company has an Audit Committee comprised of Messrs. Hoops, Nickerson and
Boatright, which oversees the accounting controls for the Company. In
fiscal 1995, the Committee met one time. The Company also has a
Compensation Committee, which committee makes recommendations on executive
compensation and selects those persons eligible to receive grants of
options under the Company's Nonqualified Stock Option Plan and the Amended
and Restated Incentive Stock Option Plan. Members of the Committee are
Messrs. Nickerson and Boatright. The Committee acted five times in fiscal
1995 by unanimous written consent. The Company does not have a nominating
committee.
EXECUTIVE OFFICERS
Timothy L. Hoops is the President and Chief Executive Officer of the
Company. Robert J. Pett is the Chairman of the Board, Mark A. Boatright
is Vice President-Finance, Chief Financial and Accounting Officer,
Treasurer and Secretary and John T. Kopcheff is Vice President-
International. See ELECTION OF DIRECTORS. Denis I. Rakich and Lynnette
M. Carpenter are Assistant Secretaries of the Company, but they are not
executive officers of the Company.
There is no arrangement or understanding between any of the executive
officers and any other persons pursuant to which he was or is to be
selected as an officer, nor is there any family relationship between or
among any executive officers, except that Mr. Boatright is the brother-in-
law of Mr. Hoops.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 31, 1993, the Board of Directors authorized the exchange
of 207,263 restricted shares of the Company's Common Stock for $466,343 in
indebtedness owed to Victoria Exploration, Inc. ("VicX") effective January
1, 1994. Because the shares received were issued in a private,
unregistered transaction, they cannot be publicly resold by VicX or its
successors in interest until after the shares have been held for two years
and then only in accordance with the other provisions of Securities Act
Rule 144. The exchange rate for the transaction was approximately $2.25
per share. As a result of the transaction, VicX owned 380,913 shares, or
59% of the outstanding Common Stock at that time. The remaining debt owed
to VicX after the transaction amounted to approximately $600,000.
On June 10, 1994, the Company transferred 709,108 shares of its
Common Stock and unvested options to acquire up to an additional 1,285,353
shares of that stock to Victoria International Petroleum N.L. ("VIP") in
exchange for all of the outstanding shares of VicX. The shares of VicX
were valued at $1,595,493, the aggregate value of the assets of VicX less
certain undeveloped properties. The value of the Company's Common Stock
in the exchange was an agreed upon value of $2.25 per share. At the time
of the exchange the Company's Common Stock was being traded at prices
between $1.75 and $2.00 per share. The options were given in
consideration for certain undeveloped properties owned by VicX which the
Company agreed to develop. These options will only vest to VIP if the
undeveloped properties are successfully developed into proved producing
properties by June 30, 1997. The options were granted on the formula of
cash received by the Company from the undeveloped properties less the cash
used to develop those properties plus 60% of the reclassified present
value discounted at 10%, divided by $3.00 per share. The properties will
be evaluated annually by a qualified independent evaluator to determine
the number of options to be vested to VIP. Because certain of the
officers and directors of the Company have similar positions with VicX and
VIP, the Company's Board required as a condition to the transaction, and
obtained, a written opinion from an independent firm experienced in oil
and gas mergers and acquisitions that the transaction was fair from a
financial point of view to the shareholders of the Company. All shares
issued in this transaction were unregistered. Prior to the transaction,
VicX transferred all of its holdings in the Company, 380,913 shares (59%)
and its note receivable from the Company to VIP.
In conjunction with the foregoing acquisition of undeveloped oil and
gas properties from VicX, the Company issued a $1,000,000 note payable to
VicX, which bore interest at the Norwest Bank Denver, N.A. prime rate with
quarterly interest payments. In December 1992, the terms of a $58,500
unsecured short term note to VicX were conformed to the terms of the
$1,000,000 note payable and the notes were combined. The note was secured
by the oil and gas properties acquired from VicX. As noted above, the
note was reduced to approximately $600,000 by the exchange of 207,263
shares of Common Stock for $466,343 in indebtedness owed to VicX on
December 31, 1993. Also, as indicated above, VicX transferred the note to
VIP on June 10, 1994. On December 27, 1994, prior to the December 31,
1994 maturity date of the note, the Company agreed to assign an unproved
waterflood project (Rocky Butte) acquired in the foregoing June 1992
transaction to VIP in exchange for the surrender of indebtedness to VIP in
the amount of approximately $600,000, thereby eliminating the note
receivable from the Company to VIP.
On November 8, 1994, VIP purchased 75,000 additional shares of Common
Stock for $2.50 per share as part of a private placement of 550,000 shares
by the Company, most of which was sold overseas. On June 26, 1995, VIP
purchased 50,000 additional shares in the open market. In August 1995,
VIP sold 48,800 shares. VIP's current shareholding interest in the
Company is 61.3% (52.4% diluted for currently vested options).
Mark A. Boatright has been providing accounting and financial
services to the Company since June, 1992. Mr. Boatright was paid $20,230
in fiscal 1995 for his services, including $17,250 from the Company and
$2,980 from VicX. On November 15, 1994, the Company entered into an
agreement with Mr. Boatright whereby he would provide services to the
Company and VicX through his company, Boatright & Associates, P.C. for
$1,500 per month. The Board of Directors believes these fees are in line
with industry standards.
As a result of the Company's close relationship with its majority
shareholder VIP, it has been afforded the opportunity to participate in
various international oil and gas drilling opportunities located by VIP.
In most cases, VIP has its own interest in the same drilling projects in
which the Company agrees to participate and in some cases the Company has
acquired its interest from VIP rather than directly from the operator or
lead promoter of the prospects.
To date, the Company has agreed to farm-in on four such international
drilling permits, including one in Papua New Guinea and three in Western
Australia. The Company earns a right to participate by sharing in the
costs of data review, seismic and drilling. In addition to the benefit,
if any, to VIP's interest in these permits resulting from the Company's
agreement to share these costs, the Company has agreed to pay a 5% royalty
to VIP on the Company's interest in any international permits referred to
the Company by VIP which produce net revenues for the Company. The
Company believes that this arrangement is fair and reasonable and that the
potential compensation to VIP is no greater than the Company would have
paid in an arms length transaction with an unrelated party who provided
comparable services.
EXECUTIVE COMPENSATION
The following sets forth in summary form the compensation received
during each of the Company's last three complete fiscal years by the Chief
Executive Officer of the Company. No other officers of the Company
received salary, bonus or other annual compensation in total from the
Company, in excess of $100,000.
Summary Compensation Table
Annual Compensation
<TABLE>
<CAPTION>
NAME AND Fiscal Salary<FN1> Bonus Options
PRINCIPAL POSITION Year ($) ($) (#)
<S> <C> <C> <C> <C>
Timothy L. Hoops 1995 $88,950 $0 40,000
President, Chief 1994 $48,000<FN2> $0 40,000
Executive Officer, 1993 $24,000<FN2> $0 25,000
and Director
_______________________________
<FN>
<FN1> Until January of 1995, Mr. Hoops provided consulting services to
the Company via a retainer agreement between the Company and his
employer, Peak Resource Management, Inc. ("Peak) which fees are
set forth under the salary column above. Beginning January 1,
1995, Mr. Hoops became an employee of the Company and, in that
capacity, provides services to the Company and the Company's
wholly owned subsidiary, Victoria Exploration, Inc. ("VicX").
<FN2> Peak also received $54,900 in consulting fees from VicX on
account of services provided to VicX by Mr. Hoops for the year
ended June 30, 1994, and $54,900 for the year ended June 30,
1993, which are not included in the salary column above.
</FN>
</TABLE>
The named executive officer received no additional compensation other
than noted above the aggregate amount of which was the lesser of either
$50,000 or 10% of the total of annual salary, bonus and consulting fees
reported for the executive officer.
The Company reimburses its officers and directors for ordinary and
necessary business expenses incurred by them on behalf of the Company.
It is anticipated that, in fiscal 1996, Mr. Hoops will be paid a
salary of $75,000 for services rendered to the Company and VicX plus
retirement and health benefits. Payment for his services from July 1,
1994 through December 31, 1994 was made through his employer, Peak
Resource Management, Inc. Since January 1, 1995, Mr. Hoops has been paid
as an employee of the Company. Mr. Hoops also expects to receive
approximately $21,500 in consulting fees from Victoria Petroleum N.L.
("Victoria") and companies owned by Victoria for services provided to
those companies in fiscal 1996. In fiscal 1995, those consulting fees
amounted to $9,000. In addition, Mr. Hoops received fees as a director of
Victoria in the amount of Australian $5,000 for fiscal 1995 and he expects
to receive the same in 1996. Resolute Samantha Limited, a publicly held
Australian mining and natural resources company, owns 29.77% of Victoria,
which indirectly owns 61.3% of the Company.
Option Grants for Fiscal Year Ended June 30, 1995
<TABLE>
<CAPTION>
% of Total
Options Granted Exercise or
Options in Fiscal Year Base
Name Granted to Date ($/share)
<S> <C> <C> <C>
Timothy L. Hoops 40,000 31% $1.875
President, Chief
Executive Officer
and Director
Robert J. Pett 20,000 15% $1.875
Chairman of
the Board
and Director
Mark A. Boatright 5,000 4% $4.00
Vice President -
Finance, Chief
Financial Officer
and Director
John T. Kopcheff 40,000 31% $1.875
Vice President -
International
and Director
Kenneth W. Nickerson 5,000 4% $4.00
Director
Denis I. Rakich 7,500 6% $1.875
Assistant Secretary
Lynnette M. Carpenter 5,000 4% $1.875
Assistant Secretary
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Expiration for Option Term
Name Date 5%($)<FN1> 10%($)<FN2>
<S> <C> <C> <C>
Timothy L. Hoops 6/20/05 $47,252 $119,252
President, Chief
Executive Officer
and Director
Robert J. Pett 6/20/05 $23,626 $59,626
Chairman of
the Board
and Director
Mark A. Boatright 9/30/04 $12,600 $31,800
Vice President -
Finance, Chief
Financial Officer
and Director
John T. Kopcheff 6/20/05 $47,252 $119,252
Vice President -
International
and Director
Kenneth W. Nickerson 9/30/04 $12,600 $31,800
Director
Denis I. Rakich 6/20/05 $8,860 $22,360
Assistant Secretary
Lynnette M. Carpenter 6/20/05 $5,907 $14,907
Assistant Secretary
<FN>
<FN1> This column represents the potential realizable value of each
grant of options, based on the assumption that the market price
of shares of Common Stock underlying the options will appreciate
in value from the date of the grant to the end of the option
term at the annual rate of five percent.
<FN2> This column represents the potential realizable value of each
grant of options, based on the assumption that the market price
of shares of Common Stock underlying the options will appreciate
in value from the date of the grant to the end of the option
term at the annual rate of ten percent.
</FN>
</TABLE>
Aggregated Option Exercises For Fiscal Year Ended June 30, 1995
and Year End Option Values
<TABLE>
<CAPTION>
Shares
Exercised Value
during fiscal Realized
Name year to date(#) ($)
<S> <C> <C>
Timothy L. Hoops 0 0
President, Chief
Executive Officer,
and Director
Robert J. Pett 0 0
Chairman of the
Board and Director
Mark A. Boatright 0 0
Vice President -
Finance, Chief
Financial and
Accounting Officer
and Director
John T. Kopcheff 0 0
Vice President -
International and
Director
Kenneth W. Nickerson 0 0
Director
Denis I. Rakich 0 0
Assistant Secretary
Lynnette M. Carpenter 0 0
Assistant Secretary
<CAPTION>
Number of Value of
Securities Unexercized
Underlying In-the-Money-
Options at Options at
June 30, 1995 June 30, 1995
Name (#)<FN1> ($)<FN2>
<S> <C> <C>
Timothy L. Hoops 25,000/80,000 $7,813/0
President, Chief
Executive Officer,
and Director
Robert J. Pett 12,500/40,000 $3,906/0
Chairman of the
Board and Director
Mark A. Boatright 0/6,500 $0
Vice President -
Finance, Chief
Financial and
Accounting Officer
and Director
John T. Kopcheff 0/80,000 $0
Vice President -
International and
Director
Kenneth W. Nickerson 1,500/6,500 $469/0
Director
Denis I. Rakich 12,500/27,500 $3,906/0
Assistant Secretary
Lynnette M. Carpenter 1,250/10,000 $391/0
Assistant Secretary
<FN>
<FN1> All unexercised options are exercisable.
<FN2> For all unexercised options held as of June 30, 1995, the
aggregate dollar value of the excess of the market value of the
stock underlying those options over the exercise price of those
unexercised options. The price used to calculate these figures
is the average of the Bid and Ask prices as of June 30, 1995,
which was $1.625 per share. However, since the underlying
shares are restricted stock, the actual value cannot be
determined. See PROPOSAL TO AMEND NONQUALIFIED STOCK OPTION
PLAN.
</FN>
</TABLE>
Amended and Restated Stock Incentive Plan
In December 1992, the Company adopted its 1993 Amended and Restated
Incentive Stock Option Plan (the "Incentive Plan") which provides for the
grant of Common Stock purchase options to key employees of the Company.
The Incentive Plan is currently administered by a committee (the
"Compensation Committee") composed of two disinterested directors of the
Company, namely Kenneth W. Nickerson and Mark A. Boatright. Messrs.
Nickerson and Boatright are not eligible to receive options under the
Incentive Plan. Options granted under the Incentive Plan may provide for
an exercise period of up to ten years and must provide for an exercise
price of at least 100% of the fair market value of the underlying Common
Stock on the date of grant, except that if the grantee is a 10%
shareholder, the exercise period may not exceed five years and the
exercise price must be at least 110% of the fair market value on the date
of grant.
Options may not be transferred other than by will or the laws of
descent and distribution and, during the lifetime of the person to whom
they are granted, may be exercised only by such person or such person's
guardian or legal representative.
The Compensation Committee may suspend, terminate or make amendments
to the Incentive Plan that it deems advisable, except that it may not,
without approval by the Company's shareholders, (i) increase the maximum
number of shares for which options may be granted except for adjustments
as provided in the Incentive Plan, (ii) extend the term of the Incentive
Plan, (iii) change the method of determining the minimum price specified
in an option, or (iv) change the class of employees to whom options may be
granted under the Incentive Plan. No option may be granted under the
Incentive Plan after June 30, 1997.
The maximum number of shares of Common Stock that may be issued under
the Incentive Plan is 36,000 shares. The Incentive Plan will terminate on
July 1, 1997, as originally provided by the 1987 Stock Incentive Plan
before it was amended and restated. As of the date of this Proxy
Statement, there are currently no outstanding incentive stock options
under the Incentive Plan.
Nonqualified Stock Option Plan
The Company also has a Nonqualified Stock Option Plan which is
proposed to be amended, the terms of which are described below under
PROPOSAL TO AMEND THE NONQUALIFIED STOCK OPTION PLAN.
KESTREL ENERGY, INC.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
Compensation Policies Toward Executive Officers
The Compensation Committee's executive compensation polices are
designed to provide competitive levels of compensation through a
combination of base level compensation, incentive stock options and cash
bonus awards.
President's Compensation: Until January of 1995, the President of
the Company provided services to the Company via a retainer agreement with
his employer, Peak Resources Management, Inc. At that time, Mr. Hoops
became an employee of the Company and began providing services to the
Company and its newly acquired subsidiary, Victoria Exploration, Inc.
("Victoria"), in that capacity for the first time. Because Mr. Hoops had
separately provided consulting services to both the Company and Victoria
prior to that time, the Compensation Committee felt it was necessary to
adjust his compensation from the Company to reflect the combined workload,
increasing his salary to $88,950.
The Committee reviews the President's performance periodically and
reports to the Board of Directors on its evaluation of that performance.
The Committee does not believe that it is reasonable, necessary or
appropriate for such a small company to require or establish a direct or
fixed relationship between the Company's financial performance and the
Chief Executive Officer's compensation. The Committee instead considers a
number of factors in making a subjective determination as to the
compensation of the Chief Executive Officer, including determinations as
to the level of salary, options and benefits: quality of service
provided, amount of time devoted to the Company's business, level of
expertise, dedication to the Company and its best interests, general
management abilities and the Company's operational and financial
performance.
In fiscal 1995, the Committee noted that Mr. Hoops' efforts on behalf
of the Company increased even more than had previously been anticipated
from the combination of Victoria and the Company. In particular, Mr.
Hoops, aided by John Kopcheff and others, raised $1,365,336 for the
Company in U.S. and overseas offerings of its common stock. Mr. Hoops
also was heavily involved in connection with the Company's acquisition of
international drilling permits and its heightened investor relations
program in 1995, both of which required considerable efforts on his part
in addition to his duties managing the Company's and Victoria's day to day
business.
Notwithstanding the substantial increase in Mr. Hoops' efforts on
behalf of the Company, the Committee has, for the time being, left his
compensation unchanged. While his fiscal 1996 salary has been set at
$75,000, as part of a restructuring of his benefit package, the total
compensation is substantially equivalent to the $88,950 he received in
fiscal 1995. In this regard, the Committee noted that most of the
Company's operating losses in fiscal 1995 were the result of dry hole
drilling costs and a one time non-cash charge to earnings. The Committee
continues to believe that the performance related compensation, such as
stock options and cash bonuses, should be the primary source of motivation
for Mr. Hoops and the Company's other officers instead of annual
adjustments based on recent operating results.
Stock Options: Stock options are granted to key personnel of the
Company by the Compensation Committee as a means of providing an equitable
long term incentive to the Company's personnel. The Compensation
Committee believes that stock options encourage performance by the
Company's executive officers and align the interests of the Company's
personnel with the interests of the Company's shareholders.
During the 1995 fiscal year, each Compensation Committee member
received an automatic grant of options to purchase 5,000 shares pursuant
to the 1993 Nonqualified Stock Option Plan. On June 20, 1995, the
Compensation Committee granted 40,000 options to the Company's President,
20,000 options to the Company's Chairman of the Board, 40,000 options to
the Company's Vice President-International, 5,000 options to each of the
Company's First and Second Assistant Secretaries. All options were
granted at the fair market value on the date of grant. The award of these
options was in accordance with the above stated policy of the Compensation
Committee and the terms of the 1993 Nonqualified Stock Option Plan. The
large awards to Messrs. Hoops and Kopcheff were made in recognition of
their substantial efforts during the year working on the Company's
international drilling program.
Cash Bonus Awards: No cash bonus awards were paid to any executive
officer during fiscal 1995, although cash bonuses remain a possible way to
reward the Company's officers for any positive results in fiscal 1996
resulting from their exceptional efforts in fiscal 1995 and 1996.
June 30, 1995 Compensation Committee Of
The Board of Directors
Kenneth W. Nickerson
Mark A. Boatright
DIRECTORS' REMUNERATION
Directors are not paid any remuneration for attendance at meetings of
the Board. Any director who serves on the Compensation Committee
automatically receives 5,000 options each September 30 pursuant to the
1993 Nonqualified Stock Option Plan. On September 30, 1994, both Messrs.
Boatright and Nickerson, as members of the Compensation Committee,
received fully vested options to purchase 5,000 shares of Common Stock at
an exercise price of $4.00 per share, the fair market value on the date of
grant. The options are exercisable for ten years from the date of grant.
No other options were awarded to members of the Compensation Committee
during fiscal 1995. See PROPOSAL TO AMEND NONQUALIFIED STOCK OPTION PLAN
below.
Mr. Hoops received 40,000 fully vested options, Mr. Pett received
20,000 fully vested options, and Mr. Kopcheff received 40,000 fully vested
options to purchase Common Stock on June 20, 1995. The options are
exercisable for ten years from the date of grant at an exercise price of
$1.875, the fair market value on the date of grant.
PERFORMANCE GRAPH
The following line graph compares the yearly percentage change in the
cumulative total shareholder return for (i) the Company, (ii) the MG
Industry Group 353 - Oil and Natural Gas Exploration, (iii) the NASDAQ
Market Index and (iv) the Standard and Poor's 500 Composite Index. The MG
Industry Group 353 consists of approximately 136 companies involved in the
oil and gas industry, including the Company.
5 Year Cumulative Total Return
<TABLE>
<CAPTION>
Fiscal Year Ending
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
Kestrel Energy 100.00 100.00 79.87 351.44 191.69 87.86
MG Industry Group 100.00 83.40 79.47 90.50 94.07 103.88
NASDAQ Index 100.00 107.40 121.81 138.44 140.39 176.99
S&P 500 Index 100.00 94.22 101.52 124.62 136.66 160.27
</TABLE>
The performance graph for the Company's 1994 annual meeting of
shareholders compared the yearly percentage changes in the cumulative
total shareholder return for (i) the Company, (ii) the MG Industry Group
353 - Oil and Natural Gas Exploration and (iii) the Standard and Poor's
500 Composite Index. Insofar as the Company is listed on NASDAQ and not
included in the Standard and Poor's 500 Composite Index, the NASDAQ
composite index was deemed a more appropriate comparison for the Company
than the Standard and Poor's 500 Composite Index. Going forward, the
Standard and Poor's 500 Composite Index will no longer be used and such
index is included in the performance graph above for transition purposes
only. The information contained in this graph was compiled by the Company
and by Media General Financial Services of Richmond, Virginia. The
Company will provide a list of the companies included in the various
indices upon the written request of any shareholder.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS
KPMG Peat Marwick was appointed by the Board of Directors as the
Company's independent certified public accountants and auditors on
December 4, 1987. The decision was based upon a comparison of the
services and fee arrangements offered by various accounting firms and an
evaluation by the Board of Directors.
Although ratification by shareholders of the selection of KPMG Peat
Marwick is not required by the Colorado Business Corporation Act, or by
the Company's Articles of Incorporation, as amended, or Bylaws, the Board
of Directors believes that a decision of this nature should be confirmed
by the Company's shareholders. Accordingly, shareholders are being asked
to consider ratification of the selection of KPMG Peat Marwick for the
fiscal year ending June 30, 1996. If a significant number of shares are
voted against the ratification of this selection, or if the Board of
Directors determines that the fees proposed to be charged by KPMG Peat
Marwick are unreasonable for the Company under the circumstances, the
Board of Directors will reconsider the selection for the fiscal year
ending June 30, 1996.
It is expected that KPMG Peat Marwick will have a representative at
the Annual Meeting who will be given the opportunity to make any statement
deemed necessary and will be available to answer questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE SELECTION OF
KPMG PEAT MARWICK AS THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 1996
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND
NONQUALIFIED STOCK OPTION PLAN
The 1993 Nonqualified Stock Option Plan (the "NQSO Plan") was adopted
by the Company in December of 1992 and amended in March 1995. The NQSO
Plan was prepared to be in compliance with rules promulgated by the
Securities and Exchange Commission and to qualify the NQSO Plan under the
Commission's Rule 16b-3. It is now proposed to approve an amendment to
increase the number of shares of Common Stock authorized for issuance
pursuant to the NQSO Plan from 500,000 shares to 750,000 shares.
The Company believes that an increase in the number of options
available for grant is important to provide flexibility to the
Compensation Committee in its administration of the NQSO Plan, to
encourage stock ownership by employees and management and to permit the
Compensation Committee and the Board of Directors to continue to provide
incentives to promote the financial success and progress of the Company,
without the expenditure of the Company's limited cash or other liquid
resources, which are being preserved for the Company's expanded
international oil exploration efforts and its planned development of its
domestic oil and gas properties.
Below is a summary description of the NQSO Plan, as proposed to be
amended.
Administration
The Compensation Committee of the Board of Directors of the Company
administers the NQSO Plan and the Company's Incentive Plan. Presently,
the members of the Compensation Committee are Kenneth W. Nickerson and
Mark A. Boatright, each of whom is a "disinterested person" within the
meaning of Rule 16b-3. In order to qualify as a disinterested person, a
director appointed to the Committee cannot have received any discretionary
options within a year prior to his appointment to the Committee and would
not be eligible to receive options, other than formula options granted to
Committee members, during his or her membership on the Committee. Subject
to the terms of the NQSO Plan, as amended, the Compensation Committee has
the authority to determine to whom options will be granted, the number of
shares covered by each such grant, the exercise price per share, the time
or times at which options will be granted, and other terms and provisions
governing the options. The interpretation or construction by the
Compensation Committee of the NQSO Plan or any option granted under it
will be final. The NQSO Plan has a term of ten (10) years from the date
of adoption by the shareholders, unless sooner terminated by the
Compensation Committee.
Underlying Securities
The securities underlying the options under the NQSO Plan are shares
of the Company's Common Stock. Pursuant to the NQSO Plan, as amended, the
maximum number of shares of Common Stock that may be issued upon exercise
shall not exceed 750,000 shares, an increase of 250,000 shares. The
market value of the total shares authorized as of September 30, 1995 was
$7,369,669. The market value on that date of the shares added by the
amendment was $968,750.
Eligible Employees and Others
All employees, officers, directors, consultants and advisors of the
Company will be eligible to receive options under the NQSO Plan; except
that consultants and advisors will be eligible only if they provide bona
fide services that are not rendered in connection with the offer or sale
of securities in a capital-raising transaction. The purpose of the NQSO
Plan is to provide a stock option compensation plan that provides more
flexibility to the Company than an incentive stock (within the meaning of
Section 422 of the Internal Revenue Code (the "Code)). As of September
30, 1995, the Company had 6 employees and other persons eligible to
receive options. Members of the Compensation Committee, which also
administers the Incentive Plan, are eligible to receive options under the
NQSO Plan, but their grants are governed by special rules as described
below. Options granted under the NQSO Plan are nonqualified options.
As previously noted, the Compensation Committee has authority to
specify the exercise price of options other than options granted to
Committee members, provided that the exercise price must be at least 50%
of the fair market value of the Common Stock per share on the date of
grant.
Option Grants to Committee Members
The Compensation Committee has no discretion to determine the amount,
price or timing of grants to members of the Committee. Grants of options
to Committee members will automatically be made once a year on
September 30 of each year. Grants to Committee members are for 5,000
options per Committee member per year and the exercise price is 100% of
the market price of the Common Stock on the date of grant. The directors
are not paid any remuneration for attendance at meetings of the Board or
of the Compensation Committee.
Option Price and Duration
Upon exercise of an option, the purchase price may be paid (i) in
cash, (ii) by certified or cashier's check, (iii) with shares of the
Company's issued and outstanding Common Stock, if permitted by the
Compensation Committee, or (iv) by any other means permitted by the
Compensation Committee, in its discretion, after determination that such
means are consistent with all applicable laws. The Compensation Committee
also has authority to fix the terms of options, not to exceed ten (10)
years.
Nontransferability of Options
Options are not transferable other than by will or the laws of
descent and distribution.
Current Stock Option Grants
Of the 500,000 shares of no par value Common Stock reserved for the
NQSO Plan, 325,250 have already been granted. With the proposed increase
in reserved shares to 750,000 shares, 424,750 shares will be available for
future option grants.
On December 31, 1992 each of the then outside directors, Steven A.
Roitman, Kenneth W. Nickerson and Kingsley W. Roth, were automatically
granted options to purchase 1,500 shares at an exercise price of $3.125
per share. On February 12, 1993, the Compensation Committee granted
options to Timothy L. Hoops, 25,000 shares, Robert J. Pett, 12,500 shares,
Denis I. Rakich, 12,500 shares, and Lynnette M. Carpenter, 1,250 shares,
at an exercise price of $1.3125 per share. On October 18, 1993, the
Compensation Committee granted options to purchase 1,500 shares at an
exercise price of $4.625 per share to Kingsley W. Roth who resigned as a
director on that date. On December 31, 1993 each of the members of the
Compensation Committee, Kenneth W. Nickerson and Mark A. Boatright, were
automatically granted options to purchase 1,500 shares at an exercise
price of $3.625. Although Steven A. Roitman resigned as a Director on
December 20, 1993, he was retained as a consultant to the Company and was
also granted 1,500 shares at an exercise price of $3.625 as of
December 31, 1993. On March 16, 1994, the Compensation Committee granted
options to Timothy L. Hoops, 40,000 shares, Robert J. Pett, 20,000 shares,
Denis I. Rakich, 20,000 shares, Lynnette M. Carpenter, 5,000 shares, and
John T. Kopcheff, 40,000 shares, at an exercise price of $2.875 per share.
On September 30, 1994, each of the members of the Compensation Committee,
Kenneth W. Nickerson and Mark A. Boatright, were automatically granted
options to purchase 5,000 shares at an exercise price of $4.00. On June
20, 1995, the Compensation Committee granted options to Timothy L. Hoops,
40,000 shares, Robert J. Pett, 20,000 shares, John T. Kopcheff, 40,000
shares, Denis I. Rakich, 7,500 shares, and Lynnette M. Carpenter, 5,000
shares at an exercise price of $1.875 per share. On September 30, 1995,
each of the two members of the Compensation Committee, Kenneth W.
Nickerson and Mark A. Boatright, were automatically granted options to
purchase 5,000 shares at an exercise price of $3.875 per share.
Certain Federal Income Tax Consequences
The Company has been advised that under current law the principal
federal income tax consequences to participants and the Company of options
granted under the NQSO Plan should generally be as set forth in the
following summary.
An individual to whom a nonqualified stock option is granted will
recognize no income at the time of the grant of such option. When such
optionee exercises the option, he will recognize ordinary compensation
income equal to the difference, if any, between the fair market value of
the common shares he receives and the option price for such shares. If,
however, such shares are subject to a substantial risk of forfeiture or
transfer restrictions, as will be the case in respect of such shares
issued to persons who are subject to liability under Section 16(b) of the
Securities Exchange Act of 1934, income will not be recognized until such
time as the risk of forfeiture or transfer restrictions terminate and the
amount of such income will be based upon the fair market value of such
shares at such time. In addition, any dividends paid on such shares that
are subject to risk of forfeiture or transfer restrictions will be taxable
as ordinary compensation income. By filing an election with the Internal
Revenue Service under Section 83(b) of the Revenue Code no later than 30
days after the date of purchase of such shares (a "Section 83(B)
election"), a person subject to risk of forfeiture or transfer
restrictions may elect to be taxed at the time of exercise of such option.
The tax basis of such shares to such optionee will be equal to the
option price paid plus the amount includable in his gross income, and his
holding period for such shares will commence on the date on which he
recognizes taxable income in respect of such shares or, if he has made a
Section 83(b) election, on the day after such shares are transferred.
Subject to the applicable provisions of the Revenue Code and
regulations thereunder, the Company will be entitled to a federal income
tax deduction in an amount equal to the ordinary income recognized by the
optionee in the Company's taxable year when such income is recognized by
such optionee.
The discussion set forth above does not purport to be a complete
analysis of all potential tax effects relevant to recipients of options or
the Company. It is based solely on federal income tax law and
interpretational authorities as of the date of this Proxy Statement, which
are subject to change at any time.
New Plan Benefits
The actual benefits available under the NQSO Plan to the executive
officers is indeterminable at this time as options are awarded at the
discretion of the Compensation Committee. The members of the Compensation
Committee, one non-executive officer director and one executive officer-
director, are eligible to receive automatic grants of options to purchase
5,000 shares on September 30th of each year, with their next grant to
occur on September 30, 1996. The amounts of options awarded by the
Compensation Committee to the executive officers and directors in fiscal
1995 appear in the Option Grant Table in the section on Executive
Compensation.
1993 Nonqualified Stock Option Plan
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) Number of Units
<S> <C> <C>
Timothy L. Hoops, President, -0- -0-
Chief Executive Officer
Executive Group (4 persons) $19,375<FN1> 5,000
Non-Executive Director
Group (1 person) $19,375<FN1> 5,000
Non-Executive Officer
Employee Group (2 persons) -0- -0-
____________________
<FN>
<FN1> While the options were granted at fair market value on September
30, 1995, the value of the options is shown as an amount equal
to the exercise price times the number of options granted.
</FN>
</TABLE>
The amendment to increase the number of shares authorized for
issuance under the NQSO Plan requires the affirmative vote of the majority
of the shares represented in person or by proxy. Only those votes cast
FOR the proposal will be counted as affirmative votes. Abstentions and
broker non-votes will be counted for purposes of establishing a quorum and
for purposes of determining the number of votes required to approve the
proposal. Abstentions and broker non-votes will not be counted as
affirmative votes and will have the same legal effect as votes "against"
the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO
THE 1993 NONQUALIFIED STOCK OPTION PLAN.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company's annual report to the Securities and Exchange Commission
on Form 10-K for the fiscal year ended June 30, 1995, which contains
audited financial statements of the Company, and which is being utilized
as the annual report to shareholders for the fiscal year ended June 30,
1995, accompanies this Proxy Statement. Copies of the numerous exhibits
to that Form 10-K are available from the Company upon written request of a
shareholder to Timothy L. Hoops, President, 999 18th Street, Suite 1100,
Denver, Colorado 80202 and payment of the Company's out-of-pocket expenses
therefor.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE 1996 ANNUAL MEETING OF SHAREHOLDERS
Any proposal by a shareholder intended to be presented at the
Company's 1996 annual meeting of shareholders must be received at the
offices of the Company, 999 18th Street, Suite 1100, Denver, Colorado
80202, not later than June 30, 1996.
OTHER MATTERS
The Board of Directors knows of no other matter to be brought before
the shareholders' meeting. If other matters properly come before the
meeting, holders of Proxies solicited and received hereunder will vote in
their best judgment.
INSIDER REPORTS
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, and executive officers, and persons who own more than
ten percent of a registered class of the Company's equity securities, to
file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other
equity securities of the Company on Section 16(a) forms and to furnish the
Company with copies thereof. To the Company's knowledge, based solely on
review of the copies of such reports furnished to the Company and written
representations that no other reports were required during the fiscal year
ended June 30, 1995, all Section 16(a) filing requirements applicable to
its directors, executive officers and greater than ten percent beneficial
owners were complied with one exception. Victoria International Petroleum
N.L. failed to timely file one report for one transaction. The June 1995
acquisition by Victoria of additional shares of the Company's Common Stock
which should have been reported in July 1995, was not reported until
August 1995.
<PAGE>
APPENDIX
PROXY CARD
PROXY
Kestrel Energy, Inc.
999 18th Street, Suite 1100
Denver, Colorado 80202
This proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Timothy L. Hoops and Lynnette M. Carpenter
as Proxies, each with the power to appoint his or her substitute, and
hereby authorizes them to represent and to vote, as designated below, all
shares of common stock of Kestrel Energy, Inc. held of record by the
undersigned on October 24, 1995 at the annual meeting of shareholders to
be held on December 12, 1995 any adjournment thereof.
1. TO ELECT FIVE DIRECTORS
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
[ ] FOR all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below. To cumulate
votes for any individual nominee, write in the number of cumulative votes
to be cast opposite such nominee's name. For an explanation of cumulative
voting, see "VOTING OF SHARES" IN THE ENCLOSED PROXY STATEMENT.)
Cumulative Cumulative
Nominee Votes Nominee Votes
Timothy L. Hoops ---------- Robert J. Pett ----------
Cumulative Cumulative
Nominee Votes Nominee Votes
Kenneth W. Nickerson ---------- Mark A. Boatright ----------
Cumulative
Nominee Votes
John T. Kopcheff ----------
2. TO APPROVE AND RATIFY THE SELECTION OF KPMG PEAT MARWICK AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND AUDITORS FOR
THE YEAR ENDING JUNE 30, 1996.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. TO APPROVE AN AMENDMENT TO THE 1993 NONQUALIFIED STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED UNDER THE PLAN.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
This proxy when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is made,
this proxy will be voted FOR proposals 1, 2 and 3 above.
Please sign exactly as your name appears below. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
Dated ------------, 1995 -------------------------------
Signature
------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
<PAGE>
APPENDIX
1993 NONQUALIFIED STOCK OPTION PLAN
KESTREL ENERGY, INC.
1993 NONQUALIFIED STOCK OPTION PLAN
as amended December 12, 1995
Section 1. PURPOSE. The purpose of the Kestrel Energy, Inc. (the
"Company") 1993 Nonqualified Stock Option Plan (the "Plan") is to provide
incentives for selected persons to promote the financial success and
progress of the Company by granting such persons options to purchase
shares of stock of the Company ("Option").
Section 2. GENERAL PROVISIONS OF THE PLAN.
A. Administration. The Plan shall be administered by
a committee comprised of two more directors designated by the Board of
Directors of the Company (the "Committee"). Each member of the Committee
shall be a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any action of the
Committee shall be taken by majority vote or the unanimous written consent
of the Committee members.
B. Authority of the Committee. Subject to other
provisions of the Plan, and with a view towards furtherance of its
purpose, the Committee shall have sole authority and absolute discretion:
1. to construe and interpret the Plan;
2. to define the terms used herein;
3. to prescribe, amend and rescind rules and
regulations relating to the Plan;
4. to determine the persons to whom Options shall
be granted under the Plan;
5. to determine the time or times at which Options
shall be granted under the Plan;
6. to determine the number of shares subject to
each Option, the price and the duration of each Option;
7. to determine all of the other terms and
conditions of Options; and
8. to make all other determinations necessary or
advisable for the administration of the Plan and to do everything
necessary or appropriate to administer the Plan.
All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on
their legal representatives, heirs and beneficiaries.
C. Number of Shares Subject to the Plan. The
aggregate number of shares of common stock subject to the Plan shall be
750,000, subject to adjustment as provided in the Plan. If any Options
granted under the Plan expire or terminate for any reason before they have
been exercised in full, the unpurchased shares shall again be available
for the purposes of the Plan.
D. Eligibility and Participation. Subject to the
terms of the Plan, Options may be granted only to such employees,
officers, directors, consultants and advisors of the Company as the
Committee shall select from time to time in its sole discretion; provided,
however, that consultants and advisors shall be eligible only if they
provide bona fide services that are not rendered in connection with the
offer or sale of securities in a capital-raising transaction. A person
may be granted more than one Option under the Plan. Furthermore,
notwithstanding any contrary provision of the Plan, the Committee shall
have no discretion to determine the amount, price or timing of grants
hereunder to Committee members. All grants to Committee members hereunder
shall be made in accordance with Section 6 hereof.
E. Effective Date of Plan. The Plan shall be
submitted to the shareholders of the Company for their approval and
adoption at a meeting to be held on or about December 16, 1992, or at any
adjournment thereof. The Plan shall be effective upon approval and
adoption by the shareholders.
F. Termination and Amendment of Plan. The Plan shall
terminate ten years after the date on which the shareholders approve the
Plan, unless sooner terminated by the Committee. No Options shall be
granted under the Plan after that date. Subject to the limitation
contained in paragraph H. of the General Provisions, the Committee may at
any time amend or revise the terms of the Plan, including the form and
substance of the Options to be used hereunder, provided that no amendment
or revision shall be made without shareholders' approval which
(i) increases the aggregate number of shares that may be sold pursuant to
Options granted under the Plan, except as permitted under paragraph G. of
the General Provisions; (ii) changes the minimum purchase price for shares
under the Plan; (iii) permits the granting of an Option to any person
other than as provided in paragraph D. of the General Provisions; or
(iv) materially increases the benefits accruing to participants under the
Plan. In addition, the provisions of Section 6 hereof relating to the
amount, price and timing of grants to Committee members of the Company
shall not be amended more than once every six months, other than to
comport with changes, if applicable, in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules thereunder.
G. Adjustments. If the outstanding shares of the
Company's common stock are increased, decreased, changed into or exchanged
for a different number or kind of shares or securities through merger,
consolidation, combination, exchange of shares, other reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse
stock split, an appropriate and proportionate adjustment shall be made in
the aggregate number and kind of shares reserved to the Plan. A
corresponding adjustment changing the number or kind of shares allocated
to unexercised Options or portions thereof, which shall have been granted
prior to any such change, shall likewise be made. Any such adjustment in
outstanding Options shall be made without change in the aggregate purchase
price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price for each share covered by the
Option.
H. Prior Options and Obligations. No amendment,
suspension or termination of the Plan shall, without the consent of the
person who has received an Option, alter or impair any of that person's
Options or rights or obligations under any Option granted under the Plan
prior to that amendment, suspension or termination.
I. Privileges of Stock Ownership. Notwithstanding the
exercise of any Option granted hereunder, no person shall have any of the
rights or privileges of a shareholder of the Company in respect of any
shares of stock issuable upon the exercise of his or her Option until
certificates representing the shares have been issued and delivered. No
shares shall be required to be issued and delivered upon exercise of any
Option until all of the requirements of law and of all regulatory agencies
having jurisdiction over the issuance and delivery of the securities shall
have been fully complied with.
J. Reservation of Shares of Common Stock. During the
term of the Plan, the Company will at all times reserve and keep available
such number of shares of its common stock as shall be sufficient to
satisfy the requirements of the Plan. In addition, the Company will from
time to time, as is necessary to accomplish the purposes of the Plan, seek
or obtain from any regulatory agency having jurisdiction any requisite
authority in order to issue shares of common stock hereunder. The
inability of the Company to obtain from any regulatory agency having
jurisdiction the authority deemed by the Company's counsel to be necessary
to the lawful issuance of any shares of its stock hereunder shall relieve
the Company of any liability in respect of the nonissuance of the stock as
to which the requisite authority shall not have been obtained.
K. Tax Withholding. The exercise of any Option is
subject to the condition that if at any time the Company shall determine,
in its discretion, that the satisfaction of withholding tax or other
withholding liabilities under any state or federal law is necessary or
desirable as a condition of, or in connection with, such exercise or the
delivery or purchase of shares pursuant thereto, then in such event, the
exercise of the Option shall not be effective unless such withholding
shall have been effected or obtained in a manner acceptable to the
Company.
Section 3. OPTION TERMS AND CONDITIONS. The terms and conditions
of Options granted under the Plan may differ from one another as the
Committee shall in its discretion determine so long as all Options granted
under the Plan satisfy the requirements of the Plan.
Section 4. DURATION OF OPTIONS. Each Option granted hereunder
shall expire on the date fixed by the Committee, which shall be not later
than ten years after the date of grant. In addition, each Option shall be
subject to early termination as provided in the Plan.
Section 5. OPTION PRICE. The option price for shares acquired
pursuant to the exercise of any Option, in whole or in part, shall be
determined by the Committee at the time of grant. Such option price may
be less than the market price of the Company's common stock on the date of
grant, but in no event shall the option price be less than fifty percent
(50%) of the fair market value of the shares on the date of grant. The
foregoing notwithstanding, the option price of Options granted to
Committee members shall be 100% of the market price of the Company's
common stock on the date of grant.
Section 6. GRANTS TO COMMITTEE MEMBERS. Notwithstanding any
contrary provision hereof, the Committee shall have no discretion to
determine the amount, price or timing of grants of Options to Committee
members. Grants of Options hereunder to Committee members shall be made
once in each calendar year and shall be granted on September 30th of each
year. Grants to Committee members shall be for 5,000 shares per director
per year and the exercise price shall be 100% of the market price of the
Company's common stock on the date of grant.
Section 7. LIMITATIONS ON ACQUIRING VOTING STOCK. No optionee who
is not an officer or director of the Company is eligible to receive or
exercise any Option which, if exercised, would result in that person's
holding beneficially or of record in excess of 5% of the outstanding
voting stock of the Company.
Section 8. EXERCISE OF OPTIONS. Each Option shall be exercisable
in one or more installments during its term, and the right to exercise may
be cumulative, as determined by the Committee. No Option may be exercised
for a fraction of a share of common stock. The option price shall be paid
at the time of exercise of the Option (i) in cash; (ii) by certified or
cashier's check; (iii) with shares of the Company's issued and outstanding
common stock if permitted by the Stock Option Committee; or (iv) by any
other means permitted by the Committee in its discretion after
determination that such means are consistent with all applicable laws and
regulations. If any portion of the purchase price at the time of exercise
is paid in shares of common stock, those shares shall be tendered at their
then fair market value as determined by the Committee on the basis of such
factors as it deems appropriate; provided that if at the time the
determination of fair market value is made, those shares are admitted to
trading on a national securities exchange for which sale prices are
regularly reported, the fair market value of those shares shall not be
less than the lower of (i) the mean between the closing bid and asked
prices reported for, or (ii) the last trade price of a 100-share lot of,
the common stock on that exchange on the day or most recent trading day
preceding the date on which the determination of fair market value is
made. For purposes of the preceding sentence, the term "national
securities exchange" shall include the National Association of Securities
Dealers Automated Quotation System and over-the-counter market.
Section 9. ACCELERATION OF OPTIONS. Notwithstanding the first
sentence of Section 8 hereof, if the Company or its shareholders enter
into an agreement to dispose of all or substantially all of the assets or
stock of the Company by means of a sale, merger or other reorganization,
liquidation, or otherwise, any Option granted pursuant to the Plan shall
become immediately exercisable with respect to the full number of shares
subject to that Option during the period commencing as of the date of the
agreement to dispose of all or substantially all of the assets or stock of
the Company and ending when the disposition of assets or stock
contemplated by that agreement is consummated or the Option is otherwise
terminated in accordance with its provisions or the provisions of the
Plan, whichever occurs first; provided that no Option shall be immediately
exercisable under this Section on account of any agreement of merger or
other reorganization where the shareholders of the Company immediately
before the consummation of the transaction will own at least 50% of the
total combined voting power of all classes of stock entitled to vote of
the surviving entity (whether the Company or some other entity)
immediately after the consummation of the transaction. In the event the
transaction contemplated by the agreement referred to in this Section 9 is
not consummated, but rather is terminated, cancelled or expires, the
Options granted pursuant to the Plan shall thereafter be treated as if
that agreement had never been entered into.
Section 10. WRITTEN NOTICE REQUIRED. Any Option granted pursuant to
the Plan shall be exercised when written notice of that exercise has been
given to the Company at its principal office by the person entitled to
exercise the Option and full payment for the shares with respect to which
the Option is exercised has been received by the Company.
Section 11. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be
issued with respect to any Option granted under the Plan unless the
exercise of that Option and the issuance and delivery of the shares
pursuant thereto shall comply with all relevant provisions of state and
federal law, including without limitation the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder and the
requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance. Further, each Optionee shall
consent to the imposition of a legend on the certificate representing the
shares of common stock issued upon the exercise of the Option restricting
their transferability as may be required by law, the Option, or by the
Plan.
Section 12. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by
the Committee, must agree in writing as a condition of the granting of his
or her Option, to remain in the employ of the Company or to remain as a
consultant or advisor to the Company following the date of grant for a
period or periods specified by the Committee, which period(s) shall in no
event exceed an aggregate of four years. Nothing in the Plan or in any
Option granted hereunder shall confer upon any optionee any right to
continued employment or retainer by the Company, or limit in any way the
right of the Company, to terminate or alter the terms of that employment
or consulting arrangement at any time.
Section 13. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT, DIRECTOR,
CONSULTANT OR ADVISOR STATUS. If an optionee ceases to be employed by the
Company or ceases to serve as a director, consultant or advisor of the
Company for any reason other than death, his or her Option shall
immediately terminate; provided that the Committee may, in its discretion,
allow the Option to remain exercisable (to the extent exercisable on the
date of termination of employment or retainer) for up to one additional
year for each year of service to the Company by the Optionee (up to a
maximum of five years after the date of termination), unless either the
Option or the Plan otherwise provides for earlier termination; and
provided further that, for purposes of determining when a director no
longer serves the Company, the period during which post-retirement or
similar benefits, if any, are paid to the director by the Company shall be
deemed to be continued service.
Section 14. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as
otherwise limited by the Committee at the time of the grant of an Option,
if an optionee dies while he or she is an employee, director, consultant
or advisor of the Company, his or her Option shall remain exercisable for
one year after the date of death, unless either the Option or the Plan
otherwise provides for earlier termination. During such exercise period
after death, the Option may be fully exercised, to the extent that it
remained unexercised on the date of death, by the person or persons to
whom the Optionee's rights under the Option shall pass by will or by laws
of descent and distribution.
Section 15. WAIVER OF VESTING RESTRICTIONS IN THE EVENT OF
RETIREMENT. Notwithstanding any provision of the Plan, in the event an
Optionee retires as an employee or director of the Company, the Committee
shall have the discretion to waive any vesting restrictions on the
retiree's Options.
Section 16. OPTIONS NOT TRANSFERABLE. Options granted pursuant to
the Plan may not be sold, pledged, assigned or transferred in any manner
otherwise than by will or the laws of descent and distribution and may be
exercised during the lifetime of an Optionee only by that Optionee or by
his or her guardian or legal representative.
Section 17. REPORTS TO OPTIONEES. The Company shall furnish to each
optionee a copy of the annual report sent to the Company's shareholders.
Upon written request, the Company shall furnish to each Optionee a copy of
its most recent Form 10-K Annual Report and each quarterly report to
shareholders issued since the end of the Company's most recent fiscal
year.
Adopted, as amended, by the shareholders of the Company on March 14, 1995.
