SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act
of 1934
(Amendment No. )
Filed by the Registrant[X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] 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
KESTREL ENERGY, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant):
N/A
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:
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
(303) 295-0344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 7, 2000
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 Thursday, December 7, 2000 in the Management Briefing Center
at Wells Fargo Bank West, N.A., North Tower, 4th Floor, 633 17th Street,
Denver, Colorado for the following purposes:
1. To elect six directors to the Board;
2. To approve and ratify the selection of KPMG LLP as the Company's
independent certified public accountants and auditors for the fiscal year
ending June 30, 2000;
3. To approve an amendment to the Company's Stock Option Plan to
increase the number of shares reserved under the Plan;
4. To approve an amendment to the Company's Articles of
Incorporation to require a majority vote of all outstanding shares only
for major corporate transactions; and
5. 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 26, 2000 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 LLP, APPROVE THE AMENDMENT TO THE STOCK OPTION PLAN AND
APPROVE THE AMENDMENT TO THE ARTICLE OF INCORPORATION.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
IN THE ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
October 30, 2000 Timothy L. Hoops
President
Mark A. Boatright
Secretary
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 7, 2000
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 WELLS FARGO BANK WEST, N.A., NORTH TOWER, 4TH FLOOR, 633 17TH
STREET, DENVER, COLORADO ON THURSDAY, DECEMBER 7, 2000 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 30, 2000.
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
26, 2000, will be entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment thereof. On that date, there were
7,680,000 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 entitled to one vote per share. The election of
directors requires that the six candidates having the highest number of
votes cast in favor of their election are elected to the Board of
Directors. The approval and ratification of the selection of KPMG LLP,
the amendment to the Stock Option Plan and the amendment to the Articles
of Incorporation require an affirmative vote of a majority of the
outstanding shares of Common Stock. 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
October 23, 2000 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 and warrants within 60 days of such date.
<TABLE>
<CAPTION>
Number
of Shares of Common Stock Beneficially Owned
--------------------------------------------
Voting
and Investment Power
----------------------
Percent
Name and Address Direct Indirect Total Shares Owned
--------------------------- ---------- ----------- ------------ -------
<S> <C> <C> <C> <C>
Victoria International
Petroleum N.L. 1,556,743(1)(2) --- 1,556,743 19.9%
10th Flr., Exchange Plaza
2 The Esplanade
Perth 6000
Western Australia
Victoria Petroleum N.L. --- 1,556,743(1)(2) 1,556,743 19.9%
10th Flr., Exchange Plaza
2 The Esplanade
Perth 6000
Western Australia
Timothy L. Hoops 267,280(3) 1,556,743(2)(4) 1,824,023 22.5%
P.O. Box 1079
Denver, CO 80201-1079
Robert J. Pett 141,208(5) 1,556,743(2)(6) 1,697,951 21.4%
10th Flr., Exchange Plaza
2 The Esplanade
Perth 6000
Western Australia
John T. Kopcheff 189,815(6) 1,556,743(2)(8) 1,746,558 21.8%
10th Flr., Exchange Plaza
2 The Esplanade
Perth 6000
Western Australia
Golden Prospect Plc 1,038,500(9) 2,696,300 34.0%
1st Floor 1,657,800(10)(11)
143-149 Great Portland St.
London W2N 5FB
England
Samson Exploration N.L. 1,657,800(11) --- 1,657,800 21.2%
Level 10, Exchange Plaza
2 The Esplanade
Perth 6000
Western Australia
The Equitable Life
Assurance Society 924,000(12) --- 924,000 11.9%
City Place House
55 Basinghall St.
London England EC2V 5DR
</TABLE>
(1) Victoria International Petroleum N.L. ("VIP"), the record holder of
the shares and warrants, is a wholly owned subsidiary of Victoria
Petroleum N.L. ("VP"), which is therefore deemed to be another
beneficial owner of the shares.
(2) Includes warrants to purchase up to 141,522 shares.
(3) Includes vested options and warrants to purchase up to 239,370
shares.
(4) Mr. Hoops is a director of VIP and of VP. As a result, all shares
and warrants held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Hoops.
(5) Includes vested options and warrants to purchase up to 131,208
shares.
(6) Mr. Pett is the Chairman and a director of VIP and a director of VP.
As a result, all shares and warrants held by VIP directly and VP
indirectly are listed as indirectly held by Mr. Pett.
(7) Includes vested options and warrants to purchase up to 185,815
shares.
(8) Mr. Kopcheff is a director of VIP and VP. As a result, all shares
and warrants held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Kopcheff.
(9) Includes vested warrants to purchase up to 89,500 shares.
(10) Golden Prospect Plc owns 29.95% of Samson Exploration N.L. and is
therefore deemed to be a beneficial owner of the shares and warrants
held by Samson.
(11) Includes vested warrants to purchase up to 150,300 shares.
(12) Includes vested warrants to purchase up to 84,000 shares.
The following table sets forth the number of shares beneficially
owned on October 23, 2000 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 and
warrants within 60 days of such date.
<TABLE>
<CAPTION>
Shares of
Common Stock
Position(s) Beneficially
With the Owned and Percent
Name and Address Company Options Granted Owned
--------------------------- ----------------- --------------- -------
<S> <C> <C> <C>
Timothy L. Hoops President, Chief 1,824,023(1)(2) 22.5%
P.O. Box 1079 Executive Officer
Denver, CO 80201-1079 and Director
Robert J. Pett Chairman of the 1,697,951(3)(4) 21.4%
10th Flr., Exchange Plaza Board and
2 The Esplanade Director
Perth 6000
Western Australia
Mark A. Boatright Vice President - 56,564(5) <1%
800 Grant St. Finance, Chief
Suite 200 Financial Officer
Denver, CO 80203 and Director
John T. Kopcheff Vice President - 1,746,558(6)(7) 21.8%
10th Flr., Exchange Plaza International and
2 The Esplanade Director
Perth 6000
Western Australia
Kenneth W. Nickerson Director 37,409(5) <1%
10780 Hanson St.
Johannesburg, MI 49751
Mark A.E. Syropoulo Director 181,800(8) 2.3%
Lot 42 Gumboil Road
Cooroy Queensland 4563
Australia
All Directors and Executive
Officers as a Group
(6 persons) 2,430,819(9) 28.2%
</TABLE>
(1) Mr. Hoops is a director of Victoria International Petroleum N.L.
("VIP") and of Victoria Petroleum N.L. ("VP"). As a result, all
shares and warrants held by VIP directly and by VP indirectly are
listed as held by Mr. Hoops.
(2) Includes vested options and warrants to purchase up to 408,802
shares.
(3) Mr. Pett is the Chairman and a director of VIP and a director of VP.
As a result, all shares and warrants held by VIP directly and VP
indirectly are listed as held by Mr. Pett.
(4) Includes vested options and warrants to purchase up to 272,730
shares.
(5) Includes or consists of vested options and warrants to purchase up to
52,564 shares and 37,409 shares for Messrs. Boatright and Nickerson,
respectively.
(6) Mr. Kopcheff is a director of VIP and VP. As a result, all shares
and warrants held by VIP directly and VP indirectly are listed as
beneficially owned by Mr. Kopcheff.
(7) Includes vested options and warrants to purchase up to 327,337
shares.
(8) Includes vested options to purchase up to 140,000 shares, and 38,000
shares and vested warrants to purchase up to 3,800 shares owned by
Syrops & Co. Pty. Ltd.
(9) Includes vested options and warrants to purchase up to 931,688
shares.
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the
six (6) nominees listed below. The Board's recommendation as nominees
includes all of the Directors elected at the last annual meeting of
shareholders, except for Mark A. Boatright who has declined to stand for
election at this meeting, and Neil T. MacLachlan who has been nominated by
the Board of Directors in his stead. The six nominees, if elected, will
hold office until the next annual meeting of shareholders and until their
successors have been elected and qualified. IT IS INTENDED THAT SHARES
REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL BE VOTED "FOR" THE
ELECTION OF THE NOMINEES NAMED BELOW UNLESS A CONTRARY DIRECTION IS
INDICATED. If at the time of the meeting any of the nominees named below
should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the Proxy will be exercised to vote
for such substitute nominee or nominees, if any, as shall be designated by
the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently
held by him, and the period during which he has served as a Director:
<TABLE>
<CAPTION>
All Positions Period
and Offices Served as
Held With the Director of
Name Age Company the Company
---- --- ------------- -----------
<S> <C> <C> <C>
Timothy L. Hoops 44 President, Chief Since 1992
Executive Officer,
and Director
Robert J. Pett 53 Chairman of the Since 1992
Board
John T. Kopcheff 52 Vice President - Since 1995
International and
Director
Kenneth W. Nickerson 80 Director Since 1992
Mark A.E. Syropoulo 48 Director Since 1998
Neil T. MacLachlan 58 Nominee for Director
</TABLE>
None of the nominees hold directorships in any other company having a
class of securities registered under the Securities Exchange Act of 1934,
as amended, or in any company registered as an investment company under
the Investment Company Act of 1940, as amended.
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.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors met one time in person and acted 11 times by
unanimous written consent during the fiscal year ended June 30, 2000. The
committees of the Board include an Audit Committee, a Compensation
Committee and an Executive Committee.
The Audit Committee acted two times by unanimous written consent in
fiscal 2000 and was comprised of Messrs. Boatright, Syropoulo and Pett.
It adopted an Audit Committee charter in fiscal 2000, a copy of which is
attached hereto as Exhibit A. The Audit Committee's primary function is
to assist the Board of Directors in fulfilling its independent and
objective oversight responsibilities of financial reporting and internal
financial and accounting controls of the Company.
The Compensation Committee makes recommendations on executive
compensation and selects those persons eligible to receive grants of
options under the Company's Stock Option Plan. Members of the Committee
were comprised of Messrs. Nickerson and Syropoulo in fiscal 2000. The
Committee met one time and acted two times by unanimous written consent in
fiscal 2000.
The Executive Committee was comprised of Messrs. Hoops, Boatright and
Syropoulo in fiscal 2000. The Executive Committee has as its primary
function director-level review and approval of non-routine matters of
significance during the periods between scheduled meetings of the Board of
Directors. The Committee met 19 times in fiscal 2000.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names of all directors and executive officers
of the Company, their ages, all positions and offices held by each such
person, the period during which he has served as such, and the principal
occupations and employment of such persons during at least the last five
years.
TIMOTHY L. HOOPS, age 44, was appointed President, Chief Executive
Officer and Director on June 1, 1992. Mr. Hoops is a petroleum geologist
with 21 years experience in the continental USA and Australia. Mr. Hoops
is President and a Director of the Company's wholly owned subsidiary,
Victoria Exploration, Inc., an independent oil and gas producer, where he
has served as an officer and Director since 1987. He was a Director and
President of Kestrel Energy California, Inc., another wholly owned
subsidiary and oil and gas producer, from March 1997 until it was merged
in May 2000. After the merger, he remained as a Director and he became
Vice President and Assistant Secretary. He has also been a Director of
Victoria International Petroleum N.L., an Australian oil and gas company,
and of Victoria Petroleum N.L., its parent, 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 53, was appointed as a Director on June 1, 1992
and Chairman of the Board on January 16, 1995. Mr. Pett served as
Secretary, Treasurer and Vice President of the Company during various
periods from June 1992 to January 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 16 years. He is currently
Chairman of Resolute 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 he is a Director of Victoria Exploration, Inc. and Kestrel
Energy California, Inc. After the merger of Kestrel Energy California in
May 2000, Mr. Pett was also appointed as its President. Mr. Pett holds a
Masters Degree in Economics (Queens University, Canada).
JOHN T. KOPCHEFF, age 52, was appointed as Vice President -
International and a Director of the Company on January 16, 1995. He also
holds the same positions at Victoria Exploration, Inc. He held the same
positions at Kestrel Energy California, Inc. until it was merged in May
2000. He remained as a Director and became its Secretary. Mr. Kopcheff
is a geologist with 30 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 of Victoria International Petroleum N.L. since 1986, and a
Director of Victoria Petroleum N.L. since 1984. Prior to his appointment
with the Company, he provided various services to the Company relating to
its 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 80, is an independent petroleum and mineral
geologist with over 50 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.
MARK A.E. SYROPOULO, age 48, was appointed as a Director on January
14, 1998. Mr. Syropoulo has been an independent corporate consultant
since 1994 and has during that time provided services to various entities
in the natural resources, information technology and investment sectors,
principally in Australia. He also acted as a consultant to the Company
from May 1, 1997 until January 1998. Prior to 1994 he was managing
director from 1987 to 1993 of Anglo Pacific Resources Limited, a United
Kingdom mining and oil company associated with Anglovaal Holdings Limited,
a major South African mining house. Mr. Syropoulo is a graduate of
mathematics and economics and an honors graduate in economics of the
University of Natal Durban, South Africa.
NEIL T. MACLACHLAN, age 58, , was nominated as a Director on
September 27, 2000. He is the Chairman and major shareholder in Markham
Associates, a London based corporate investment and advisory business. He
is also a non-executive director of Samson Exploration N.L., Geographe
Resources Ltd., Titan Resources Ltd. and Sapphire Mines NL, all publicly
traded Australian mining companies, and Golden Prospect Plc., a publicly
traded United Kingdom mining investment company listed in London on the
Alternative Investment Market. Golden Prospect is one of the principal
shareholders of the Company, holding, directly and indirectly,
approximately 34% of its stock. Samson Exploration N.L. is another
principal shareholder of the Company holding 21.2% of the Company's stock.
Because Golden Prospect Plc owns 29.95% of Samson, the 21.2% held by
Samson is included in the 34% held by Golden Prospect. Mr. MacLachlan
has over 25 years investment banking experience gained in Europe,
Southeast Asia and Australia. Mr. MacLachlan was employed by Barrick Gold
Corporation as Executive Vice President Asia from 1993 to 1997. He was a
former director of Wardley Holdings and James Capel & Co. Limited,
investment banking subsidiaries of the Hong Kong and Shanghai Banking
Corporation. Mr. MacLachlan graduated from Manchester University in 1964
with a Bachelor of Science in Biochemistry and he took the post graduate
Business Studies course at London Polytechnic at Rutherford College.
MARK A. BOATRIGHT, age 43, was appointed a Director on October 18,
1993, and as Vice President - Finance, Chief Financial Officer, Treasurer
and Secretary on January 16, 1995. He also holds the same positions at
Victoria Exploration, Inc. He has declined to stand for election as a
Director of the Company at this meeting and he will also resign as a
Director of Victoria Exploration, Inc. at its next annual meeting. He
held the same positions at Kestrel Energy California, Inc. from 1995 until
it was merged in May 2000. Mr. Boatright is President of Boatright and
Associates, P.C., Certified Public Accountants. Mr. Boatright has over 21
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 President of Regatta Financial Services, a
registered investment advisory firm. 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.
He has been providing accounting and financial services to the Company
since June, 1992. Mr. Boatright is the brother-in-law of Mr. Hoops.
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 May 5, 2000, the Company sold its six international permits with a
net book value of $143,179 for petroleum drilling in Western Australia and
New Guinea to Victoria Petroleum USA, Inc. ("VP/USA"), a Colorado
corporation and wholly owned subsidiary of Victoria Petroleum N.L. ("VP"),
an Australian corporation and an affiliate of the Company, in exchange for
8,250,000 shares of VP common stock. The stock was valued at $0.0292187
per share and resulted in a gain on the sale of $97,721. Sproule
Associates, Inc., an independent expert, was engaged to value the oil and
gas properties and to determine their fair market value.
Also, on May 5, 2000, the Company, Kestrel Energy California, Inc.
("KEC"), a wholly owned subsidiary of the Company, VP and VP/USA entered
into an Agreement and Plan of Merger (the "Merger Agreement"). Pursuant
to the Merger Agreement, on May 12, 2000, the Company, as sole shareholder
of KEC, acquired 66,750,000 shares of VP common stock and VP/USA acquired
all of the issued and outstanding shares of KEC through a merger of KEC
with and into VP/USA, with KEC as the surviving corporation. The VP
common stock was valued at $0.292187 per share and resulted in a gain on
the sale of $1,497,208, based upon sales of other assets totaling $242,
accounts payable totaling $2,000, and property and equipment with a net
book value of $454,899. Again, Sproule Associates, Inc. was engaged to
value the assets of KEC.
Victoria International Petroleum, N.L., another wholly owned
subsidiary of VP, has a current shareholding interest in the Company of
19.9% (16.2% diluted for currently vested options and warrants). The
Company currently owns 15.02% of VP.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the
Chief Executive Officer of the Company, and two other non-executive
officers of the Company who received salary, bonus or other annual
compensation in total from the Company, in excess of $100,000 during the
same period.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------
Other
Annual
Fiscal Salary CompensationOptions
NAME AND PRINCIPAL POSITION Year ($) ($) (#)
--------------------------- ------ -------- ------- ---------
<S> <C> <C> <C> <C>
Timothy L. Hoops, President, 2000 $144,000 $0 100,000
Chief Executive Officer, 1999 $144,000 $0 99,464(1)
and Director 1998 $144,000 $0 0
Ira Pasternack, Vice President 2000 $120,000 $0 0
- Exploration 1999 $0 $15,000(2) 100,000
1998 $0 $0 0
Richard L. Vine, Former 2000 $100,000 $0 50,000
Vice President - Engineering 1999 $80,000 $16,938(3) 50,000
1998 $0 $93,864(3) 0
</TABLE>
(1) Consists of previously granted options which were repriced in fiscal
1999.
(2) Mr. Pasternack became an officer of the Company on July 1, 1999. He
was paid as a consultant during the fiscal year ended June 30, 1999.
(3) Mr. Vine became an officer of the Company on September 1, 1998. He
was paid as a consultant during the fiscal year ended June 30, 1998 and
for the first two months of the fiscal year ended June 30, 1999. Mr. Vine
resigned as an officer effective September 30, 2000, but has served as a
consultant to the Company since that time.
None of the named officers received 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 such 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 2001, Mr. Hoops will continue to be
paid his current salary of $144,000 for services rendered to the Company
and Victoria Exploration, Inc., plus retirement and health benefits.
Besides his salary, Mr. Hoops received fees as a director of Victoria
Petroleum N.L. in the amount of Australian $5,000 for fiscal 2000 and
expects to receive the same amount in fiscal 2001.
OPTION GRANTS FOR FISCAL YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
Number Of % of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price
Name Granted Fiscal Year ($/share)
-------------------------------- ---------- ------------ -----------
<S> <C> <C> <C>
Timothy L. Hoops 100,000 33.6% $1.375
President, Chief Executive
Officer and Director
Ira Pasternack, Vice President- 0 0% N/A
Exploration
Richard L. Vine, Former Vice 50,000(4) 16.8% $1.375
President-Engineering
Robert J. Pett 55,000 N/A $1.375
Chairman of the
Board and Director
Mark A. Boatright 27,206(5) 9.2% $1.375
Vice President - Finance,
Chief Financial Officer and
Director
John T. Kopcheff 60,000(5) 20.2% $1.375
Vice President - International
and Director
Kenneth W. Nickerson 10,000(4) N/A $1.375
Director 5,000(4) $2.08
Mark A.E. Syropoulo 100,000(4) N/A $1.375
Director 5,000(4) $2.08
</TABLE>
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
For Option Term
-----------------------------
Expiration
Name Date 5%($)(1) 10%($)(2)
------------------------------ ---------- -------- ---------
<S> <C> <C> <C>
Timothy L. Hoops 8-5-09 $86,625 $218,625
President, Chief
and Director
Ira Pasternack, Vice N/A N/A N/A
President - Exploration
Richard L. Vine, Former 8-5-09 $43,313 $109,313
Vice President - Engineering
Robert J. Pett 8-5-09 $47,644 $120,244
Chairman of the
Board and Director
Mark A. Boatright 8-5-09 $23,567 $59,479
Vice President - Finance,
Chief Financial Officer
and Director
John T. Kopcheff 8-5-09 $51,975 $131,175
Vice President -
International and
Director
Kenneth W. Nickerson 8-5-09 $8,663 $21,863
Director 9-30-09 $6,552 $16,536
Mark A.E. Syropoulo 8-5-09 $86,625 $218,625
Director 9-30-09 $6,552 $16,536
</TABLE>
(1) This column represents the potential realizable value of each grant
of options, based on the assumption that the market price of shares
of Common Stock underlying the options will appreciate in value from
the date of the grant to the end of the option term at the annual
rate of five percent.
(2) This column represents the potential realizable value of each grant
of options, based on the assumption that the market price of shares
of Common Stock underlying the options will appreciate in value from
the date of the grant to the end of the option term at the annual
rate of ten percent.
(3) Of this grant, 72,727 were incentive stock options and 27,273 were
nonqualified stock options.
(4) Of this grant, all were nonqualified stock options.
(5) Of this grant, all were incentive stock options.
AGGREGATED OPTION EXERCISES FOR FISCAL YEAR ENDED JUNE 30, 2000
AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Shares Underlying Unexercised
Acquired Unexercised In-the-Money
on Value Options at Options at
Exercise Realized June 30, 2000 June 30, 2000
Name (#) ($) (#) ($)(1)
------------------- ---------- -------- ------------- --------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
------------------- ---------- -------- ------------- --------------
<S> <C> <C> <C> <C>
Timothy L. Hoops
President, Chief
Executive Officer,
and Director 0 N/A 236,580/0 $96,712/$0
Ira Pasternack,
Vice President
- Exploration 0 N/A 100,000/0 $109,375/$0
Richard L. Vine, Former
Vice President -
Engineering 10,000 $12,687(2) 90,000/0 $102,500/$0
Robert J. Pett
Chairman of the
Board and Director 0 N/A 130,208/0 $61,745/$0
Mark A. Boatright
Vice President -
Finance, Chief
Financial and
Accounting Officer
and Director 0 N/A 47,164/5,000 $22,899/$0
John T. Kopcheff
Vice President -
International and
Director 0 N/A 185,415/0 $65,677/$0
Kenneth W. Nickerson
Director 0 N/A 32,409/5,000 $21,347/$0
Mark A.E. Syropoulo
Director 0 N/A 140,000/0 $86,265/$0
</TABLE>
(1) For all unexercised options held as of June 30, 2000, the aggregate
dollar value is 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 closing
price as of June 30, 2000 on the Nasdaq SmallCap Market, which was
$2.125 per share.
(2) During the fiscal year ended June 30, 2000, Mr. Vine had only sold
5,000 of the shares he received upon exercise.
KESTREL ENERGY, INC.
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.
The Committee reviews the executive officers' performance
periodically and reports to the Board of Directors on its evaluation of
that performance. The Committee has not in the past required or
established a direct or fixed relationship between the Company's financial
performance and the compensation of the Chief Executive Officer or the
other executive officers. The Committee has instead considered a number
of factors in making a subjective determination as to the compensation of
these officers, including 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.
Mr. Hoops, the President and CEO of the Company, received a salary
from the Company of $144,000 in fiscal 2000. Mr. Hoops received the same
salary in 1998 and 1999. The Committee has determined to leave Mr. Hoops
at the same salary level at this time. On the other hand, in light of the
recent escalation of executive salaries generally, the increase in the
prevailing prices for oil and natural gas and the resulting strength of
the petroleum industry overall, and the Company's recent successful
exploration activities, the Committee intends to review Mr. Hoops' cash
compensation sometime in fiscal 2001 In making its determination, the
Committee may consider the Company's progress in developing the Green
River Basin in southeast Wyoming, which has become a significant part of
the Company's asset base over the past year.
Richard L. Vine, the Company's Vice President of Engineering, and Ira
Pasternack, Vice President of Exploration, who became employees of the
Company during fiscal 1999 were the only officers of the Company to
receive stock options grants in fiscal 1999, receiving 50,000 and 100,000
options, respectively. While the Committee felt that additional option
grants to executive officers and directors were not appropriate in 1999
because of the Company's relatively poor financial performance that year,
the positive results of fiscal 2000, which were almost certainly the
result of the investment in the future made in 1999, suggest no such
limitations. Accordingly, Mr. Hoops' diligence and success in the Green
River Basin Project was rewarded with a grant of an additional 100,000
options. Additional grants of options were made by the Committee to
Richard Vine, the Company's former Vice President of Engineering, Robert
Pett, Chairman of the Board, Mark Boatright, Chief Financial Officer, and
John Kopcheff, Vice President-International, in the amounts of 50,000,
55,000, 27,206 and 60,000, respectively. All of the options were granted
at the fair market value on the date of grant.
August 5, 2000 Kenneth W. Nickerson
Mark A.E. Syropoulo
DIRECTORS' REMUNERATION
Directors who are not officers or employees of the Company are paid
$900 for attendance at meetings of the Board or Committees thereof. Any
director who serves on the Compensation Committee automatically receives
5,000 options each September 30 pursuant to the Company's Stock Option
Plan. Accordingly, on September 30, 1999, both Messrs. Nickerson and
Syropoulo, as members of the Compensation Committee, received fully vested
options to purchase 5,000 shares of Common Stock at an exercise price of
$2.08 per share, the fair market value on the date of grant. The options
are exercisable for ten years from 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 Group
121 - Independent Oil and Gas and (iii) the Nasdaq Market Index. The MG
Industry Group 353 consists of approximately 132 independent oil and gas
companies, including the Company. The line graph and table cover the five
year period from July 1995 through June 2000 and represent the total value
of a $100 investment in each security/market index on July 1, 1995. All
dividends are assumed to be reinvested.
<TABLE>
<CAPTION>
1995 1996 1997 1998 1999 2000
---- ---- ---- ---- ---- ----
<C> <S> <S> <S> <S> <S> <S>
Kestrel Energy Inc. 100 263.64 213.64 54.55 104.55 154.55
MG Group 121
Independent Oil
and Gas 100 119.47 135.50 117.14 119.13 148.91
Nasdaq Market Index 100 125.88 151.64 201.01 281.68 423.84
</TABLE>
The information contained in this graph was compiled 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 LLP 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 LLP 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 LLP for the fiscal year
ending June 30, 2001. 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 LLP are
unreasonable for the Company under the circumstances, the Board of
Directors will reconsider the selection for the fiscal year ending June
30, 2001.
It is expected that KPMG LLP 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 LLP AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 2001
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE STOCK OPTION PLAN
The Stock Option Plan (the "Plan") was adopted by the Company in
December of 1992 in order to grant stock options to officers, directors,
key employees, advisors and consultants of the Company and its
subsidiaries. On September 27, 2000, the Compensation Committee (the
"Committee) approved an amendment to the Plan to increase the number of
shares reserved under the Plan. The Company's Board of Directors and its
Compensation Committee (consisting of Kenneth W. Nickerson and Mark A.E.
Syropoulo, both of whom are outside directors) believe that an increase in
the number of options available for grant is important to provide
flexibility to the Committee in its administration of the Plan, to
encourage stock ownership by employees and management, to permit the
Company to attract and retain officers, directors, key employees, advisors
and consultants, and to continue to provide incentives and promote the
financial success and progress of the Company. In addition, the grant of
stock options can be made without the expenditure of the Company's limited
cash or other liquid resources, which are being preserved for the
Company's expanded oil exploration efforts and its planned development in
oil and gas reserves. Accordingly, the shareholders are being asked to
increase the number of shares reserved under the Plan from 1,500,000 to
1,850,000.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE STOCK OPTION PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE ARTICLE OF INCORPORATION
On July 1, 1994, the law for Colorado corporations was revised to
provide for an affirmative majority vote for major corporate actions to be
taken by the shareholders: amendments to the Articles of Incorporation
creating dissenters' rights, mergers or share exchanges, a sale, lease,
exchange or other disposition of all or substantially all of the Company's
property other than in the usual and regular course of business, and to
dissolve the Company. On all other routine matters, such as ratification
of the auditors and approval of amendments to the Company's Stock Option
Plan, Colorado law provides only that the votes cast in favor of the
matter exceed the votes against. The Company's Articles of Incorporation,
however, provide that, even for such routine issues, a majority of all
outstanding shares must be cast in favor of the proposal. Accordingly,
the Company proposes to reduce the shareholder voting requirement for all
corporate actions, other than the major corporate actions listed above, to
require an affirmative vote of the shares actually voted rather than a
majority of all outstanding shares.
The Company believes that this change will avoid delays in taking non-
controversial corporate actions that might otherwise occur with the higher
vote requirement. The Company has in the past encountered difficulty in
soliciting sufficient votes, affirmative or otherwise, to take corporate
action on routine matters requiring a majority vote of all outstanding
shares because of the large number of small shareholders who do not vote
and the large number of shares held in nominee names which the nominees do
not vote. The Company has in the past been forced to adjourn and
reconvene shareholder meetings one or more times in order to solicit
additional votes on proposals presented at the annual meetings even
though, of the votes cast, 90% or more have been voted in favor of the
proposal. The Company believes that it should not permit such corporate
paralysis to recur simply because a group of shareholders are not
sufficiently concerned about the Company's routine affairs to bother
casting their vote. The Company also believes that, because this change
would not apply to major corporate transactions such as mergers or sales
of all or substantially all of the Company's assets or to approve
significant future amendments to the Company's Articles of Incorporation,
shareholders' corporate governance rights will not be adversely affected.
The voting rights of the shareholders of the Company before and after
the proposed amendment are summarized in the following chart:
VOTING REQUIREMENTS
TYPE OF BEFORE THE AFTER THE
CORPORATE ACTION AMENDMENT AMENDMENT
----------------- ---------- ---------
Approval of amendments Majority of Majority of
to the Articles of Outstanding Shares Outstanding Shares
Incorporation (with
dissenters' rights(1))
e.g., alters or abolishes
a preferential right of
shares, eliminates cumulative
voting.
Approval of amendments Majority of Affirmative Vote
to the Articles of Outstanding Shares of a Majority
Incorporation (without of the Votes Cast
dissenters' rights(1)) at the Meeting
e.g., change of name,
increase the number of
authorized shares.
Approval of sale, lease or Majority of Majority of
exchange, or other Outstanding Shares Outstanding Shares
disposition of all, or
substantially all, of the
property of the Company
Approval of the Company's Majority of Affirmative Vote
independent accountants Outstanding Shares of a Majority
of the Votes Cast
at the Meeting
Approval of new plans, Majority of Affirmative Vote
or amendments to existing Outstanding Shares of a Majority
employee stock option plans of the Votes Cast
at the Meeting
Approval of a plan of
merger when shareholder
approval is required Majority of Majority of
Outstanding Shares Outstanding Shares
Approval of the dissolution
of the Company Majority of Majority of
Outstanding Shares Outstanding Shares
(1) A shareholder is entitled to the right to dissent and obtain payment
of the fair value of his or her shares in the event of certain
corporate actions by the Company which create a dissenters' rights.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE ARTICLE OF INCORPORATION.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the
Common Stock of the Company, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission and the exchange on
which the Common Stock is listed for trading. Those persons are required
by regulations promulgated under the Exchange Act to furnish the Company
with copies of all reports filed pursuant to Section 16(a). Two of the
Company's principal shareholders, Samson Exploration N.L. ("Samson") and
CIBC Eyres Reed Australian Resources Fund ("CIBC") failed to make timely
filings of six ownership reports required by Section 16(a) with the
Securities and Exchange Commission. Samson failed to file a timely report
on Form 4 (i) relating to the purchase of 15,000 shares of the Company's
Common Stock in May 1999, which report was filed on September 10, 1999,
(ii) relating to the purchase of 20,000 shares in November 1999, which
report was filed December 13, 1999, and (iii) relating to the purchase of
3,500 shares in June 2000, which report was filed on July 14, 2000. CIBC
failed to file a timely report on Form 3 to report its becoming a 10% or
more shareholder of the Company in August 1999, which report was filed
September 20, 1999. CIBC also failed to file a timely report on Form 4
(i) relating to the purchase of 150,000 shares in December 1999, which
report was filed on February 18, 2000, and (ii) relating to the purchase
or 40,000 shares on April 20, 2000, which report was filed on October 16,
2000. CIBC and Golden Prospect Plc ("Golden"), a publicly traded United
Kingdom mining investment company listed in London on the Alternative
Investment Market, have entered into an agreement for the merger of CIBC
into Golden Prospect Plc. effective June 30, 2000 which would result in
the transfer by CIBC of its 915,000 shares and warrants to purchase up to
87,500 shares of the Company's stock to Golden. However, at this time,
the other terms of the merger have not been determined, and the shares
have not yet been transferred. CIBC and Golden have indicated that they
will file the appropriate ownership reports when the stock is actually
transferred.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2000 accompanies this Proxy Statement. The audited financial
statements of the Company are included in the Form 10-K. Copies of the
exhibits to the Form 10-K are available from the Company upon written
request of a shareholder and payment of the Company's out-of-pocket
expenses addressed to Mark A. Boatright, 999 18th Street, Suite 2490,
Denver, Colorado 80202. The Commission also maintains a site on the World
Wide Web at http://www.sec.gov/edgarhp.htm that contains the Form 10-K,
the exhibits filed with the Form 10-K and other information concerning the
Company which have been electronically filed by the Company with the
Commission.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE 2001 ANNUAL MEETING OF SHAREHOLDERS
Any proposal from a shareholder intended to be presented at the
Company's 2001 annual meeting of shareholders to be held in December 2001,
must be received at the offices of the Company, 999 18th Street,
Suite 2490, Denver, Colorado 80202, no later than July 1, 2001, in order
to be included in the proxy statement and proxy for that meeting. In
addition, any such proposal must satisfy the conditions established by the
SEC for shareholder proposals to be included in the proxy statement and
proxy for that meeting.
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.
For the election of directors, subject to the effect of cumulative
voting, that number of candidates equaling the number of directors to be
elected having the highest number of votes cast in favor of their election
are elected to the Board of Directors. Accordingly, the six (6) persons
receiving the greatest number of votes at the meeting, in person or by
proxy, will be elected. For the approval and ratification of the
independent certified public accountants, the approval of the amendment to
the Stock Option Plan and the approval of the amendment to the Articles of
Incorporation, the vote or concurrence of a majority of the outstanding
shares entitled to vote thereon is required. Abstentions and broker non-
votes will be counted for purposes of establishing a quorum only. Only
those votes cast for the election of directors and the other proposals
will be counted as votes in favor or affirmative votes.
EXHIBIT A
CHARTER OF THE AUDIT COMMITTEE
OF
KESTREL ENERGY, INC.
This Charter outlines the purpose, composition and responsibilities
of the Audit Committee (the "Committee") of Kestrel Energy, Inc. (the
"Company"), and how these responsibilities are to be discharged. The
Committee shall review and update this Charter on the annual basis, as
conditions dictate.
ARTICLE I
PURPOSE
PRIMARY PURPOSE. The primary function of the Committee is to assist
the Board of Directors in fulfilling its oversight responsibilities of
financial reporting and internal financial and accounting control of the
Company by reviewing:
- the financial reports and other financial information provided by the
Company to any governmental body or public;
- the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board of
Directors have established; and
- the Company's auditing, accounting and financial reporting generally.
Consistent with this function, the Committee should encourage
continuous improvement of and should foster adherence to the Company's
policies, procedures and practices at all levels.
ARTICLE II
COMPOSITION OF THE COMMITTEE
2.01. NUMBER AND ELECTION. The Committee shall be comprised of
three or more Directors of the Company as determined by the Board of
Directors. The Committee members shall be elected by the Board of
Directors at the meeting following the annual shareholders' meeting of the
Company or until their successors are duly elected and qualified at a
Board of Directors meeting.
2.02. INDEPENDENT DIRECTORS. The majority of the Committee shall be
Independent Directors who are free from any relationship with the Company
that, in the opinion of the Board, would interfere with the exercise of
his or her independent judgement as a member of the Committee. For the
purposes of this Charter, an "Independent Director" shall mean a director
who (i) is not employed by the Company or any of its affiliates for the
current year or any of the past five (5) years, (ii) does not receive any
compensation from the Company or its affiliates in excess of $60,000
during the previous fiscal year, other than compensation for Board
service, benefits under a tax qualified retirement plan, or
nondiscretionary compensation, (iii) is not a member of the immediate
family of an individual who is, or has been in any of the past three (3)
years, employed by the Company or any of its affiliates as an executive
officer (for purposes hereof, "immediate family" shall mean a spouse,
parent, child, sibling, mother-in-law, father-in-law, brother-in-law,
sister-in-law, son-in-law, daughter-in-law, and anyone who resides in the
same household as the executive officer), (iv) is not a partner in, or a
controlling shareholder or an executive officer of, any for-profit
business organization to which the Company made, or from whom the Company
received, payments that exceed five percent (5%) of the corporation's or
business organization's consolidated gross revenue for that year, or
$200,000, whichever is more, in any of the past three (3) years; or (v) is
not employed as an executive officer of another company where any of the
Company's executive officers serve on that other company's compensation
committee.
2.03. QUALIFICATIONS. Every member of the Committee shall be familiar
with basic finance and accounting practices and with the business of the
Company and its industry to the extent necessary to effectively perform
his or her functions as a member of the Committee. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant.
2.04. CHAIRMAN. Unless a Chairman of the Committee is elected by the
Board of Directors, the members of the Committee may designate a Chairman
by majority vote of all the Committee's members. The Chairman shall be an
Independent Director and shall possess adequate knowledge in accounting,
finance, and the business and affairs of the Company. The Chairman shall
preside over all the meetings of the Committee and shall supervise and
direct the activities of the Committee, including contacts with legal
counsel and the independent auditors.
ARTICLE III
COMPENSATION
The Board of Directors shall establish the compensation of the
Committee members for service on the Committee.
ARTICLE IV
MEETINGS
4.01. REGULAR MEETINGS. The Committee shall meet four times
annually, or more frequently as circumstances dictate. The Committee may
provide by resolution the date, time and place for the holding of regular
meetings without other notice. The Committee may ask members of Company
management or others to attend meetings and provide pertinent information
as necessary. The Committee may at any time choose to exclude members of
the Company's management from all or a portion of its meetings, including
the exclusion of a member of the Committee from the Committee's
discussions with legal counsel or the independent auditors.
4.02. SPECIAL MEETINGS. In addition to or as part of the regular
Committee meetings, the Committee members may meet periodically with the
management of the Company, the Company's internal accounting department
and the Company's independent auditors to discuss any financial,
accounting and audit matters, including preparation and review of the
annual and quarterly financial statements. The Committee may meet with
these groups in separate sessions if the Committee or each of these groups
believe that such meetings should be conducted privately.
4.03. MINUTES. The Committee shall keep minutes of all of its
meetings as a Committee.
ARTICLE V
RESPONSIBILITIES AND DUTIES
5.01. PRIMARY RESPONSIBILITIES. The Committee shall serve as an
independent and objective party to monitor the Company's financial
reporting process and internal control system, review and appraise the
efforts of the Company's independent auditors and accounting department
and provide an open avenue of communication among the independent
auditors, financial and senior management, the accounting department, and
the Board of Directors. To fulfill its responsibilities, the Committee
shall carry out activities enumerated below.
5.02. REVIEW OF DOCUMENTS AND REPORTS. The Committee shall
review the Company's annual and quarterly financial statements and any
reports or other financial information submitted to any governmental body,
or the public, including any certification, report, opinion, or review
rendered by the independent auditors. When practicable, prior to the
filing of the Company's 10-Qs, and prior to the public release of
quarterly or annual earnings, the Committee, or its Chairman representing
the Committee, shall review such reports or releases with management and,
if appropriate, the independent auditors. In addition, the Committee
shall review any internal reports to management prepared by the accounting
department and management's responses, if any, to such reports.
5.03. INDEPENDENT ACCOUNTANTS. The Committee shall recommend to
the Board of Directors the selection of the independent auditors,
considering their independence and effectiveness, approve the fees and
other compensation to be paid to the independent auditors, review the
performance of the independent auditors and approve any proposed discharge
of the independent auditors when circumstances warrant. On an annual
basis, the Committee should review and discuss with the independent
auditors all significant relationships the auditors have with the Company
to ensure their continuing independence. The Committee shall obtain a
formal written statement from the independent auditors delineating all
relationships between the auditor and the Company, consistent with
Independence Standards Board Standard 1.
5.04. FINANCIAL REPORTING PROCESSES. The Committee shall review
the integrity of the Company's financial reporting processes, both
internal and external, and consult with the independent auditors with
respect to the quality and appropriateness of the Company's accounting
principles as applied to financial reporting. If, upon its review and
consultation with the management, the accounting department and the
independent auditors, the Committee determines that major changes to the
Company's auditing and accounting principles and practices are required,
the Committee shall approve such changes or improvements, if appropriate.
The Committee shall monitor the implementation of such changes and
improvements.
5.05. REPORTING TO THE COMMITTEE. The Committee shall establish
regular and separate systems of reporting to the Committee by each of
management, the independent auditors and the accounting department
regarding any significant judgments made in management's preparation of
the financial statements and the view of each of the above groups as to
appropriateness of such judgements.
5.06. PROCESSES IMPROVEMENT. Following completion of the annual
audit, the Committee shall review separately with each of management, the
independent auditors and the accounting department any significant
difficulties and disagreements among these groups encountered during the
course of preparation of financial statements or audit, including any
restrictions on the scope of auditor's work or access to required
information.
5.07. ETHICAL AND LEGAL COMPLIANCE. The Committee shall consider
whether management has the proper review system in place to ensure that
the Company's financial statements, reports and other financial
information, as disseminated to governmental organizations and the public,
satisfy legal requirements. In addition, the Committee shall meet with
the Company's legal counsel to review any legal matters that could have
significant impact on the Company's financial statements, reports and
other financial information disseminated to the governmental organizations
and the public.
5.08. OTHER ACTIVITIES. The Committee may perform any other
activities consistent with this Charter and the Company's Bylaws, as the
Committee or the Board of Directors deem necessary or appropriate.
5.09. MANAGEMENT'S ASSISTANCE. The Committee shall coordinate
with the Board of Directors and management to ensure that the Committee's
members have access to the information necessary to effectively monitor
the Company's financial reporting, internal financial and accounting
controls and internal and external auditing.
ARTICLE VI
REPORTS
6.01. ANNUAL REPORT. The Committee may prepare and present to
the Board of Directors periodic reports summarizing its activities,
conclusions and recommendations and its future agendas. The Committee may
elect to submit written reports or make regular oral reports to the Board
of Directors at meetings of the Board as recorded in the minutes of such
meetings.
6.02. OTHER REPORTS. The Committee shall prepare such other
reports or statements as it or the Board of Directors deems necessary or
as may be required by law. For example, the Committee may issue one or
more statements or reports which may be included in the annual report on
Form 10-K, annual report to shareholders, or proxy statement concerning
the fact that the Committee has adopted this Charter or that it has
satisfied its responsibilities in compliance with this Charter.
APPENDIX I
PROXY CARD
PROXY
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Timothy L. Hoops and Mark A. Boatright as
Proxies, each with the power to appoint his 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 26, 2000 at the annual meeting of shareholders to be held on
December 7, 2000 or any adjournment thereof.
1. TO ELECT SIX DIRECTORS
--------- FOR all nominees listed below
--------- WITHHOLD AUTHORITY to vote 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.)
Nominee Cumulative Votes
------- ----------------
Timothy L. Hoops ----------------
Nominee Cumulative Votes
------- ----------------
Robert J. Pett ----------------
Nominee Cumulative Votes
------- ----------------
Kenneth W. Nickerson ----------------
Nominee Cumulative Votes
------- ----------------
Neil T. MacLachlan ----------------
Nominee Cumulative Votes
------- ----------------
John T. Kopcheff ----------------
Nominee Cumulative Votes
------- ----------------
Mark A.E. Syropoulo ----------------
2. TO APPROVE AND RATIFY THE SELECTION OF KPMG LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND AUDITORS FOR THE YEAR
ENDING JUNE 30, 2001
FOR ------------- AGAINST ------------- ABSTAIN ------------
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED UNDER THE PLAN
FOR ------------- AGAINST ------------- ABSTAIN ------------
4. TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
REQUIRE A MAJORITY VOTE OF ALL OUTSTANDING SHARES ONLY FOR MAJOR
CORPORATE TRANSACTIONS
FOR ------------- AGAINST ------------- ABSTAIN ------------
5. 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, 3 and 4 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 -----------------------, 2000 ----------------------------------
Signature
----------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
APPENDIX II
STOCK OPTION PLAN
KESTREL ENERGY, INC.
STOCK OPTION PLAN
as amended December 7, 2000
SECTION 1. PURPOSE. The purpose of the Kestrel Energy, Inc. (the
"Company") 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 or more directors designated by the Board of Directors of
the Company (the "Committee"). Notwithstanding the foregoing, if it would
be consistent with all applicable laws, including without limitation Rule
16b-3, 17 C.F.R. 240.16b-3 ("Rule 16b-3") promulgated under the Securities
Exchange Act of 1934 (the "Exchange Act"), then the Plan may be
administered by the Board of Directors, and, if so administered, all
subsequent references to the Committee shall refer to the Board of
Directors. Any action of the Committee shall be taken by majority vote or
by 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 1,850,000, 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,
except to the extent that the Committee's exercise of such authority is
consistent with all applicable laws, including, without limitation, Rule
16b-3. Grants to Committee members shall be made in accordance with
Section 6 hereof. Only employees of the Company shall be eligible to
receive Incentive Stock Options.
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. To the extent required by paragraph F, subsequent
amendments to the Plan shall be submitted to the Shareholders and such
amendments shall be effective upon such approval. All other amendments
shall be effective upon adoption by the Committee.
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 or the Board of Directors. No Options
shall be granted under the Plan after that date. Subject to the
limitation contained in paragraph E of this Section 2, the Committee or
the Board of Directors 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 issued pursuant to Options granted under the Plan, except as
provided under paragraph G of this Section 2; or (ii) effects any change
to the Plan which is required to be approved by shareholders by law.
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. 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 there has been full compliance
with all of the requirements of law and of all regulatory agencies having
jurisdiction over the issuance and delivery of the securities.
J. During the term of the Plan, the Company will at all times
reserve and keep available for issuance a sufficient number of shares of
its Common Stock 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 all requisite authority necessary 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. 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. The Committee may, in its
discretion, accept payment of such withholding taxes and liabilities from
an Optionee in the form of shares of the Company's Common Stock or other
property and may elect to deduct shares of Common Stock that would have
otherwise been delivered to an Optionee upon exercise to satisfy all or a
part of such taxes and liabilities.
L. FAIR MARKET VALUE. The "fair market value" of the Common Stock
on any given date means (a) if there is an established market for the
Company's Common Stock on a stock exchange, in an over-the-counter market
or otherwise, the mean between the highest and lowest reported sale prices
on the valuation date, or (b) if there were no such sales on the valuation
date, then in accordance with Treasury Regulation Section 20.2031-2 or
successor regulations. With respect to the grant of Options, unless
otherwise specified by the Committee at the time of grant, the valuation
date shall be the date of grant. The Committee may specify in any grant
of an Option that, instead of the date of grant, the valuation date shall
be a valuation period of up to ninety (90) days preceding the date of
grant, and fair market value for purposes of such grant shall be the
average over the valuation period of the mean of the highest and lowest
quoted selling prices on each date on which sales were made in the
valuation period, provided, however, that if the Committee fails to
specify a valuation period and there were no sales on the date of grant
then fair market value shall be determined as if the Committee had
specified a thirty (30) day valuation period for such determination,
unless there is no established market for the Company's Common Stock in
which case determination of fair market value shall be in accordance with
clause (b) above.
SECTION 3. OPTION TERMS AND CONDITIONS. Options granted under this
plan may be Incentive Stock Options (within the meaning of Section 422 of
the Internal Revenue Code (the "Code")) or nonqualified stock options.
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;
provided, however, that any Options designated as Incentive Stock Options
must comply with the provisions of the Plan specifically relating to
Incentive Stock Options and the Code.
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; provided, however, that in the case of
Incentive Stock Options granted to a 10% shareholder, no option shall be
exercisable more than five 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 fair market value of the Company's Common Stock on the
valuation date or valuation period, but in no event shall the option price
be less than fifty percent (50%) of the fair market value of the shares on
the valuation date or valuation period; provided, however that the
exercise price of Incentive Stock Options shall be fixed by the Committee
at not less than 100% of the fair market value of the Common Stock on the
valuation date or valuation period; provided further, that in the case of
Incentive Stock Options granted to a 10% shareholder, the exercise price
of the option shall not be less than 110% of the fair market value of the
Common Stock on the valuation date or valuation period.
SECTION 6. GRANTS TO COMMITTEE MEMBERS. Except as provided in
paragraph D of Section 2 hereof, the Committee shall have no discretion to
determine the amount, price or timing of grants of Options to Committee
members. Grants of Options to Committee members shall be made at the
discretion of the Board of Directors (with members of the Committee
abstaining) or in accordance with a formula established by the Board of
Directors; provided, however, that if the Board of Directors fails to make
a discretionary grant of Options or otherwise establish a formula by which
Options are granted to Committee members in any fiscal year of the
Company, then automatic grants of Options to Committee members shall be
made on the following September 30th. Such automatic grants to Committee
members shall be nonqualified Options for 5,000 shares per Committee
member and the exercise price shall be 100% of the fair market value of
the Company's Common Stock based on a valuation period consisting of the
thirty (30) day period ending September 29 of such year.
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
becoming the beneficial owner, as defined in the Exchange Act, of more
than 5% of the outstanding voting stock of the Company without the
unanimous consent of the Board of Directors.
SECTION 8. 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) if permitted by the Committee, with shares of the Company's issued
and outstanding Common Stock; 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 the
Company's Common Stock, those shares shall be tendered at their fair
market value on the date of exercise.
The Committee may also permit an Optionee to effect a net
exercise of an option without tendering any shares of the Company's stock
as payment for the Option. In such an event, the Optionee will be deemed
to have paid for the exercise of the Option with shares of the Company's
stock and shall receive from the Company a number of shares equal to the
difference between the shares that would have been tendered and the number
of Options exercised. Members of the Committee may effect a net exercise
of their Options only with the approval of the Board of Directors.
The Committee may also cause the Company to enter into
arrangements with one or more licensed stock brokerage firms whereby
Optionees may exercise options without payment therefor but with
irrevocable orders to such brokerage firm to immediately sell the number
of shares necessary to pay the exercise price for the option and the
withholding taxes, if any, and then to transmit that portion of the
proceeds from such sales to the Company to pay such obligations.
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 payment for the shares with respect to which the
Option is exercised has been received by the Company in accordance with
Section 8 hereof.
SECTION 11. LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS. To
the extent required by the Code, the aggregate fair market value
(determined at the time the Option is granted) of Common Stock for which
Incentive Stock Options are exercisable for the first time by a
participant during any calendar year (including all plans of the Company
and its subsidiaries) shall not exceed $100,000.
SECTION 12. 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, which compliance shall be determined by counsel for the Company.
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 if and to the
extent required by law, the terms of the Option or the Plan.
SECTION 13. Each Optionee, if requested by the Committee, must agree
in writing as a condition of the granting of an 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 14. 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, however, 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 15. 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 16. 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 17. OPTIONS NOT TRANSFERABLE. Options granted pursuant to
the Plan may not be sold, pledged, assigned or transferred in any manner
other 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 18. 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.
