<PAGE>
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 Section 240.14a-11(c) or Section
240.14a-12
Sharon Energy Ltd.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
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:
------------------------------------------------------------------------
<PAGE>
SHARON ENERGY LTD.
NOTICE OF ANNUAL GENERAL MEETING
TAKE NOTICE that the Board of Directors of Sharon Energy Ltd. (the "Company")
has called the 1998 annual general meeting of the shareholders of the Company
for Thursday, September 3, 1998 at 2:00 P.M., 10th Floor, Room 1000 - 840 Howe
Street, Vancouver, British Columbia.
At the meeting the shareholders will consider resolutions to:
(a) approve the report of the directors, the financial statements of the
Company for the year ended March 31, 1998, and the auditor's report
on those statements;
(b) appoint an auditor for the coming year and authorize the directors to
fix the auditor's remuneration;
(c) to fix the number of Directors on the Board of Directors at four and
elect directors for the coming year;
(d) approve the amendment to the incentive share option plan of the
Company to increase the number of common shares reserved for issuance
pursuant to the plan from 1,172,600 common shares to 1,500,000 common
shares;
(e) ratify, confirm and approve all acts, deeds and things done by the
proceedings of directors and officers of the Company on its behalf
since the last annual general meeting of the Company as referred to in
the Annual Report and the financial statements to be presented to the
meeting which accompany this Notice, and the section of the
information circular/proxy statement headed "Certain Transactions with
Management and Principal Shareholders".
The shareholders may also transact any other business properly brought before
the meeting.
All registered shareholders are entitled to attend and vote at the meeting in
person or by proxy. The Board of Directors requests all shareholders who will
not be attending the meeting in person to read, date and sign the accompanying
proxy and deliver it to Montreal Trust Company of Canada at 510 Burrard Street,
Vancouver, British Columbia, V6C 3B9. If a shareholder does not deliver a proxy
to Montreal Trust Company of Canada before the close of business on September 1,
1998, or to the presiding officer of the annual general meeting before the
commencement of the meeting, then the shareholder will not be entitled to vote
at the meeting by proxy.
An Information Circular/Proxy Statement and a form of proxy accompany this
notice.
DATED ON JULY 30 , 1998.
--------------
BY ORDER OF THE BOARD OF DIRECTORS
JOHN S. "JACK" STEINHAUSER
PRESIDENT & DIRECTOR
<PAGE>
SHARON ENERGY LTD.
INFORMATION CIRCULAR & PROXY STATEMENT
- ------------------------------------------------------------------------------
SOLICITATION OF PROXIES
This Information Circular/Proxy Statement is provided in connection with the
solicitation of proxies by the management of Sharon Energy Ltd. (the
"Company"). The form of proxy which accompanies this circular/statement (the
"Proxy") is for use at the annual general meeting of the shareholders of the
Company to be held on September 3, 1998 (the "Meeting"), at the time and
place set out in the accompanying notice of meeting. The Company will bear
the cost of this solicitation. The solicitation will be made by mail, but
may also be made by telephone.
APPOINTMENT AND REVOCATION OF PROXY
The persons named in the Proxy are directors and officers of the Company. A
shareholder desiring to appoint some other person to represent him at the
Meeting may do so by striking out the printed names and inserting the desired
person's name in the blank space provided. The completed Proxy should be
delivered to Montreal Trust Company of Canada at 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9 by the close of business on the 1st day of September,
1998, or to the presiding officer of the Meeting before the start of the
Meeting.
A Proxy may be revoked by:
(a) signing a Proxy with a later date and delivering it at the place and
within the time aforesaid;
(b) signing and dating a written notice of revocation and delivering it at
the time and place noted above; or
(c) attending the Meeting or any adjournment of the Meeting and
registering with the scrutineer as a shareholder present in person.
PROVISIONS RELATING TO VOTING OF PROXIES
THE SHARES REPRESENTED BY PROXY IN THE ENCLOSED FORM WILL BE VOTED BY THE
DESIGNATED HOLDER IN ACCORDANCE WITH THE DIRECTION OF THE SHAREHOLDER APPOINTING
HIM. IF THERE IS NO DIRECTION BY THE SHAREHOLDER, THOSE SHARES WILL BE VOTED IN
THE AFFIRMATIVE FOR ALL PROPOSALS SET OUT IN THE PROXY AND FOR THE ELECTION OF
DIRECTORS AND THE APPOINTMENT OF THE AUDITOR AS SET OUT IN THIS
CIRCULAR/STATEMENT.
The Proxy gives the person named in it the discretion to vote as he sees fit on
any amendments or variations to matters identified in the notice of meeting or
any other matters which may properly come before the Meeting. At the time of
printing this Circular/Statement, the management of the Company knows of no
other matters which may come before the Meeting other than those referred to in
the notice of meeting.
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
VOTING SECURITIES AND PRINCIPAL HOLDERS OF VOTING SECURITIES
On the date of the accompanying notice of meeting, the Company had 9,880,800
common shares outstanding. All shares in the capital of the Company are of the
same class and each carries the right to one vote.
Shareholders registered on or before July 27, 1998 are entitled to attend and
vote at the Meeting. Shareholders who wish to be represented by proxy at the
Meeting must, to entitle the person appointed by the Proxy to attend and vote,
deliver their proxies at the place and within the time set forth in the notes to
the Proxy.
The following table sets forth the persons who beneficially own more than 5% of
the common shares of the Company as of July 30, 1998, and the number of shares
held by all officers and directors of the Company as a group:
BENEFICIAL OWNERS OF MORE THAN 5% OF COMMON SHARES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAME NUMBER OF SHARES(2) % OF CLASS(2)
- -------------------------------------------------------------------------------
<S> <C> <C>
Humboldt Capital Corp.(1) 1,750,000 17.7%
All Directors and Officers as a Group(2) 695,000 7.03%
- -------------------------------------------------------------------------------
</TABLE>
(1) A director of Sharon Energy Ltd., Mr. Robert W. Lamond, owns approximately
60% of Humboldt Capital Corp.
(2) Not including shares that may be acquired upon the exercise of common stock
options and warrants. If all the Company's outstanding common stock options and
warrants are exercised, all Directors and Officers as a group (5 persons) will
beneficially own 1,401,500 common shares representing 13.24% of the shares then
outstanding.
ELECTION OF DIRECTORS
The directors of the Company are elected annually and hold office until the next
annual general meeting of the shareholders or until their successors are
elected. The management of the Company proposes to fix the number of directors
on the Board of Directors at four and to nominate the persons listed below for
election as directors of the Company to serve until their successors are elected
or appointed. In the absence of instructions to the contrary, proxies given
pursuant to the solicitation by the management of the Company will be voted by
the nominees listed in this Circular/Statement.
MANAGEMENT DOES NOT CONTEMPLATE THAT ANY OF THE NOMINEES WILL BE UNABLE TO SERVE
AS A DIRECTOR. IF ANY VACANCIES OCCUR IN THE SLATE OF NOMINEES LISTED BELOW
BEFORE THE MEETING, MANAGEMENT WILL EXERCISE DISCRETION TO VOTE THE PROXY FOR
THE ELECTION OF ANY OTHER PERSON OR PERSONS AS DIRECTORS.
Page 2 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
The following table sets out the names of the nominees for election as
directors, the offices they hold within the Company, their age, their
occupations, the length of the time they have served as directors of the
Company, the members of the Board of Director's Executive Committee, the Audit
Committee, and the Compensation Committee, and the number of shares of the
Company and its subsidiaries which each beneficially owns directly or indirectly
or over which control or direction is exercised as of the date of the notice of
meeting:
NOMINEES FOR ELECTION AS DIRECTOR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NO. SECURITIES % OF
NAME, COUNTRY OF OVER WHICH CLASS
RESIDENCE & AGE PRINCIPAL OCCUPATION DIRECTOR CONTROL OR (4)
OFFICE HELD SINCE DIRECTION
EXERCISED (4)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(1) (2) 39 President & CEO of Sharon Sept 8
John (Jack) S. Steinhauser Energy Ltd. & Chairman, 1995 187,000 1.65
9700 Villasur Court CEO and Director of
Parker Colorado Sharon Resources, Inc.
80134USA
President & Director
- ----------------------------------------------------------------------------------------------------------------------------------
(1)(2)(3) 56 Management, Accountant July 19 481,500 4.87
David L. Bennington & Consultant 1989
3555 Morgan Creek Way
So Surrey, B.C.
V4P 3A2 CAN
Director
- ----------------------------------------------------------------------------------------------------------------------------------
(2)(3) 54 1998-Present, Chairman of March 12
Robert W. Lamond the Board, President of 1998 -0-
2208 Amherst St SW Diaz Resources Ltd.
Calgary, Alberta
T2T 3B7 CAN 1991-1998, Chairman of
Director the Board, President, CEO
of Orbit Oil & Gas Ltd.
- ----------------------------------------------------------------------------------------------------------------------------------
(1)(2) 48 1998-Present, Executive March 12
C. A. "Tony" Teare Vice President of Diaz 1998 -0-
3034 Linden Dr SW Resources Ltd.
Calgary, Alberta
T3C 6C5 CAN 1991-1998, Executive Vice
Director President, Chief Financial
Officer of Orbit Oil & Gas
Ltd.
- ----------------------------------------------------------------------------------------------------------------------------------
All Nominees as a Group 668,500 6.76%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Members of the Audit Committee.
(2) Members of the Board of Director's Executive Committee.
(3) Members of the Compensation Committee, Messrs. Bennington and Lamond are
not employees of the Company
(4) Not including shares that may be acquired upon the exercise of common stock
options. If all the company's outstanding common stock options are
exercised, the nominees as a group will beneficially own 1,218,500 shares,
representing 11.68% of the shares then outstanding.
Note: The information as to shares beneficially owned has been provided by the
directors themselves.
Page 3 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
BUSINESS BACKGROUND OF NOMINEES FOR ELECTION AND EXECUTIVE OFFICERS OF THE
COMPANY
JOHN (JACK) S. STEINHAUSER
Jack S. Steinhauser, President of Sharon Energy Ltd. and Chairman and Chief
Executive Officer of Sharon Resources, Inc., received a Bachelor's Degree in
Economics from Claremont McKenna College and a Masters of International
Management Degree from the University of Denver. He was formerly a financial
analyst with Martin Marietta Aerospace Corporation and an analyst with the
United Nations in 1980-81. Mr. Steinhauser was a consultant to Sharon from 1980
to 1982. He has since been employed by Sharon on a full time basis holding
successive positions of Assistant to the President, Land Manager, Executive
Director, Executive Vice-President of Operations, President and Chief Executive
Officer. He is a member of the Executive Board of the Independent Petroleum
Association of Mountain States.
DAVID L. BENNINGTON
David L. Bennington, Director, obtained his accounting degree in 1960 and has
been actively involved in accounting and management for the resource industries
in British Columbia since 1963. He has been the proprietor of an accounting and
management consultant practice in both Vancouver, B.C. and Sechelt, B.C. since
1971. He has been on the Board of Directors of Sharon Energy since 1989. He
has been a resident of the Vancouver area since 1971.
ROBERT W. LAMOND
Robert W. Lamond, Director, received a B.SC., Geology Honors, at Edinburgh
University, Scotland in 1965. Mr. Lamond founded Czar Resources Ltd. in 1974
and was the President and Chairman of the Board until 1995 when the company was
sold. Mr. Lamond was also the Chairman of the Board of Orbit Oil & Gas Ltd.
from 1987 and President from 1996 until the company was sold in 1998. Mr.
Lamond is currently President and Chairman of the Board of Humboldt Capital
Corporation and Diaz Resources Ltd.
C. A. "TONY" TEARE
Tony Teare, Director, received a B.Comm. at University of Calgary, Alberta in
1974 and became a member of the Institute of Chartered Accountants in 1976. Mr.
Teare was a co-founder and President of Aurora Energy Fund Ltd., which became
Europa Petroleum Ltd. and Orbit Oil & Gas Ltd. through a series of mergers.
Orbit was sold in 1998. Mr. Teare was the Executive Vice President of Czar
Resources Ltd. from 1989 to 1995 when the company was sold. Mr. Teare is
currently the Executive Vice President of Humboldt Capital Corporation, a
venture capital holding company, and Diaz Resources Ltd., an oil and gas
company.
JO BETH McFADDEN
Jo Beth McFadden, Vice-President, Secretary and Treasurer has been employed by
Sharon since 1984. She has over twenty-five years experience in the oil and gas
industry in land, geology, production and finance areas. She was formerly
employed by Union Oil Company of California, Al-Aquitaine Oil and Gas Ltd., and
Canterra Petroleum. She received her Bachelor of Science Degree in Business
Administration with a minor in Economics from Regis University, Denver,
Colorado. In 1984 she was Assistant Secretary and Office Manager for Sharon.
In 1987 she became Secretary and Assistant Treasurer and in 1991
Secretary/Treasurer. In 1994 she was named Vice President of the Company and
the Company's wholly owned subsidiary, Sharon Resources, Inc.
Page 4 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
ADVANCE NOTICE OF MEETING
Advance Notice of the Meeting was published in the Vancouver Sun newspaper on
June 30, 1998 in accordance with Section 111 of the COMPANY ACT. No nominations
for directors have been received from the shareholders of the Company.
COMMITTEES AND MEETINGS
During fiscal 1998, there was an Audit Committee, Executive Committee, and a
Compensation Committee of the Board of Directors. There is no nominating or
other committee performing similar functions.
The Audit Committee's functions include recommending to the Board of Directors
the engagement of the Company's independent public accountants and reviewing
with such accountants the plans for and the results and scope of their auditing
engagement and certain other matters relating to their services provided the
Company, including the independence of such accountants. Members of the Audit
Committee are John S. (Jack) Steinhauser, David L. Bennington and C. A. Teare.
The Audit Committee met one time in fiscal 1998.
In 1982, the Shareholders of the Company approved an Incentive Award Plan
authorizing the Board of Directors of the Company to grant incentive awards
to eligible corporate officers and key employees of the Company and its
wholly-owned subsidiary. The Compensation Committee of the Board of
Directors is responsible for determining such incentive awards. In
addition, the Compensation Committee will review on behalf of, and make
recommendations to, the Board of Directors with respect to all forms of
compensation for directors, executive officers and key employees. Members of
the Compensation Committee are David L. Bennington and Robert W. Lamond.
The Compensation Committee met once in fiscal 1998.
The Board of Directors met seventeen times either by meeting in person, by phone
conference, and/or written consent during the past fiscal year. Each director
participated in more than 75 percent of the meetings, including the written
consents, that were held during the period he was a director.
COMPENSATION OF DIRECTORS
Members of the Board of Directors do not receive meeting fees but are reimbursed
for out-of-pocket expenses to attend Board of Directors' Meetings. Shareholders
have approved five-year stock options for the directors as outlined in this
circular/statement.
EXECUTIVE COMPENSATION
There are presently two Executive Officers of the Company. The term "Executive
Officer" means the president, any vice-president in charge of a principal
business unit such as sales, finance or production, any officer of the Company
or a subsidiary who performs a policy-making function for the Company whether or
not that person is also a director of the Company or the subsidiary, and the
chairman and any vice-chairman of the Board of Directors of the Company if that
person performs the functions of that office on a full-time basis. The
following table sets forth for the fiscal year ended March 31, 1998, certain
information concerning compensation paid or accrued for the President and Chief
Executive Officer ("CEO") and the other Executive Officer who was serving on
March 31, 1998.
Page 5 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
(All amounts expressed in U.S. dollars unless otherwise indicated)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
NAME STOCK ALL OTHER
AND FISCAL ANNUAL COMPENSATION OPTION GRANTS COMPENSATION(4)
PRINCIPAL POSITION YEAR --------------------------------- ($)
SALARY BONUS(2) OTHER(3)
FEES(1) ($) ($) (NUMBER)
($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
JACK S. STEINHAUSER 1998 $54,896 -0- -0- 125,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
President & 1997 64,800 -0- -0- 73,500 -0-
- ----------------------------------------------------------------------------------------------------------------------------
Chief Exec. Officer 1996 64,800 2,700 3,279 44,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
JO BETH MCFADDEN 1998 $32,436 -0- -0- 90,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
Vice President & 1997 36,600 -0- -0- 38,500 -0-
- ----------------------------------------------------------------------------------------------------------------------------
Corporate Sec/ Treas 1996 36,600 1,525 2,561 38,000 -0-
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The dollar value of base salary and/or management fees (cash and non-cash)
received.
(2) The dollar value of a year-end bonus equivalent to one-half month's salary
in fiscal 1996 was paid to all employees or consultants at the sole
discretion of the Board of Directors. No year-end bonus was paid in fiscal
1997 or 1998.
(3) Compensation received pursuant to the Employee Royalty Pool. Subsequent to
FY '95 the Company phased out the Employee Royalty Pool and royalties are
assigned directly to officers and key employees.
(4) Includes compensation received pursuant to the Incentive Award Plan.
Amounts paid under this Plan are based on profits achieved in the
preceding fiscal year. No compensation has been paid during the last three
fiscal years pursuant to the Incentive Award Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and Directors who own more than 10% of the outstanding shares
of a registered class of the company's equity securities, to file reports of
ownership and changes of ownership with the Securities and Exchange Commission,
copies of which filed reports are required to be furnished to the company.
Based solely on its review of any forms received by it, the company believes
that during the year ended March 31, 1998 all filing requirements applicable to
the company's officers, directors and greater than 10% stockholders were met
except that Messrs. Robert W. Lamond and C. A. "Tony" Teare have not filed Forms
3, 4 or Form 5 (which may not be applicable). Messrs. Lamond and Teare are
residents of Canada.
COMPENSATION PURSUANT TO PLANS
INCENTIVE SHARE OPTION PLAN
The Company received shareholder approval to implement an incentive share option
plan (the "Plan") for directors, officers and full and part-time employees and
consultants of the Company and its controlled and subsidiary companies. The
Plan was approved by the shareholders of the Company at an extraordinary general
meeting held on May 8, 1997.
Pursuant to the Plan, the Company has authorized the reservation of 1,172,600
common shares for the grant of options from time to time, provided that the
total number of common shares to be reserved for issuance at any one time for
any one optionee shall not exceed 5% of the issued common shares of the Company
at the time of grant. In the event the optionee is a consultant or a director
employed in an investor relations capacity or an employee employed in an
investor relations capacity, then the grant of options shall not exceed 2% of
the issued common shares of the Company at the time of the grant. The purchase
price per common share for any option granted under the Plan shall not be less
than the ten-day average of the closing prices of
Page 6 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
the Company's common shares of the Company on the Vancouver Stock Exchange
(the "VSE") prior to the date of grant.
Pursuant to the Plan, options shall be granted pursuant to an option agreement
in a form that complies with the rules and policies of the VSE, which provides
as follows:
(a) all options granted shall be non-assignable;
(b) an option must be exercisable during a period not extending beyond 10
years from the time of grant; and
(c) no financial assistance will be provided with respect to the exercise
of stock options.
The Plan also provides for the granting of share appreciation rights ("SARs").
SARs would permit a holder to receive at no cost to the holder common shares,
which, when multiplied by the fair market value on the day immediately prior to
the date of the exercise of the SARs, have a total value equal to the product of
the number of common shares subject to the SARs times the difference between the
fair market value on the day immediately prior to the exercise of the SARs and
the exercise price. The Board has not activated this part of the Plan and no
SARs have been granted.
The Company has approved an increase in the number of shares available under the
Plan and is asking the shareholders of the Company to approve such increase.
(See "Other Matters to be Acted Upon - Increase in Option Shares Available
Pursuant to the Plan").
INCENTIVE AWARD PLAN
The Shareholders of Sharon Energy Ltd. approved an Incentive Award Plan in 1982
authorizing the Board of Directors of Sharon Energy Ltd. to grant incentive
awards to eligible corporate officers and key employees of Sharon Energy Ltd.
and Sharon Resources, Inc. For this purpose the Board of Directors has
established a Compensation Committee of the Board. The total amount of
incentive awards to be granted may, at the discretion of the Board of Directors,
be up to 12% of the consolidated before-tax annual profit of Sharon Energy, Ltd.
and its wholly-owned subsidiary Sharon Resources, Inc. The amount of annual
profit shall be for each fiscal year ended, as audited by the Company's
independent auditors.
Incentive awards to eligible officers and key employees are solely at the
discretion of the Board of Directors, both as to selection of participants and
amount of individual awards, and shall be made on an annual basis to eligible
participants following the release of the final audited, fiscal year-end
financial statements by the Company's independent auditors.
The award to each participant will be in the form of a percentage of the
total funds in the Incentive Award Plan to be distributed at the end of the
fiscal year. Awards are only for one fiscal year and there is no vesting of
any interest to a participant other than the percentage awarded to the
participant while the participant remains an officer or key employee in good
standing and, in any event, for only one fiscal year for which the award is
made. Any year-end bonuses paid to recipients for the same fiscal year are
deducted from such incentive awards.
OFFICERS AND KEY EMPLOYEE OVERRIDES
Beginning fiscal 1995, in certain oil and gas exploration projects generated by
the Company, the Company has been able to arrange and reserve an overriding
royalty on production that resulted from such projects which the Board of
Directors, at their discretion, allocated and assigned permanently as incentive
awards to certain officers and key employees for their exemplary performance.
Page 7 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
YEAR-END BONUS
In early December of each year, the Compensation Committee evaluates the state
of the Company's business and financial condition. If found to be satisfactory
in the opinion of Management, the Compensation Committee may, at its sole
discretion, grant each officer, employee or consultant, as designated by
Management, a maximum of one month's salary or consultant fee, as the case may
be, for services rendered during the year. A year-end bonus equal to one-half
month's salary was awarded in fiscal 1996 and none in fiscal 1997 or 1998.
In order to qualify for the bonus, an employee or designated consultant must
have been an employee or designated consultant of the Company on or before
November 1 of the bonus year, and the bonus will be calculated on the percent of
the year the employee or designated consultant worked for the Company by
dividing the number of months worked by 12.
OPTION GRANTS TABLE
The following table sets forth information concerning individual grants of stock
options to the Company's President and each other executive officer of the
Company
OPTION GRANTS FOR FISCAL YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term.(1)
- --------------------------------------------------------------------------------------------------------------
% of Total
Options
Granted to Exercise
Options Employees or Base Expiration
Name Granted in Fiscal Price Date 5% (Cdn. $)(3) 10% (Cdn. $)(4)
(#) Year(2) ($/Sh)
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
Jack S. Steinhauser 45,000 $0.35 Apr 15, 2002 $787.50 $1,575.00
80,000 24.13% $0.35 Feb 10, 2003 $1,400.00 $2,800.00
- --------------------------------------------------------------------------------------------------------------
Jo Beth McFadden 35,000 $0.35 Apr 15, 2002 $612.58 $1,225.00
55,000 17.3% $0.35 Feb 10, 2003 $962.50 $1,925.00
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These amounts represent certain assumed rates of appreciation only in
accordance with rates specified in applicable federal securities
regulations. Actual gains, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance of the Common Stock
and over-all stock market conditions. There can be no assurances that the
amounts reflected in this table will be achieved.
(2) The Company granted options representing 518,000 shares to all employees or
consultants in fiscal 1998.
(3) The potential realizable value, in Canadian dollars, of each grant of
options assuming that the market price of shares of Common Stock underlying
the options appreciates in value from the date of grant to the end of the
option term at the annual rate of five percent.
(4) The potential realizable value, in Canadian dollars, of each grant of
options assuming that the market price of shares of Common Stock underlying
the options appreciates in value from the date of grant to the end of the
option term at the annual rate of ten percent.
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth information concerning each exercise of stock
options during the fiscal year ended March 31, 1998 by the Company's President
and Chief Executive Officer and each other executive officer of the Company and
the fiscal year-end value of unexercised options held by these persons.
Page 8 of 13
<PAGE>
Sharon Energy Ltd. Information Circular & Proxy Statement
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AGGREGATED OPTION EXERCISES FOR FISCAL YEAR ENDED MARCH 31, 1998 AND YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Name Shares Value Number of
Acquired on Realized Unexercised Options Value of Unexercised
Exercise (#)(1) (Cdn.$)(2) at Fiscal Year-End In-the-Money Options at
(#)(3) Fiscal Year-End (Cdn. $)(4)
Exercisable/ Exercisable/
Unexercisable Unexercisable
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Jack S. Steinhauser -0- -0- 212,500 -0-
- --------------------------------------------------------------------------------------------------------------------------
Jo Beth McFadden -0- -0- 156,500 -0-
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of shares received upon exercise of options during the fiscal
year ended March 31, 1998.
(2) With respect to options, if exercised, during the Company's fiscal year
ended March 31, 1998, the dollar value of the difference between the option
exercise price and the market value of the option shares purchased on the
date of the exercise of the options.
(3) The total number of unexercised options held as of March 31, 1998,
separated between those options that were exercisable and those options
that were not exercisable.
(4) For all unexercised options held as of March 31, 1998, 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. On March 29,
1998, the closing sale price of the Common Stock was $0.26CAN per share.
These values are shown separately for those options that were exercisable
and those options that were not yet exercisable on March 31, 1998. As
required, the price used to calculate these figures was the latest closing
sale price of the Common Stock prior to March 31, 1998.
EMPLOYEE RETIREMENT , LONG-TERM INCENTIVE AND PENSION PLANS
No defined benefit or actuarial or pension plans exist with respect to the two
named executive officers or full-time employees. Excluding the Company's stock
option plan, the Company has no long-term incentive plan intended to serve as
incentive for performance to occur over a period longer than one fiscal year.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company does not have any written employment contracts with respect to any
of its executive officers. In addition, the Company has no compensatory plan or
arrangement that results or will result from the resignation, retirement, or any
other termination of an executive officer's employment with the Company and its
subsidiaries or from a change in control of the Company or a change in an
executive officer's responsibilities following a change in control.
INDEBTEDNESS OF DIRECTORS AND SENIOR OFFICERS
None of the directors or senior officers of the Company has more than "routine
indebtedness" to the Company.
CERTAIN TRANSACTIONS WITH MANAGEMENT AND PRINCIPAL SHAREHOLDERS
None of the persons who were directors or officers of the Company at any time
during the Company's last financial year, the proposed nominees for election to
the Board of Directors of the Company, the insiders of the Company, or the
associates or affiliates of those persons, has any material interest, direct or
indirect, by way of beneficial ownership of securities or otherwise, in:
(a) any matter to be acted upon at the meeting other than the election of
directors, the approval of incentive stock options or the appointment of
the auditor;
(b) any transaction since the start of the Company's last financial year; or
Page 9 of 13
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Sharon Energy Ltd. Information Circular & Proxy Statement
- ------------------------------------------------------------------------------
(c) any transaction or proposed transaction which has materially affected or
would materially affect the Company or any of its subsidiaries.
REPORT OF THE COMPENSATION COMMITTEE
Under rules established by the U.S. Securities and Exchange Commission (the
"SEC"), the Company is required to provide certain data in regard to the
compensation and benefits provided to the Company's Chairman and Chief
Executive Officer and the other executive officers. The disclosure
requirements for these individuals include a report explaining the rationale
and considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the
Compensation Committee at the direction of the Board of Directors has
prepared the following report for inclusion in this Information Circular.
The Compensation Committee of the Board of Directors consists of Messrs. David
L. Bennington and Robert W. Lamond neither of whom is an employee of the
Company. The Compensation Committee sets and administers the policies that
govern the annual compensation and long-term compensation of executive officers
of the Company. The Compensation Committee makes all decisions concerning
compensation of executive officers and awards of stock options under the
Company's stock option plans.
The Compensation Committee considers on an annual basis whether to pay cash
bonuses or grant stock options to some or all of the Company's employees,
including the Company's executive officers in accordance with the terms of the
Company's Year-end Bonus Plan and/or Incentive Award Plan. Cash bonuses and
stock options are based on the Company's performance as well as the perceived
contributions of individual employees to the Company's performance.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Compensation Committee's executive compensation policies are designed to
provide competitive levels of compensation that relate compensation with the
Company's annual and long-term performance goals, reward above average corporate
performance, recognize individual initiative and achievements, and assist the
Company in attracting and retaining qualified executives. The Compensation
Committee attempts to achieve these objectives through a combination of base
salary, incentive stock options, and cash bonus awards.
BASE SALARY
As a small company, the Company offers its executives and key employees
competitive base salaries. Positions are defined carefully in terms of scope,
responsibility, experience required and other factors. The Compensation
Committee agrees upon salaries, taking into account performance and achievement
of pre-stated objectives for the year. Other exponents of performance are also
taken into consideration. Salaries are reviewed annually and adjusted, if
possible, according to the Company's performance. The last salary increases
were in 1991.
INCENTIVE STOCK OPTIONS
The Incentive Share Option Plan (the "Plan") was approved by shareholders in May
1997 as explained in detail previously. The Compensation Committee may grant
stock options to executive officers, directors, employees, and certain
consultants in adherence with the provisions of the Plan. The Compensation
Committee believes that stock options encourage increased performance by the
Company's employees, including its officers, and align the interests of the
Company's employees with the interest of the Company's shareholders. Decisions
concerning the granting of stock options are made on the same basis as decisions
concerning base salary as discussed in the previous paragraph.
Page 10 of 13
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Sharon Energy Ltd. Information Circular & Proxy Statement
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An amendment to this Plan is contemplated as described under "Other Matters to
be Acted Upon - Increase in Option Shares Available Pursuant to the Plan" on
Page 12 of this Information Circular and the Proxy Statement.
INCENTIVE AWARD PLAN (CASH BONUS AWARDS)
The shareholders of the Company approved an Incentive Award Plan in 1982
authorizing the Compensation Committee of the Board of Directors to consider, on
an annual basis, whether to pay cash bonuses to some or all of the Company's
eligible corporate officers and key employees of Sharon Energy Ltd. and Sharon
Resources, Inc. Cash bonuses are based on the Company's performance was well as
the perceived contributions of individual employees to the Company's
performance. The total amount of incentive awards to be granted are limited to
12% of the consolidated before tax annual profit for each fiscal year-end, as
audited by the Company's independent auditors. The criteria used by the
Compensation Committee for determining incentive awards to eligible executive
officers and key employees are 1) the participant's compensation in relation to
other eligible employees; 2) the level of participant's position in relation to
other eligible employees; and, 3) the evaluation of the employee's performance
and contribution to the success of the Company. With respect to cash bonus
awards for the fiscal year ended March 31, 1998, no awards were granted based
upon an insufficient profit level from continuing operations for the fiscal
period.
YEAR-END BONUS
The Compensation Committee considers on an annual basis whether to pay
year-end bonuses to all of the Company's employees, including the Company's
executive officers. The Compensation Committee may, based upon the financial
condition and prospects of the Company, grant a maximum of one month's salary
as a year-end bonus. No bonuses were paid in December, 1997.
EMPLOYEE ROYALTY POOL
In certain oil and gas exploration projects generated by the Company, the
Company is able to reserve and assign an overriding royalty on production that
results from such prospects to disperse in the form of discretionary incentive
awards to certain executive officers and key employees for exemplary
performance. All of such Company overriding royalty awards are granted solely
at the discretion of the Compensation Committee.
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of the Company's President and Chief Executive Officer is
determined in the same manner as the compensation for other officers and
employees of the Company as described above. As a result, other than with
respect to base salary, the compensation of the Company's Chief Executive
Officer's long-term compensation from stock options also is largely dependent
upon Company performance. During the past fiscal year, the Chief Executive
Officer's base salary did not increase, nor was the Chief Executive officer paid
a cash bonus for the fiscal year ended March 31, 1998.
Compensation Committee of The Board of Directors:
David L. Bennington
Robert W. Lamond
Page 11 of 13
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Sharon Energy Ltd. Information Circular & Proxy Statement
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OTHER MATTERS TO BE ACTED UPON
APPOINTMENT OF AUDITOR
Arthur Andersen & Co. has been the auditor of the Company since February 18,
1980. The management of the Company intends to nominate that firm for
re-appointment. Forms of Proxy given pursuant to the solicitation of the
management of the Company, will, on any poll, be voted as directed and if
there is no direction, for the re-appointment of Arthur Andersen & Co. at a
remuneration to be fixed by the directors.
INCREASE IN OPTION SHARES AVAILABLE PURSUANT TO THE PLAN
As the Company currently has 9,880,800 issued and outstanding common shares and
seeks to issue stock options from time to time as part of executives' and
employees' compensation based on merit and to assist in the further growth of
the Company, the board is of the view that it is appropriate to authorize an
amendment to the Plan to provide that the number of common shares in the capital
of the Company that may be reserved for issuance for all purposes under the Plan
should increase from 1,172,600 common shares to 1,500,000 common shares subject
to adjustment or increase of such number pursuant to the provisions of the Plan.
There are 2,445,000 shares held by insiders, their associates or their
associated companies. Accordingly, the shareholders, other than insiders, their
associates or their associated companies (the "disinterested shareholders", will
be asked at the Meeting to pass a resolution in the following terms:
RESOLVED THAT:
(i) the Company's Incentive Share Option Plan (the "Plan"), approved by
the shareholders on May 8, 1997, be and the same is hereby amended
by deleting the first sentence of section 1.4(a) and replacing it
with the following:
1.4(a) The maximum number of Common Shares which may be
reserved for issuance for all purposes under the Plan shall not
exceed 1,500,000 Common Shares, or such greater number as
may be approved from time to time by the shareholders of the
Company.
(ii) the Plan as so amended, is hereby approved, ratified and con-
firmed; and
(iii) any one director or officer of the company be and he is hereby
authorized and directed to do all such acts and things and to
execute and deliver under the corporate seal or otherwise all
such deeds, documents, instruments and assurances as in his
opinion may be necessary or desirable to carry out and give
effect to the foregoing.
A resolution by disinterested shareholders requires the approval of a simple
majority (50% plus one vote) of the votes cast by those shareholders of the
Company, other than insiders and their associates and associated companies, who,
being entitled to, vote in person or by proxy at a general meeting of the
Company.
Page 12 of 13
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Sharon Energy Ltd. Information Circular & Proxy Statement
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RATIFICATION OF PROCEEDINGS
Shareholders will be asked to approve a resolution to ratify, confirm and
approve all acts, deeds and things done by the proceedings of directors and
officers of the Company on its behalf since the last annual general meeting of
the Company as referred to in the Annual Report and the financial statements to
be presented to the Meeting which accompany this Information Circular/Proxy
Statement, and the section of this Information Circular/Proxy Statement headed
"Interest of Insiders in Material Transactions and Matters to be Acted Upon".
It is not known whether any other matters will come before the Meeting other
than set forth above and in the notice of meeting, but if any other matters do
arise, the persons named in the Proxy intend to vote on any poll, in accordance
with their best judgment, exercising discretionary authority with respect to
amendments or variations of matters raised in the Notice of Meeting and other
matters which may properly come before the meeting or any adjournment.
DATED JULY 30, 1998.
BY THE MANAGEMENT OF SHARON ENERGY LTD.
- ---------------------------------------
JOHN S. STEINHAUSER, PRESIDENT
Page 13 of 13
<PAGE>
SHARON ENERGY LTD.
FORM OF PROXY FOR USE AT THE
ANNUAL GENERAL MEETING TO BE HELD ON SEPTEMBER 3, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF
THE COMPANY.
I am the registered owner of common shares of the capital of Sharon Energy Ltd.
("the Company") and I appoint John S. Steinhauser or, in this person's absence,
David L. Bennington or:
----------------------------------------------
----------------------------------------------
(You may fill in the name of another person you wish to act for you; see note
(a) at the end of this form.)
as my proxy to attend and act for me in respect of all the common shares
registered in my name at the 1998 annual general meeting of the Company to be
held on September 3, 1998, and at any and all adjournments of that meeting.
Without limiting the general powers conferred by this proxy, I direct my proxy
to vote as follows:
(a) VOTE FOR ( )
VOTE AGAINST ( )
a resolution that the shareholders of the Company approve the report
of the directors, the financial statements of the Company for the year
ended March 31, 1998, and the auditor's report on those statements;
(b) VOTE FOR ( )
WITHHOLD FROM VOTING FOR ( )
a resolution that the Company appoints Arthur Andersen & Co. as the
Company's auditor to hold office until the close of the next annual
general meeting and authorizes the directors to fix the remuneration
paid to the auditor;
(c) to fix the number of directors on the Board of Directors at four;
(d) to vote on the election of directors as follows:
VOTE FOR ( ) WITHHOLD FROM VOTING FOR ( )
JOHN S. "JACK" STEINHAUSER
VOTE FOR ( ) WITHHOLD FROM VOTING FOR ( )
DAVID L. BENNINGTON
VOTE FOR ( ) WITHHOLD FROM VOTING FOR ( )
R. W. LAMOND
VOTE FOR ( ) WITHHOLD FROM VOTING FOR ( )
C. A. "TONY" TEARE
(e) VOTE FOR ( )
VOTE AGAINST ( )
a resolution that:
(i) the Company's Incentive Share Option Plan (the "Plan"), approved by
the shareholders on May 8, 1997, be and the same is hereby amended by
deleting the first sentence of section 1.4(a) and replacing it with
the following:
<PAGE>
1.4(a) The maximum number of Common Shares which may be
reserved for issuance for all purposes under the Plan shall not
exceed 1,500,000 Common Shares, or such greater number as
may be approved from time to time by the shareholders of the
Company.
(ii) the Plan as so amended, is hereby approved, ratified and con-
firmed; and
(iii) any one director or officer of the company be and he is hereby
authorized and directed to do all such acts and things and to
execute and deliver under the corporate seal or otherwise all
such deeds, documents, instruments and assurances as in his
opinion may be necessary or desirable to carry out and give
effect to the foregoing.
(f) VOTE FOR ( )
VOTE AGAINST ( )
a resolution to ratify, confirm and approve all acts, deeds and things
done by the proceedings of directors and officers of the Company on
its behalf since the last annual general meeting of the Company as
referred to in the Annual Report and the financial statements to be
presented to the meeting.
IF I HAVE NOT SPECIFIED THAT MY PROXY VOTE IN A PARTICULAR WAY, THEN I DIRECT MY
PROXY TO VOTE IN FAVOUR OF EACH RESOLUTION AND TO VOTE FOR THE NAMED AUDITOR AND
THE NOMINATED DIRECTORS.
I AUTHORIZE MY PROXY TO ACT FOR ME AND TO VOTE AS HE OR SHE SEES FIT ON ANY
MATTER WHICH MAY PROPERLY COME BEFORE THE MEETING.
I revoke any proxy previously given by me for use at the annual general meeting
of the Company.
Date: ___________________________________
Signature: ______________________________
PLEASE PRINT:
Name: _______________________________
Address: ____________________________
NOTES TO SHAREHOLDER COMPLETING THIS FORM:
(a) YOU HAVE THE RIGHT TO APPOINT ANY PERSON (WHO NEED NOT BE A SHAREHOLDER)
OTHER THAN THE PERSON DESIGNATED IN THIS FORM TO ATTEND AND ACT FOR YOU AT
THE MEETING. IF YOU WISH TO EXERCISE THIS RIGHT, YOU SHOULD STRIKE OUT THE
NAMES PRINTED ON THIS PROXY AND INSERT THE NAME OF THE PERSON YOU WISH TO
ACT FOR YOU AT THE MEETING.
(b) IF YOU GIVE A PROXY AND THE INSTRUCTIONS IN IT ARE CERTAIN, THEN THE SHARES
REPRESENTED BY THE PROXY WILL BE VOTED ON ANY POLL, AND WHERE YOU SPECIFY A
CHOICE WITH RESPECT TO ANY MATTER TO BE ACTED ON, THE SHARES WILL BE VOTED
ON ANY POLL ACCORDINGLY.
(c) YOU OR YOUR ATTORNEY AUTHORIZED IN WRITING MUST DATE AND SIGN THIS PROXY.
(d) IF YOU ARE A CORPORATION, YOU MUST EXECUTE THIS PROXY UNDER SEAL OR BY AN
OFFICER OR ATTORNEY AUTHORIZED IN WRITING.
(e) THIS PROXY IS VALID FOR ONE YEAR FROM ITS DATE.
(f) YOU MUST DEPOSIT THIS PROXY WITH MONTREAL TRUST COMPANY OF CANADA AT 510
BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, V6C 3B9 BEFORE THE CLOSE OF
BUSINESS ON SEPTEMBER 1, 1998 OR WITH THE PRESIDING OFFICER OF THE ANNUAL
GENERAL MEETING BEFORE THE COMMENCEMENT OF THE MEETING.
<PAGE>
TO: SHARON ENERGY LTD.
I hereby request that I be placed on Sharon
Energy Ltd.'s supplemental mailing list for
the delivery of interim financial statements.
I am an owner of securities of Sharon Energy
Ltd.
- ----------------------------
Signature SHARON ENERGY LTD.
C/O MONTREAL TRUST COMPANY OF CANADA
- ---------------------------- 510 BURRARD STREET
Printed Name VANCOUVER, B. C. CANADA
V6C 3B9
- ----------------------------
Address
- ----------------------------
- ----------------------------
