<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
AER Energy Resources, Inc.
- --------------------------------------------------------------------------------
(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> 2
(AER ENERGY LOGO)
March 4, 1999
Dear Shareholder:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
of AER Energy Resources, Inc. on Wednesday, April 7, 1999, at 11:00 a.m., local
time, at the Sheraton Buckhead Hotel, 3405 Lenox Road, NE, Atlanta, Georgia
30326.
The items of business to be acted on during the meeting include the
election of six Directors and the authorization of a reverse stock split (any
split falling within a range between and including a 1-for-2 and a 1-for-5
reverse stock split) of the Company's Common Stock, depending upon a
determination by the Board that such a reverse stock split is in the best
interest of the Company and its shareholders. The accompanying proxy statement
contains details on these items. At the meeting, we will also review the major
developments of 1998.
Your participation in the affairs of the Company is important, regardless
of the number of shares you hold. To ensure your representation at the meeting
whether or not you are able to be present, please complete and return the
enclosed proxy card as soon as possible. If you do attend the meeting, you may
revoke your proxy and vote in person if you so desire.
I look forward to seeing you on April 7. Thank you for your continuing
interest in the Company.
Sincerely yours,
/s/ DAVID W. DORHEIM
DAVID W. DORHEIM
President and Chief Executive Officer
AER Energy Resources, Inc.
<PAGE> 3
AER ENERGY RESOURCES, INC.
4600 HIGHLANDS PARKWAY
SUITE G
SMYRNA, GEORGIA 30082
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 7, 1999
To the Shareholders of AER Energy Resources, Inc.:
The Annual Meeting of Shareholders of AER Energy Resources, Inc. (the
"Company") will be held at the Sheraton Buckhead Hotel, 3405 Lenox Road, NE,
Atlanta, Georgia 30326, on Wednesday, April 7, 1999, at 11:00 a.m., local time,
for the following purposes:
1. To elect six Directors.
2. To authorize the Board of Directors to effect a reverse stock split
(any split falling within a range between and including a 1-for-2
and a 1-for-5 reverse stock split) of the Company's Common Stock.
3. To transact such other business as may properly come before the
meeting.
February 22, 1999 is the record date for the determination of shareholders
entitled to notice of and to vote at such meeting or any adjournment thereof.
Only shareholders of record at the close of business on that date are entitled
to notice of and to vote at the meeting.
Whether or not you expect to be present in person at the meeting, please
sign and date the accompanying proxy and return it promptly to our transfer
agent in the enclosed postage-paid reply envelope. This will assist us in
preparing for the meeting.
By Order of the Board of Directors
/s/ J.T. MOORE
J. T. MOORE
Vice President -- Chief Financial
Officer, Secretary and Treasurer
March 4, 1999
SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN THE
UNITED STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY BECAUSE HE OR SHE
OWNS SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR COOPERATION WILL BE APPRECIATED. YOUR PROXY WILL BE
VOTED WITH RESPECT TO THE MATTERS IDENTIFIED THEREON IN ACCORDANCE WITH ANY
SPECIFICATIONS ON THE PROXY.
<PAGE> 4
AER ENERGY RESOURCES, INC.
4600 HIGHLANDS PARKWAY
SUITE G
SMYRNA, GEORGIA 30082
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 7, 1999
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of AER Energy Resources, Inc. (the "Company")
to be used at the Annual Meeting of Shareholders (the "Annual Meeting") of the
Company to be held at the Sheraton Buckhead Hotel, 3405 Lenox Road, NE, Atlanta,
Georgia 30326, at 11:00 a.m., local time, on April 7, 1999, and any adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual Meeting
of Shareholders. A copy of the Company's Annual Report to Shareholders for the
fiscal year ended December 31, 1998 is enclosed. This Proxy Statement and
accompanying form of proxy and the Company's 1998 Annual Report to Shareholders
were first sent or given to shareholders on or about March 4, 1999.
SOLICITATION OF PROXIES
This proxy solicitation will be conducted principally by mail, and the cost
will be paid by the Company. Proxies may also be solicited by officers and
regular employees of the Company personally or by telephone, but such persons
will not be specifically compensated for such services. Banks, brokers, nominees
and other custodians and fiduciaries will be requested to forward proxy
solicitation material to their principals and customers where appropriate, and
the Company will reimburse such banks, brokers, nominees, custodians and
fiduciaries for their reasonable out-of-pocket expenses in sending the proxy
material to beneficial owners of the shares.
ACTIONS TO BE TAKEN UNDER THE PROXY
In voting on the election of Directors (Proposal 1), shareholders may vote
in favor of all nominees or withhold their votes as to some or all nominees. In
voting to amend the Company's Articles of Incorporation to effect a reverse
stock split of the Company's Common Stock (Proposal 2), shareholders may vote
FOR, AGAINST, or ABSTAIN with respect to the proposal. Unless other instructions
are indicated on the proxy card, all properly executed proxies received by the
Company will be voted FOR Proposal 1, the election of all the nominees for
Director set forth below under "Election of Directors" and FOR Proposal 2, to
amend the Company's Articles of Incorporation to effect a reverse stock split of
the Company's Common Stock. Some proxies may be broker non-votes (marked to
indicate that the shares are not being voted on either or both proposals).
The presence, in person or by proxy, of at least a majority of the total
number of outstanding shares is necessary to constitute a quorum at the Annual
Meeting. Any proxy authorized to be voted at the Annual Meeting on any matter
(including on routine matters pursuant to the discretionary authority granted in
management's proxy), whether or not the proxy is marked to withhold authority or
abstain or to effect a broker non-vote on any proposal, will be counted in
establishing a quorum.
The election of Directors will require the affirmative vote of a plurality
of the shares voted at the Annual Meeting in person or by proxy. Votes withheld
and broker non-votes will not be included in vote totals for Director nominees
and will have no effect on the outcome of the vote. Approval of Proposal 2 will
require the affirmative vote of a majority of the outstanding Common Stock of
the Company. Abstentions and broker non-votes will have the effect of a vote
against Proposal 2.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by giving written notice of revocation, or a duly executed proxy
bearing a later date, to the Secretary of the Company. In order to be effective,
such notice or later dated proxy must be received by the Company prior to the
exercise of the earlier proxy. A shareholder may attend the Annual Meeting,
revoke his proxy and vote in person.
1
<PAGE> 5
VOTING SECURITIES
Only holders of record as of the close of business on February 22, 1999 of
the Company's Common Stock, no par value ("AER Common Stock"), are entitled to
vote at the Annual Meeting. On that date, there were 24,862,263 shares of AER
Common Stock outstanding, each entitled to one vote.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of February 22, 1999, certain
information with respect to the only persons known by the Company to be the
beneficial owners, as determined pursuant to Rule 13d-3 ("Rule 13d-3")
promulgated by the Securities and Exchange Commission ("SEC"), of more than 5%
of the outstanding AER Common Stock. Except as otherwise indicated, the holders
listed below have sole voting and investment power with respect to all shares
beneficially owned by them. The following table is based in part upon
information from SEC Schedule 13Ds and 13Gs furnished to the Company.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------------------------ -------------------- ------------
<S> <C> <C>
Jon A. Lindseth(1).......................................... 6,599,645 26.5%
12651 Elmwood Avenue
Cleveland, OH 44111
Jon A. Lindseth, Trustee under Jon A. Lindseth Trust........ 6,469,645 26.0%
Agreement dated April 25, 1986, as modified(1)
12651 Elmwood Avenue
Cleveland, OH 44111
AER Partners(1)............................................. 3,189,915 12.8%
12651 Elmwood Avenue
Cleveland, OH 44111
Elmwood Partners II(1)...................................... 3,158,500 12.7%
12651 Elmwood Avenue
Cleveland, OH 44111
Odyssey Partners, L.P.(2)................................... 2,177,055 8.8%
31 West 52nd Street
New York, NY 10019
Keystone, Inc.(3)........................................... 1,095,500 4.4%
201 Main Street, Suite 3100
Fort Worth, TX 76102
FW AER Partners L.P.(3)..................................... 2,419,158 9.4%
201 Main Street, Suite 3100
Fort Worth, TX 76102
</TABLE>
- ---------------
(1) The Jon A. Lindseth Trust Agreement dated April 25, 1986, as modified (the
"Trust"), is a revocable trust created to manage and invest certain assets
for the benefit of Mr. Lindseth. The Trust's 26.0% interest in AER Common
Stock is owned indirectly through the Trust's 50% ownership interests in AER
Partners and Elmwood Partners II and 30% ownership interest in Battery
Partners. Elmwood Partners II and AER Partners are investment partnerships
that are composed of substantially the same partners. Battery Partners is a
partnership which owns 121,230 shares or 0.5% of the outstanding AER Common
Stock. Each of these entities is controlled by Mr. Lindseth. Mr. Lindseth
claims beneficial ownership of all shares of AER Common Stock indirectly
owned by the Trust. Mr. Lindseth also controls The Kindt-Collins Company
("Kindt-Collins") which owns 100,000 shares of AER Common Stock. Mr.
Lindseth's adult children and their spouses together hold approximately a
15% interest in each of AER Partners, Elmwood Partners II and Kindt-Collins
and a 26% interest in Battery Partners. Mr. Lindseth disclaims
2
<PAGE> 6
beneficial ownership of the interest of his children and their spouses in
AER Partners, Elmwood Partners II, Kindt-Collins and Battery Partners.
Giving effect to the shares owned by AER Partners, Elmwood Partners II,
Kindt-Collins and Battery Partners, Mr. Lindseth and his wife currently
control approximately 26.5% of the outstanding AER Common Stock.
(2) Messrs. Stephen Berger, Leon Levy, Jack Nash, Joshua Nash and Brian Wruble,
by virtue of being general partners of Odyssey Partners, L.P., a
privately-held investment partnership ("Odyssey"), may be deemed to
beneficially own the shares of AER Common Stock owned by Odyssey. Each of
such partners disclaims any such beneficial ownership (within the meaning of
Rule 13d-3) which exceeds the proportionate interest in the AER Common Stock
which he may be deemed to own as a general partner of Odyssey. No other
persons exercise (or may be deemed to exercise) any voting or investment
power over the shares of AER Common Stock owned by Odyssey.
(3) Shares reported as beneficially held by Keystone, Inc. ("Keystone") include
1,000,000 shares held by Keystone; 77,500 shares held jointly by David G.
Brown, Vice President of and Consultant to Keystone and his spouse, Maureen
Brown; and 18,000 shares held by Mark A. Wolfson, Vice President of and
Consultant to Keystone. Robert M. Bass as President and sole director of
Keystone may, pursuant to Rule 13d-3, be deemed to be the beneficial owner
of the 1,000,000 shares of AER Common Stock owned by Keystone. In May 1996,
FW AER Partners L.P. ("FW Partners") acquired 1,584,158 shares plus warrants
to purchase an additional 835,000 shares. Group 31, Inc. as sole general
partner of FW Partners and J. Taylor Crandall as President of Group 31 may,
pursuant to Rule 13d-3, be deemed to be the beneficial owner of the
1,584,158 shares of AER Common Stock and warrants to purchase an additional
835,000 shares of AER Common Stock owned by FW Partners. The above
individuals, together with Keystone, FW Partners and Group 31 jointly filed
a Schedule 13D reporting the acquisition of an aggregate of 3,514,658 shares
of AER Common Stock because they may be deemed to constitute a "group"
within the meaning of Rule 13d-3. The Schedule 13D filing did not include
14,750 shares received subsequent to the filing by David G. Brown pursuant
to the Company's 1993 Non-Employee Directors' Restricted Stock Award Plan.
3
<PAGE> 7
Security Ownership of Directors and Management
The following table sets forth, as of February 22, 1999, certain
information concerning the beneficial ownership, as defined in Rule 13d-3, of
shares of AER Common Stock by the Directors, the Named Executive Officers (as
defined below), and all executive officers and Directors as a group. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares beneficially owned by them.
<TABLE>
<CAPTION>
SHARES OF AER PERCENTAGE OF
COMMON STOCK COMMON STOCK
NAME POSITION BENEFICIALLY OWNED OUTSTANDING
- ---- -------- ------------------ -------------
<S> <C> <C> <C>
Jon A. Lindseth............... Chairman of the Board 6,599,645(1)(2) 26.5%
David W. Dorheim.............. Director, President and Chief 239,110(3) *
Executive Officer
David G. Brown................ Director 92,250(2)(4) *
James W. Dixon................ Director 29,250(2) *
William L. Jackson............ Director 35,250(2) *
H. Douglas Johns.............. Director 63,500(2)(4) *
John L. Wilkes................ Director 44,250(2)(5) *
R. Dennis Bentz............... Vice President -- Product and 163,260(3) *
Process Development
Frank M. Harris............... Vice President -- Marketing 162,710(3) *
and Licensing
J. T. Moore................... Vice President -- Chief -- *
Financial Officer, Secretary
and Treasurer
Lawrence A. Tinker............ Vice President -- Advanced 130,372(3) *
Technology
All executive officers and
Directors as a group
(11 persons)................
7,559,597(6) 29.8%
</TABLE>
- ---------------
* Less than 1.0%
(1) Includes 3,189,915 shares held by AER Partners, 3,158,500 shares held by
Elmwood Partners II, 121,230 shares held by Battery Partners and 100,000
shares held by Kindt-Collins.
(2) Includes shares awarded pursuant to the Company's 1993 Non-Employee
Directors' Restricted Stock Award Plan, which are subject to restrictions on
transfer that lapse over five years.
(3) Includes 78,750, 56,250 and 56,250 shares subject to options which are
exercisable immediately at $0.89 per share held by Messrs. Dorheim, Bentz
and Harris, respectively, and 108,000, 54,000 and 54,000 shares subject to
options immediately exercisable at $3.19 per share held by Messrs. Dorheim,
Bentz and Harris, respectively. Also includes 32,625 and 74,000 shares
subject to immediately exercisable options held by Dr. Tinker at $1.89 and
$3.19 per share, respectively.
(4) Includes 77,500 shares held jointly by Mr. Brown and his spouse.
(5) Includes 25,000 shares subject to an option which is immediately exercisable
at $2.125 per share.
(6) Includes a total of 538,875 shares subject to options.
PROPOSAL 1
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, six Directors will be elected to
serve for a term of one year and until their successors are elected and
qualified. It is the intention of the persons named in the accompanying proxy to
vote for the election of the nominees identified below. Should any nominee be
unable or fail to accept nomination or election, which is not anticipated, it is
the intention of the persons named in the proxy, unless
4
<PAGE> 8
otherwise instructed in the proxy, to vote for the election in his stead of such
other person as management may recommend.
The following table sets forth certain information concerning persons
nominated as Directors.
<TABLE>
<CAPTION>
POSITION WITH COMPANY DIRECTOR OF
NAME AGE AND PRINCIPAL OCCUPATION COMPANY SINCE
- ---- --- ------------------------ -------------
<S> <C> <C> <C>
Jon A. Lindseth.......... 64 Chairman of the Board. Chairman of Kindt-Collins 1989
(foundry supply company)
David W. Dorheim......... 49 Director, President and Chief Executive Officer 1989
David G. Brown........... 42 Director. Vice President of Keystone; limited partner of 1996
FW Partners; principal of Arbor Investors, LLC (all
are investment companies). Mr. Brown also serves on
the Board of Directors of Bell & Howell Company.
James W. Dixon........... 51 Director. Chief Executive Officer of Broadreach 1997
Consulting, Inc. (formerly The Reohr Group) (internet
professional services company). Mr. Dixon also serves
on the Board of Directors of US Data, Inc.
William L. Jackson....... 72 Director. Retired Chairman of Tupperware, Inc. (consumer 1993
product manufacturer)
John L. Wilkes........... 73 Director. Retired Senior Vice President of Technology 1993
Worldwide of Duracell Battery Company (battery
manufacturer)
</TABLE>
Each nominee for Director has been principally employed in his present
capacity or a similar capacity with the same organization for at least the last
five years except as follows. From 1988 to 1996, Mr. Dixon served as Chairman
and Chief Executive Officer of CompuCom Systems, Inc., a national computer
reseller and services company.
Mr. H. Douglas Johns has decided not to stand for re-election at the Annual
Meeting for personal reasons. The Board of Directors has not nominated a
replacement for Mr. Johns and instead has fixed the number of members of the
Board at six for the 1999 term.
Each of the Company's directors serves for a one-year term and until his
successor is elected and qualified or until his earlier death, resignation or
removal.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors met nine times during 1998 and each Director
attended at least 75% of such meetings. During 1998, each Director serving on a
committee of the Board attended at least 75% of the meetings of each committee
on which such Director served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit and Compensation Committees,
which are composed of three members. The Board of Directors does not have a
nominating committee.
The Audit Committee, composed of Messrs. Lindseth, Jackson and Wilkes, met
one time in 1998. The functions of the Audit Committee are to recommend to the
Board each year the accounting firm to be retained as the Company's independent
auditors, consider the fee arrangement and scope of the audit, review the
financial statements and the independent auditors' report and the accompanying
management letter, and consult with the independent auditors with regard to the
adequacy of the Company's overall accounting and financial controls.
5
<PAGE> 9
The Compensation Committee, composed of Messrs. Lindseth, Brown, and
Jackson, met one time in 1998. The purpose of the Compensation Committee is to
approve compensation policies and programs for the Company's employees and
executive officers and to grant options to employees and executive officers
under the Company's 1992 Stock Option Plan (the "Stock Option Plan").
SHAREHOLDER VOTE
The election of the six nominees named above will require the affirmative
vote of the holders of a plurality of the shares of AER Common Stock voted at
the Annual Meeting, assuming a quorum is present. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE SIX NOMINEES NAMED ABOVE.
EXECUTIVE COMPENSATION
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors of
the Company is composed of Directors who are not employees of the Company. The
Board of Directors has delegated to the Committee the authority:
1. To determine the compensation of David W. Dorheim, President and
Chief Executive Officer of the Company.
2. To approve, upon recommendation by Mr. Dorheim, the compensation
arrangements of executive officers of the Company, other than Mr. Dorheim,
including the executive officers named in the Summary Compensation Table
below.
3. To grant options to employees of the Company under the Stock Option
Plan and to carry out the duties and responsibilities of the Board of
Directors with respect to the Company's incentive plans.
Compensation Policies
The Company's compensation policies for executive officers are designed to
provide competitive levels of compensation allowing the Company to attract and
retain highly qualified executive officers whose contributions are essential to
the success of the Company. The Committee approves salary increases of executive
officers. The Company's compensation policies for executive officers have two
principal components: (1) a significant portion of an individual executive
officer's compensation depends on the performance of the individual, and (2)
compensation in the form of stock options is contingent upon continued
employment of the executive officer over a specified period of time because
options typically vest 20% per year. The Committee believes that ownership of
the Company's stock by its executive officers is important, and the Company's
compensation policies and plans are designed to encourage such stock ownership.
Specific information concerning the implementation of these policies in
connection with the compensation of Mr. Dorheim and the other executive officers
is provided below.
Annual Salaries
The annual salaries of executive officers are fixed initially at amounts
that are deemed sufficient to induce them to accept employment with the Company.
Salaries of executive officers are reviewed annually, and increases, if any, are
made based on the individual's and the Company's performance. To the extent any
salary increases have been granted, they have been based on a subjective
evaluation of the performance of the recipient.
The Company currently intends that all compensation paid to executive
officers shall qualify for deductibility under Section 162(m) of the Internal
Revenue Code (the "Code"), which provides that compensation paid to certain
executive officers of public corporations in excess of $1,000,000 per year is
not deductible for federal income tax purposes.
6
<PAGE> 10
Payment of Bonuses
No bonuses were paid in 1998 to the executive officers.
Compensation of Chief Executive Officer
Using the criteria discussed above and in recognition of his efforts in
implementing a new corporate strategy, reducing the Company's losses and the
execution of a license agreement, Mr. Dorheim's salary was set at $231,846 for
1998, an increase of approximately $9,585 (4%) over the prior year. Pursuant to
an understanding between the Company and Mr. Dorheim when he was hired in 1989,
Mr. Dorheim receives a $6,000 per year automobile allowance. In addition, 50% of
the principal of and accrued interest under a note from Mr. Dorheim to the
Company for the purchase of AER Common Stock were forgiven pursuant to terms of
the note, as amended. This reduction in note principal and related accrued
interest and reimbursement of related income taxes resulted in $18,568 in
additional compensation to Mr. Dorheim for 1998.
Stock Options
Under the Stock Option Plan, the Committee has awarded to executive
officers options to purchase AER Common Stock. The options become exercisable at
20% per year following the date of grant. The options are exercisable for ten
years and were originally priced at 100% of the fair market value of the AER
Common Stock at the date of grant. The options were repriced effective March 22,
1996 to the closing market price on that date. In connection with the repricing,
each option holder agreed that each of the repriced options could not be
exercised for a period of one year. Options granted have not had performance
contingencies, but the 20% annual vesting encourages executive officers to
remain employed by the Company, and the value of the options depends on
increases in the market value of AER Common Stock. Certain stock options were
granted to certain executive officers prior to the implementation of the Stock
Option Plan which have provisions similar to those described above, except the
options became fully vested upon the Company's public offering in 1993.
Submitted by the Compensation Committee of the Board of Directors.
JON A. LINDSETH
DAVID G. BROWN
WILLIAM L. JACKSON
7
<PAGE> 11
EXECUTIVE COMPENSATION
Compensation Summary. The following table shows, for the last three fiscal
years of the Company, annual compensation paid or awarded by the Company to the
President and Chief Executive Officer and each of the four highest compensated
executive officers of the Company (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION NUMBER OF
---------------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(2)
- --------------------------- ---- --------- -------- --------------- -------------
<S> <C> <C> <C> <C> <C>
David W. Dorheim.................... 1998 231,846 -- 6,000(3)/18,568(4) --
President and Chief 1997 222,261 45,000 6,000(3)/18,568(4) --
Executive Officer 1996 209,475 15,000 6,000(3) 160,000(5)
R. Dennis Bentz..................... 1998 150,840 -- 18,568(4) --
Vice President -- Product 1997 143,597 15,000 18,568(4) --
and Process Development 1996 133,897 7,500 -- 80,000(5)
Frank M. Harris..................... 1998 150,840 -- 18,568(4) --
Vice President -- 1997 143,597 15,000 18,568(4) --
Marketing and Licensing 1996 133,897 7,500 -- 80,000(5)
J. T. Moore......................... 1998 35,397(6) -- -- --
Vice President -- 1997 -- -- -- --
Chief Financial Officer, 1996 -- -- -- --
Secretary and Treasurer
Lawrence A. Tinker.................. 1998 133,452 -- 16,917(4) --
Vice President -- 1997 127,044 15,000 16,917(4) --
Advanced Technology 1996 118,462 7,500 -- 100,000(5)
</TABLE>
- ---------------
(1) The Company does not maintain a "long-term incentive plan," as defined by
rules of the SEC, and has not made any awards of stock appreciation rights
("SARs").
(2) Includes options issued pursuant to the Stock Option Plan.
(3) Automobile allowance.
(4) Consists of the forgiveness of notes receivable and related interest and the
reimbursement of related income taxes.
(5) Consists of stock options repriced during 1996.
(6) Mr. Moore was hired in September 1998. His annual salary is currently
$110,000.
OPTION GRANTS IN 1998
There were no options granted to the Named Executive Officers during 1998.
8
<PAGE> 12
EXERCISES OF OPTIONS IN 1998 AND AGGREGATE YEAR-END OPTION VALUES
Shown below is information with respect to the year-end values of all
options held by the Named Executive Officers. No Named Executive Officer
exercised any options in 1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
SHARES OPTIONS AT MONEY OPTIONS AT
ACQUIRED FY-END(#) FY-END($)(1)
ON EXERCISE VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- -------------- -------------------
<S> <C> <C> <C> <C>
David W. Dorheim........................ N/A N/A 186,750/52,000 0/0
R. Dennis Bentz......................... N/A N/A 110,250/26,000 0/0
Frank M. Harris......................... N/A N/A 110,250/26,000 0/0
J. T. Moore............................. N/A N/A 0/0 0/0
Lawrence A. Tinker...................... N/A N/A 106,625/26,000 0/0
</TABLE>
- ---------------
(1) Equal to the net value of the option as of December 31, 1998, i.e., the
closing market price of $0.75 per share of AER Common Stock on December 31,
1998, less the applicable per share exercise price of the option, multiplied
by the number of shares subject to the option.
LONG-TERM INCENTIVE PLAN AWARDS IN 1998
The Company has no "long-term incentive plan" as defined in the SEC's proxy
statement disclosure rules.
PENSION PLAN
The Company has no defined benefit or actuarial plan.
DIRECTOR COMPENSATION
The Company historically has paid no cash compensation to its Directors,
except reimbursement for reasonable expenses. In 1993, the Board of Directors
adopted the Company's 1993 Non-Employee Directors' Restricted Stock Award Plan
(the "Restricted Stock Plan"), pursuant to which non-employee directors were
granted restricted stock awards. The Restricted Stock Plan was approved by the
Company's shareholders at the Company's 1994 Annual Meeting of Shareholders.
Under the Restricted Stock Plan, every five years each non-employee director
receives a restricted stock award covering 15,000 shares of AER Common Stock.
Restrictions on such shares lapse 20% per year for each year the non-employee
director serves on the Board of Directors. Awards are pro-rated for non-employee
directors selected between annual meetings of the shareholders. As of February
22, 1999, 167,750 shares had been awarded pursuant to the Restricted Stock Plan.
9
<PAGE> 13
PERFORMANCE MEASUREMENT COMPARISON
The following chart shows total shareholder returns for the periods
indicated for each of (i) AER Common Stock, (ii) the Nasdaq Stock Market-U.S.
Index, and (iii) the Hambrecht & Quist Growth Index (a subset of the Hambrecht &
Quist Technology Index).
COMPARISON OF SIXTY MONTH CUMULATIVE TOTAL RETURN ON
INVESTMENT AMONG AER ENERGY RESOURCES, INC., THE NASDAQ STOCK MARKET
U.S. INDEX AND THE HAMBRECHT & QUIST GROWTH INDEX
(PERFORMANCE COMPARISON GRAPH)
<TABLE>
<CAPTION>
NASDAQ
AER ENERGY STOCK HAMBRECHT &
MEASUREMENT PERIOD RESOURCES, MARKET-U.S. QUIST GROWTH
(FISCAL YEAR COVERED) INC. INDEX INDEX
<S> <C> <C> <C>
12/31/93 100.00 100.00 100.00
12/31/94 43.90 97.75 103.28
12/31/95 28.10 138.26 172.37
12/31/96 21.37 170.01 180.41
12/31/97 11.02 208.58 185.30
12/31/98 7.32 293.21 268.78
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Effective May 7, 1993, the Board of Directors established a Compensation
Committee of which no executive officers or former executive officers are or
have been members.
Mr. Lindseth is Chairman of the Board and founder of the Company. Prior to
the Company's initial public offering in 1993, entities controlled by Mr.
Lindseth, which consist of Kindt-Collins, Battery Partners, Elmwood Partners II
and AER Partners (the "Lindseth Entities"), purchased or acquired at various
times since the Company's inception an aggregate of 5,169,645 shares of AER
Common Stock for a total cost of $7,186,979. These shares were purchased at the
same prices and on the same terms as AER Common Stock purchased by other
shareholders at the same times. Kindt-Collins purchased an additional 100,000
shares of AER Common Stock in the Company's initial public offering in July
1993. Elmwood Partners II purchased an additional 350,000 shares of AER Common
Stock in the Company's public offering in November 1994. In December 1994,
Kindt-Collins distributed 800,000 shares of AER Common Stock to its shareholders
as a dividend. In January 1995, the 800,000 shares were subsequently contributed
by the shareholders, who are also the partners of Elmwood Partners II, to
Elmwood Partners II. In October 1995, Mr. Lindseth transferred his
10
<PAGE> 14
interests in Battery Partners, Elmwood Partners II and AER Partners to Jon A.
Lindseth, Trustee under Jon A. Lindseth Trust Agreement dated April 25, 1986, as
modified. In February 1996, Kindt-Collins sold to Elmwood Partners II 1,058,500
shares of AER Common Stock acquired prior to the Company's initial public
offering for a total cost of $1,998,500 or approximately $1.89 per share. In
February 1996, Elmwood Partners II purchased 950,000 shares of AER Common Stock
in the public market.
CERTAIN TRANSACTIONS
The Company is party to a 1989 License Agreement (the "DEMI License") with
Dreisbach Electromotive, Inc. ("DEMI") and Mike Cheiky, a founder of DEMI, its
former principal inventor and a former director of DEMI. During 1996, 1997 and
1998, respectively, the Company paid $150,000 $100,000 and $100,000 in royalty
payments to DEMI under the DEMI License. Minimum royalties are $50,000 for 1999,
with no minimum royalties thereafter. DEMI has also agreed to the terms of a
proposed original equipment manufacturer ("OEM") air manager license agreement
to be entered into by the Company and any OEMs licensing the air manager system.
The DEMI License basically provides for royalties of 4% payable to DEMI on net
sales of zinc-air batteries incorporating DEMI's technology made by the Company
or its sublicensees. The OEM air manager license basically provides that 4% of
the royalties the Company receives from sublicensing the air manager system will
be payable to DEMI.
Mr. Dorheim is a director of DEMI. At the time the DEMI License was
executed, all of the shareholders of DEMI were shareholders in the Company. The
Company is unable to determine how many DEMI shareholders (other than the
Lindseth Entities) currently own AER Common Stock. As of December 31, 1998, the
Lindseth Entities owned approximately 13% of the stock of DEMI.
Messrs. Dorheim, Harris, Bentz and Tinker, all current executive officers
of the Company, acquired a total of 156,375 shares of AER Common Stock in
exchange for a total of $160,375 in cash and promissory notes when they began
employment. In December 1994, the notes were amended to include full recourse
against the borrowers in the event of nonpayment and to add a provision whereby
the Company would forgive the entire indebtedness contingent on the continued
employment of each such employee. On each of December 1, 1997 and 1998, pursuant
to the forgiveness provisions, an aggregate of $41,912 of outstanding principal
and related interest were forgiven and recorded as compensation expense. In
addition, in each year, the Company reimbursed Messrs. Dorheim, Harris, Bentz
and Tinker for income taxes related to the additional compensation in the
aggregate amount of $31,760.
PROPOSAL 2
AUTHORIZE THE BOARD OF DIRECTORS TO EFFECT A REVERSE STOCK SPLIT (ANY SPLIT
FALLING WITHIN AND INCLUDING A 1-FOR-2 AND A 1-FOR-5 REVERSE STOCK SPLIT) OF THE
COMPANY'S OUTSTANDING COMMON STOCK
On February 2, 1999, the Board of Directors, by unanimous vote, authorized
and recommended that the Company's shareholders approve a proposal to effect a
reverse stock split (any split falling within a range between and including a
1-for-2 and a 1-for-5 reverse stock split) (the "Reverse Stock Split") of AER
Common Stock that may be effected by the Board depending on market conditions.
Pursuant to the Reverse Stock Split as appropriate, each two to five of the
outstanding shares of AER Common Stock on the date of the Reverse Stock Split
(the "Old Shares") will be automatically converted into one share of AER Common
Stock (the "New Shares"). The Reverse Stock Split will not alter the number of
shares of AER Common Stock authorized for issuance, but will simply reduce the
number of shares of AER Common Stock issued and outstanding. The Reverse Stock
Split, if authorized by the shareholders, will be effected only upon a
determination by the Board that the Reverse Stock Split is in the best interest
of the Company and its shareholders and thereupon the Board will select at its
discretion the ratio of the Reverse Stock Split which will fall within a range
between and including a 1-for-2 and a 1-for-5 reverse stock split. The Reverse
Stock Split will become effective upon filing of Articles of Amendment (the
"Articles of Amendment") to the Company's Articles of Incorporation with the
Georgia Secretary of State, and the Board of Directors reserves
11
<PAGE> 15
the right not to make such filing if it deems it appropriate not to do so. The
form of Articles of Amendment to effect the Reverse Stock Split is attached as
Exhibit A hereto.
PURPOSE AND EFFECT OF PROPOSED REVERSE STOCK SPLIT
The Board believes the Reverse Stock Split is desirable because it will
assist the Company in continuing to meet the requirements for continued listing
on the Nasdaq Stock Market's National Market or Small Cap Market ("Nasdaq") by
helping to raise the trading price of AER Common Stock. One of the key
requirements for continued listing on Nasdaq is that AER Common Stock must
maintain a minimum bid price above $1.00 per share. The Company was notified on
September 3, 1998 by Nasdaq that it was not in compliance with the listing rules
because the closing minimum bid price per share of AER Common Stock had remained
below $1.00 for 30 consecutive trading days. On November 30, 1998, the Company
formally requested an oral hearing before the Nasdaq Hearings Department. On
February 4, 1999, the Company appeared at a hearing before a Nasdaq Review Panel
to present its business case and to disclose the Company's intention to effect a
reverse stock split at its April 7, 1999 Annual Meeting of Shareholders in order
to meet the minimum bid price requirement for continued listing on Nasdaq.
Questions were raised by the Nasdaq Review Panel concerning the Company's net
tangible assets. In response to these questions, the Company prepared a plan and
submitted it to Nasdaq on February 12, 1999, showing the projected net tangible
assets for the Company throughout the coming twelve months. The Company is
awaiting a decision from the Nasdaq Review Panel. There is no assurance that the
Nasdaq Review Panel's ruling will result in the Company's continued listing on
the Nasdaq National Market.
The effect of the Reverse Stock Split upon the market price for AER Common
Stock cannot be predicted. There can be no assurance that the market price per
New Share of AER Common Stock after the Reverse Stock Split will rise in
proportion to the reduction in the number of Old Shares of AER Common Stock
outstanding resulting from the Reverse Stock Split, or that such price will
either exceed or remain in excess of the $1.00 minimum bid price as required by
Nasdaq. The market price of AER Common Stock may also be based on Company
performance and other factors, some of which may be unrelated to the number of
shares outstanding.
The Reverse Stock Split will affect all shareholders uniformly and will not
affect any shareholder's percentage ownership interests in the Company or
proportionate voting power, except to the extent that the Reverse Stock Split
results in a shareholder of the Company owning a fractional share. In lieu of
issuing fractional shares, the Company will pay to any shareholder who otherwise
would have been entitled to receive a fractional share as a result of the
Reverse Stock Split an amount in cash equal to the value of such fractional
share determined by reference to the average closing bid price of the AER Common
Stock for a period of five successive trading days immediately preceding the
effective date of the Reverse Stock Split.
After the Reverse Stock Split, the number of shares issued and outstanding
will be reduced. The per share loss and net book value of AER Common Stock will
be increased because there will be fewer shares of AER Common Stock outstanding.
The Reverse Stock Split would have the following effects upon the number of
shares of AER Common Stock outstanding and the number of authorized and unissued
shares of AER Common Stock.
<TABLE>
<CAPTION>
UNISSUED AND
REVERSE COMMON STOCK RESERVED AUTHORIZED
STOCK SPLIT OUTSTANDING SHARES(1) COMMON STOCK(2)
----------- ------------ --------- ---------------
<S> <C> <C> <C>
Before Split 24,862,263 2,574,000 75,137,737
1-for-2 12,431,131 1,284,000 87,568,869
1-for-3 8,287,421 858,000 91,712,579
1-for-4 6,215,565 643,500 93,784,435
1-for-5 4,972,452 514,800 95,027,548
</TABLE>
- ---------------
(1) Includes any shares reserved for stock option plans, the Non-Employee
Director Restricted Stock Award Plan and warrants. No adjustment has been
made for shares issued under such plans.
(2) Equals the total number of AER Common Stock authorized less shares
outstanding.
12
<PAGE> 16
IN CONNECTION WITH THE APPROVAL OF THE REVERSE STOCK SPLIT, SHAREHOLDERS OF
THE COMPANY WILL NOT HAVE A RIGHT TO DISSENT AND OBTAIN PAYMENT FOR THEIR SHARES
UNDER SECTION 14-2-1301 ET SEQ. OF THE GEORGIA BUSINESS CORPORATION CODE.
OUTSTANDING WARRANTS AND OPTIONS
Commencing with the effective date of the Reverse Stock Split, all
outstanding warrants and options entitling the holders thereof to purchase
shares of AER Common Stock will entitle such holders to receive, upon exercise
of their warrants or options, the appropriate fraction of the number of shares
of AER Common Stock which such holders may purchase upon exercise of their
warrants or options and the exercise prices will increase in proportion to the
fraction by which such warrants and options are reduced.
MANNER OF EFFECTING THE REVERSE STOCK SPLIT AND EXCHANGE OF STOCK CERTIFICATES
In the event of the approval of the Reverse Stock Split by the Company's
shareholders, and following the determination by the Board of the appropriate
ratio for the Reverse Stock Split, the Reverse Stock Split will be effected by
the filing with the Secretary of the State of Georgia the Articles of Amendment.
The Reverse Stock Split will become effective on the date of filing the Articles
of Amendment unless the Company specifies otherwise (the "Effective Date"). As
soon as practicable after the Effective Date, the Company will send a letter of
transmittal to each holder of record of Old Shares outstanding on the Effective
Date. The letter of transmittal will contain instructions for the surrender of
certificates representing the Old Shares. Upon proper completion and execution
of the letter of transmittal and return thereof, together with certificates
representing Old Shares, a shareholder will be entitled to receive a certificate
representing the number of New Shares into which his Old Shares have been
reclassified as a result of the Reverse Stock Split. SHAREHOLDERS SHOULD NOT
SUBMIT ANY CERTIFICATES UNTIL REQUESTED TO DO SO. No new certificate will be
issued to a shareholder until he has surrendered his outstanding certificates
together with the properly completed and executed letter of transmittal. Until
so surrendered, each outstanding certificate representing Old Shares will be
deemed for all corporate purposes after the Effective Date to evidence ownership
of New Shares in the appropriately reduced number.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company believes that the Federal income tax consequences of the
Reverse Stock Split to holders of Old Shares and holders of New Shares will be
as follows:
1. Except as set forth in (5) below, no gain or loss will be
recognized by a shareholder on the surrender of the Old Shares or receipt
of a certificate representing New Shares.
2. The aggregate tax basis of the New Shares will equal the aggregate
tax basis of the Old Shares exchanged therefor (not including the tax basis
of any Old Shares exchanged for cash in lieu of a fractional share).
3. To the extent that Old Shares are exchanged for cash in lieu of a
fractional share, the holding period of the New Shares will include the
holding period of the Old Shares if such Old Shares were held as capital
assets.
4. The conversion of the Old Shares into the New Shares will produce
no gain or loss to the Company.
5. The receipt of cash in lieu of a fractional share by a shareholder
will result in a tax liability to the shareholder.
The Company's opinion is not binding upon the Internal Revenue Service or
the courts, and there can be no assurance that the Internal Revenue Service or
the courts will accept the positions expressed above.
This summary does not purport to be complete and does not address the tax
consequences to holders that are subject to special tax rules, such as banks,
insurance companies, regulated investment companies, personal holding companies,
foreign entities, nonresident foreign individuals, broker-dealers and tax exempt
entities.
13
<PAGE> 17
The state and local tax consequences of the Reverse Stock Split may vary
significantly as to each shareholder, depending upon the state in which he
resides.
The foregoing summary is included for general information only.
Accordingly, shareholders are urged to consult their own tax advisors with
respect to the Federal, State and local tax consequences of the Reverse Stock
Split.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors will offer the following resolution at the Annual
Meeting:
RESOLVED, that the Board of Directors is empowered in its discretion
without further action of the shareholders of the Company, to file an amendment
to the Articles of Incorporation of the Company in the form attached as Exhibit
A to effect a reverse stock split of the Company's outstanding shares of common
stock, no par value, in a ratio falling within a range between and including a
1-for-2 and a 1-for-5 reverse stock split, and that the President, Secretary, or
other officer designated by the President, and each of them be, and hereby are
empowered to take any and all action necessary to effectuate the foregoing.
Approval of the Reverse Stock Split will require the affirmative vote of a
majority of the outstanding shares of AER Common Stock. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" APPROVAL OF THE REVERSE STOCK SPLIT.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of the outstanding AER Common Stock, to file reports
of ownership and changes of ownership with the SEC. Officers, directors and
greater than ten percent shareholders are also required to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on the Company's
review of copies of such forms furnished to the Company, or written
representations that no Form 5s were required, the Company believes that during
1998 its officers, directors and greater than ten percent shareholders complied
with all applicable Section 16(a) filing requirements.
RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young LLP as independent auditors of the Company for 1999.
Ernst & Young LLP have been the independent public auditors for the Company
since 1989. Representatives of Ernst & Young LLP are expected to be present at
the Annual Meeting and will have an opportunity to make a statement if they
desire to do so and will be able to respond to appropriate questions.
SHAREHOLDERS' PROPOSALS FOR 2000 ANNUAL MEETING
A shareholder who wishes to submit a proposal for action at the 2000 Annual
Meeting of Shareholders and have the proposal included in the proxy statement
for such meeting must send his proposal sufficiently in advance so that it is
received at the Company's executive offices by November 3, 1999. Further, a
shareholder proposal received outside the processes of Rule 14a-8 of the
Exchange Act and after February 23, 2000 will be considered untimely and the
form of proxy accompanying this proxy statement may confer discretionary
authority to the Company to vote on any such proposal if it is included in the
Company's proxy statement. The shareholder should also notify the Company in
writing regarding his intention to appear personally at the meeting to present
his proposal at the time he submits his proposal.
14
<PAGE> 18
OTHER MATTERS
Management of the Company is not aware of any other matters to be presented
for action at the Annual Meeting other than those mentioned herein. If any other
matters come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote on such matters in accordance with their judgment.
By Order of the Board of Directors
/s/ J.T. MOORE
J. T. MOORE
Vice President -- Chief Financial
Officer, Secretary and Treasurer
15
<PAGE> 19
EXHIBIT A
ARTICLES OF AMENDMENT
OF
AER ENERGY RESOURCES, INC.
I.
The name of the corporation, which was organized under the Georgia Business
Corporation Code, is "AER Energy Resources, Inc."
II.
The amendment adopted is as follows:
Article II of the articles of incorporation of the corporation shall be
amended to add the following paragraph to the end of Article II:
"Effective upon the filing of these Articles of Amendment with the
Georgia Secretary of State (the "Effective Date"), each Common Share issued
and outstanding at such time ("Old Common Stock") shall be automatically
reclassified as and converted, pursuant to a reverse stock split, into a
fraction thereof falling within a range between and including one-half and
one-fifth of a share of the corporation's outstanding Common Stock ("New
Common Stock"), depending on a determination by the Board of Directors that
a reverse stock split is in the best interests of the corporation and the
shareholders and the determination by the Board of the precise ratio for
the reverse stock split, subject to the treatment of fractional share
interests as described below. Each holder of a certificate or certificates
which immediately prior to the Effective Date represents outstanding shares
of Old Common Stock (the "Old Certificates," whether one or more) shall be
entitled to receive upon surrender of such Old Certificates to the
corporation's Transfer Agent for cancellation, a certificate or
certificates (the "New Certificates," whether one or more) representing the
number of whole shares of the New Common Stock into and for which the
shares of the Old Common Stock formerly represented by such Old
Certificates so surrendered, are reclassified under the terms hereof. From
and after the Effective Date, Old Certificates shall represent only the
right to receive New Certificates pursuant to the provisions hereof. No
certificates or scrip representing fractional share interests in New Common
Stock will be issued, and no such fractional share interest will entitle
the holder thereof to vote, or to any rights of a shareholder of the
corporation. No fractional shares shall be issued; the corporation shall
pay cash in lieu thereof."
III.
The date of the adoption of the amendment was , 1999.
IV.
The amendment was duly approved by the shareholders in accordance with the
provisions of O.C.G.A. sec.14-2-1003.
DULY EXECUTED and delivered by the undersigned on , 1999.
AER ENERGY RESOURCES, INC.
By:
------------------------------------
David W. Dorheim
President
A-1
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PLEASE MARK VOTES REVOCABLE PROXY
X AS IN THIS EXAMPLE AER ENERGY RESOURCES,INC. For Withhold For All
All For All Except
ANNUAL MEETING OF SHAREHOLDERS 1. The election as directors of all nominees
April 7, 1999 listed below (except as marked to the
contrary):
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David W. Dorheim and Jon A. DAVID G. BROWN, JAMES W. DIXON, DAVID W. DORHEIM, WILLIAM
Lindseth, or either of them, each with full power of substitution, L. JACKSON, JON A. LINDSETH AND JOHN L. WILKES.
acting jointly or by either one of them if only one be present and
acting, attorney and proxy to vote in the manner specified below INSTRUCTION: To withhold your vote for any nominee(s), mark
(according to the number of shares which the undersigned would be "For All Except" and write that nominee's name on the line
entitled to cast if then personally present) at the annual meeting below
of shareholders of AER Energy Resources, Inc. to be held on April 7,
1999, including adjournments. -----------------------------------------------------------
For Against Abstain
2. To authorize the Board of Directors
to effect a reverse stock split (any split
falling within a range between and including
a 1-for-2 and a 1-for-5 reverse stock
split) of the Company's Common Stock.
3. In their discretion upon such other
business as may properly come before the
meeting.
THIS PROXY SHALL BE VOTED AS DIRECTED. IF NO
DIRECTION TO THE CONTRARY IS INDICATED, IT WILL
----------------------- BE VOTED FOR THE PROPOSALS LISTED ABOVE, AS
Please be sure to sign and date Date INDICATED IN THE ENCLOSED PROXY STATEMENT.
this Proxy in the box below DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO
---------------------------------------------------------- ALL OTHER MATTERS THAT MAY COME BEFORE THE MEETING.
--Shareholder sign above---Co-holder (if any) sign above--
</TABLE>
DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED.
AER ENERGY RESOURCES, INC.
- --------------------------------------------------------------------------------
Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
- --------------------------------------------------------------------------------
