SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
|X| Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
KESTREL ENERGY, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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|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:
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(2) Aggregate number of securities to which transaction applies:
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(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
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(5) Total fee paid:
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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:
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(4) Date Filed:
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
(303) 295-0344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 5, 2002
10:00 A.M.
To Our Shareholders:
We strongly encourage your attendance and participation at the Annual
Meeting of Shareholders of Kestrel Energy, Inc., which will be held at 10:00
a.m. on Thursday, December 5, 2002, at the offices of the Company at 999 18th
Street, Suite 2490, Denver, Colorado for the following purposes:
1. To elect seven directors to the Board;
2. To approve and ratify the selection of Wheeler Wasoff, P.C. as the
Company's independent certified public accountants and auditors for the fiscal
year ending June 30, 2003;
3. To approve an amendment to the Company's Stock Option Plan to extend
the term of the Plan for an additional ten years; and
4. To transact such other business as may properly come before the
meeting.
A Proxy Statement explaining the matters to be acted upon at the meeting
is enclosed.
The Board of Directors has designated October 22, 2002 as the record date
for determining shareholders entitled to notice of and to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS WOULD LIKE TO EMPHASIZE THE IMPORTANCE OF
EXERCISING YOUR RIGHTS AS SHAREHOLDERS TO VOTE ON THE ISSUES DESCRIBED IN THE
ENCLOSED PROXY STATEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE ELECTION OF DIRECTORS, APPROVE THE SELECTION OF WHEELER WASOFF,
P.C., AND APPROVE THE AMENDMENT TO THE STOCK OPTION PLAN.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
October 28, 2002 Barry D. Lasker
President
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 5, 2002
10:00 A.M.
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF KESTREL
ENERGY, INC., A COLORADO CORPORATION (THE "COMPANY"), FOR USE AT THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD AT THE OFFICES OF THE COMPANY AT 999 18TH
STREET, SUITE 2490, DENVER, COLORADO ON THURSDAY, DECEMBER 5, 2002 AT 10:00
A.M., MOUNTAIN STANDARD TIME, AND AT ANY ADJOURNMENT THEREOF. It is anticipated
that this Proxy Statement and the accompanying Proxy will be mailed to the
Company's shareholders on or about October 28, 2002.
The expense of the Board of Directors' Proxy solicitation will be borne by
the Company. In addition to solicitation of Proxies by use of the mails, some of
the Company's officers and directors may solicit Proxies by telephone, telegraph
or personal interview without any additional compensation to them. The Company
will reimburse brokers, nominees, custodians and other fiduciaries for expenses
in forwarding Proxy materials to their principals.
Any shareholder giving a Proxy on the enclosed form may revoke it at any
time prior to the exercise thereof by advising the Secretary of the Company in
writing at the above address, by properly executing a later dated Proxy, or by
appearing in person and voting at the Annual Meeting.
VOTING OF SHARES
Only holders of the Company's outstanding shares of common stock, no par
value ("Common Stock"), of record at the close of business on October 22, 2002,
will be entitled to notice of, and to vote at, the Annual Meeting and at any
adjournment thereof. On that date, there were 9,115,200 shares of Common Stock
outstanding.
Cumulative voting in the election of directors is allowed. Under
cumulative voting, each shareholder is entitled to cast a number of votes in the
election of directors equal to the number of directors to be elected multiplied
by the number of shares being voted. The shareholder may cast his vote for one
nominee or may distribute the votes among nominees in any manner. Unless
directed otherwise, the enclosed Proxy gives discretionary authority to cumulate
votes in the election of directors. Subject to the effect of cumulative voting,
that number of candidates equaling the number of directors to be elected having
the highest number of votes cast in favor of their election are elected to the
Board of Directors. Accordingly, the seven (7) persons receiving the greatest
number of votes at the meeting, in person or by proxy, will be elected. On all
matters other than the election of directors, each shareholder will be entitled
to one vote per share.
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The election of directors requires that the seven candidates having the
highest number of votes cast in favor of their election are elected to the Board
of Directors. The approval and ratification of the selection of Wheeler Wasoff,
P.C. and the amendment to the Stock Option Plan require an affirmative vote of a
majority of the shares represented in person or by proxy at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of establishing a
quorum only. Only those votes cast for the election of directors and the other
proposals will be counted as votes in favor or affirmative votes. THE BOARD OF
DIRECTORS URGES EACH SHAREHOLDER TO MARK, SIGN AND MAIL THE ENCLOSED PROXY CARD
IN THE RETURN ENVELOPE AS PROMPTLY AS POSSIBLE.
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS
AND MANAGEMENT
The following table sets forth, as far as is known to the Board of
Directors or the management of the Company, the only persons owning on October
22, 2002 more than five percent of the outstanding shares of the Company's
Common Stock. For purposes of this disclosure, the amount of the Company's
Common Stock beneficially owned is the aggregate number of shares of the Common
Stock outstanding on such date plus an amount equal to the aggregate amount of
Common Stock which could be issued upon the exercise of stock options and
warrants within 60 days of such date.
=================================== ================================================================================
Number of Shares of Common Stock Beneficially Owned
----------------------------------- -------------------------------------- --------------- -------------------------
Voting and Investment Power
----------------------------------- ------------------ ------------------- --------------- -------------------------
Name and Address Direct Indirect Total Shares Percent Owned
----------------------------------- ------------------ ------------------- --------------- -------------------------
Victoria International Petroleum 1,556,743(1)(2) --- 1,556,743 16.8%
N.L.
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
----------------------------------- ------------------ ------------------- --------------- -------------------------
Victoria Petroleum N.L. --- 1,556,743(1)(2) 1,556,743 16.8%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
----------------------------------- ------------------ ------------------- --------------- -------------------------
Timothy L. Hoops 287,280(3) 1,556,743(2)(4) 1,844,023 19.4%
P.O. Box 1079
Denver, CO 80201-1079
----------------------------------- ------------------ ------------------- --------------- -------------------------
Robert J. Pett 151,208(5) 1,556,743(2)(6) 1,707,951 18.2%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
----------------------------------- ------------------ ------------------- --------------- -------------------------
3
=================================== ================================================================================
Number of Shares of Common Stock Beneficially Owned
----------------------------------- -------------------------------------- --------------- -------------------------
Voting and Investment Power
----------------------------------- ------------------ ------------------- --------------- -------------------------
Name and Address Direct Indirect Total Shares Percent Owned
----------------------------------- ------------------ ------------------- --------------- -------------------------
John T. Kopcheff 209,815(7) 1,556,743(2)(8) 1,766,558 18.7%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
----------------------------------- ------------------ ------------------- --------------- -------------------------
Golden Prospect Plc 1,038,500(9) 2,657,800(10)(11) 3,696,300 37.5%
1st Floor
143-149 Great Portland St.
London W2N 5FB
England
----------------------------------- ------------------ ------------------- --------------- -------------------------
Samson Exploration N.L. 2,657,800(11) --- 2,657,800 27.2%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
----------------------------------- ------------------ ------------------- --------------- -------------------------
The Equitable Life Assurance 924,000(12) --- 924,000 8.9%
Society
City Place House
55 Basinghall St.
London EC2V 5DR
England
----------------------------------- ------------------ ------------------- --------------- -------------------------
(1) Victoria International Petroleum N.L. ("VIP"), the record holder of the
shares and warrants, is a wholly owned subsidiary of Victoria Petroleum
N.L. ("VP"), which is therefore deemed to be another beneficial owner of
the shares.
(2) Includes warrants to purchase up to 141,522 shares.
(3) Includes vested options and warrants to purchase up to 259,370 shares.
(4) Mr. Hoops is a director of VIP and of VP. As a result, all shares and
warrants held by VIP directly and VP indirectly are listed as indirectly
held by Mr. Hoops.
(5) Includes vested options and warrants to purchase up to 141,208 shares.
(6) Mr. Pett is the Chairman and a director of VIP and a director of VP. As a
result, all shares and warrants held by VIP directly and VP indirectly are
listed as indirectly held by Mr. Pett.
(7) Includes vested options and warrants to purchase up to 195,815 shares.
(8) Mr. Kopcheff is a director of VIP and VP. As a result, all shares and
warrants held by VIP directly and VP indirectly are listed as indirectly
held by Mr. Kopcheff.
(9) Includes vested warrants to purchase up to 89,500 shares.
(10) Golden Prospect Plc owns 29.95% of Samson Exploration N.L. and is
therefore deemed to be a beneficial owner of the shares and warrants held
by Samson.
(11) Includes vested warrants to purchase up to 650,300 shares.
(12) Includes vested warrants to purchase up to 84,000 shares.
The following table sets forth the number of shares beneficially owned on
October 22, 2002 by the Company's executive officers and directors, and by all
of the executive officers and directors as a group. For purposes of this
disclosure, the amount of the Company's Common Stock beneficially owned is the
aggregate number of shares of the Common Stock outstanding
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on such date plus an amount equal to the aggregate amount of Common Stock which
could be issued upon the exercise of stock options and warrants within 60 days
of such date.
===============================================================================
Position(s) Number of Shares
With the of
Name and Address Company Common Stock Percent Owned
Beneficially Owned
-------------------------------------------------------------------------------
Barry D. Lasker President, Chief 381,000(1) 3.7%
999 18th Street, Suite Executive
2490 Officer and
Denver, CO 80202 Director
-------------------------------------------------------------------------------
Timothy L. Hoops Director 1,844,023(2)(3) 22.6%
P.O. Box 1079
Denver, CO 80201- 1079
-------------------------------------------------------------------------------
Robert J. Pett Chairman of the 1,707,951(4)(5) 21.3%
2 The Esplanade, 36th Board and
Flr. Director
Perth 6000
Western Australia
-------------------------------------------------------------------------------
John T. Kopcheff Director 1,766,558(6)(7) 18.7%
2 The Esplanade, 36th
Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
Kenneth W. Nickerson Director 57,409(8) <1%
10780 Hanson St.
Johannesburg, MI 49751
-------------------------------------------------------------------------------
Mark A.E. Syropoulo Director 201,800(9) 2.2%
Lot 42 Gumboil Road
Cooroy Queensland 4563
Australia
-------------------------------------------------------------------------------
Neil T. MacLachlan Director 200,780(10) 2.2%
1 Victoria Square
London SWIW OQY
England
-------------------------------------------------------------------------------
All Directors and 3,046,035(11) 29.1%
Executive Officers as a
Group (7 persons)
===============================================================================
(1) Consists of vested options and warrants purchase up to 340,000 shares.
(2) Mr. Hoops is a director of Victoria International Petroleum N.L. ("VIP")
and of Victoria Petroleum N.L. ("VP"). As a result, all shares and
warrants held by VIP directly and by VP indirectly are listed as
beneficially owned by Mr. Hoops.
(3) Includes vested options and warrants to purchase up to 400,892 shares.
(4) Mr. Pett is the Chairman and a director of VIP and a director of VP. As a
result, all shares and warrants held by VIP directly and VP indirectly are
listed as held by Mr. Pett.
(5) Includes vested options and warrants to purchase up to 282,730 shares.
(6) Mr. Kopcheff is a director of VIP and VP. As a result, all shares and
warrants held by VIP directly and VP indirectly are listed as beneficially
owned by Mr. Kopcheff.
(7) Includes vested options and warrants to purchase up to 337,337 shares.
(8) Consists of vested options to purchase up to 57,409 shares.
(9) Includes vested options to purchase up to 160,000 shares, and 38,000
shares and vested warrants to purchase up to 3,800 shares owned by Syrops
& Co. Pty. Ltd.
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(10) Includes vested options and warrants to purchase up to 43,980 shares, and
55,000 shares and vested warrants to purchase up to 2,000 shares owned
indirectly and by a trust.
(11) Includes vested options and warrants to purchase up to 1,343,104 shares.
ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the seven
(7) nominees listed below. The Board's recommendation as nominees includes all
of the Directors elected at the last annual meeting of shareholders. The seven
nominees, if elected, will hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified. IT IS
INTENDED THAT SHARES REPRESENTED BY PROXIES IN THE ACCOMPANYING FORM WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW UNLESS A CONTRARY DIRECTION
IS INDICATED. If at the time of the meeting any of the nominees named below
should be unable to serve, which event is not expected to occur, the
discretionary authority provided in the Proxy will be exercised to vote for such
substitute nominee or nominees, if any, as shall be designated by the Board of
Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently held
by him, and the period during which he has served as a Director:
All Positions and Offices Period Served as
Name Age Held With the Company Director of the Company
---- --- --------------------- -----------------------
Barry D. Lasker 42 President, Chief Since 2001
Executive Officer,
and Director
Timothy L. Hoops 46 Director Since 1992
Robert J. Pett 55 Chairman of the Board Since 1992
John T. Kopcheff 54 Director Since 1995
Kenneth W. Nickerson 82 Director Since 1992
Mark A. E. Syropoulo 50 Director Since 1998
Neil T. MacLachlan 60 Director Since 2000
None of the nominees hold directorships in any other company having a
class of securities registered under the Securities Exchange Act of 1934, as
amended, or in any company registered as an investment company under the
Investment Company Act of 1940, as amended.
There is no arrangement or understanding between any of the nominees and
any other person or persons pursuant to which he was or is to be selected as a
director or nominee.
6
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors acted 16 times by unanimous written consent during
the fiscal year ended June 30, 2002. The committees of the Board include an
Audit Committee, a Compensation Committee and an Executive Committee.
The Audit Committee, which acted four times by unanimous written consent
in fiscal 2002, was comprised of Messrs. Nickerson, Syropoulo and Pett during
the fiscal year. The Audit Committee operates in accordance with its charter,
which it adopted in fiscal 2000. Historically the Audit Committee's primary
function has been to assist the Board of Directors in fulfilling its independent
and objective oversight responsibilities of financial reporting and internal
financial and accounting controls of the Company. The Audit Committee intends to
amend its charter to reflect the changes in the powers, duties and
responsibilities of the Audit Committee after the Sarbanes-Oxley Act of 2002,
including but not limited to the power to hire independent legal and accounting
experts to advise the Committee at the Company's expense, the duty to approve
any non-audit services by the Company's auditors, and the responsibility for
selection of the Company's independent auditors.
The Compensation Committee makes recommendations on executive compensation
and selects those persons eligible to receive grants of options under the
Company's Stock Option Plan. The members of the Committee in fiscal 2002 were
Messrs. Nickerson and Syropoulo. The Committee held one meeting and acted seven
times by unanimous written consent in fiscal 2002.
The Executive Committee was comprised of Messrs. Lasker, Syropoulo and
Pett in fiscal 2002. The Executive Committee has as its primary function
director-level review and approval of non-routine matters of significance during
the periods between scheduled meetings of the Board of Directors. The Committee
did not meet during fiscal 2002.
DIRECTORS' REMUNERATION
Directors who are not officers or employees of the Company are paid $900
for attendance at meetings of the Board or Committees thereof. Any director who
serves on the Compensation Committee automatically receives 5,000 options on the
last trading day in September pursuant to the Company's Stock Option Plan.
Accordingly, on September 28, 2001, both Messrs. Nickerson and Syropoulo, as
members of the Compensation Committee, received fully vested options to purchase
5,000 shares of Common Stock at an exercise price of $0.89 per share, the
closing price on the date of grant. The options are exercisable for ten years
from the date of grant.
7
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names of all directors and executive officers of
the Company, their ages, all positions and offices held by each such person, the
period during which he has served as such, and the principal occupations and
employment of such persons during at least the last five years.
BARRY D. LASKER, age 42, was appointed President, Chief Executive Officer
and Director on August 16, 2001, and he was appointed Chief Financial Officer
and Secretary on February 15, 2002. Mr. Lasker was the President and Chief
Executive Officer of TransAtlantic Petroleum Corp., an oil and gas exploration
company located in Calgary, Alberta, Canada with offices in Houston, Texas, from
December 1998 until August 2001. From January 1997 to December 1998, he was the
President and Chief Executive Officer of GHP Exploration located in Houston,
Texas of which he was a co-founder. It became a publicly held company in April
1997 and was acquired in September 1998 by Profco Resources, a Toronto, Canada
listed company, which then changed its name to TransAtlantic Petroleum Corp in
December 1998. Prior to that time, Mr. Lasker was the Asset Manager of GOM
Shelf/Flex Trend for BHP Petroleum, an oil and gas exploration and production
company in Houston, Texas, from January to December 1996. From 1993 to January
1996, Mr. Lasker was an Exploration Manager in Southern Australia, New Zealand
and Western Australia for BHP Petroleum. He also worked in various positions as
a geophysicist and geoscientist from 1982 to 1992. Mr. Lasker received his
Bachelor of Science in Geology and Geophysics from Macquarie University in
Sydney, Australia in 1981.
TIMOTHY L. HOOPS, age 46, has been a Director since June 1, 1992. He also
served as President and Chief Executive Officer of the Company from June 1, 1992
until August 15, 2001, when he resigned from those positions, but he remained as
a consultant to the Company through March 2002. On April 1, 2002, Mr. Hoops was
rehired at the Company's operations manager. Mr. Hoops is a petroleum geologist
with 23 years experience in the continental USA and Australia. Mr. Hoops was the
President and a Director of the Company's wholly owned subsidiary, Victoria
Exploration, Inc., an independent oil and gas producer, where he had served as
an officer and Director since 1987 until it was merged into the Company in June
2001. He was a Director and President of Kestrel Energy California, Inc., a
former wholly owned subsidiary and oil and gas producer, from March 1997 until
it was merged in May 2000. After the merger, he remained as a Director and he
became Vice President and Assistant Secretary. He has also been a Director of
Victoria International Petroleum N.L., an Australian oil and gas company, and of
Victoria Petroleum N.L., its parent, since 1987. Mr. Hoops was Exploration
Manager for Royal Resources Corporation, a publicly held Denver based company
engaged in the exploration and development of oil and gas, from 1984 to 1987.
Prior to 1984, Mr. Hoops was employed by Amoco Production, Cities Service and
Santa Fe Energy. Mr. Hoops is a 1979 graduate of the Colorado School of Mines,
with a degree in geology.
ROBERT J. PETT, age 55, was appointed as a Director on June 1, 1992 and
Chairman of the Board on January 16, 1995. Mr. Pett served as Secretary,
Treasurer and Vice President of the Company during various periods from June
1992 to January 1995. Mr. Pett has been a director of Victoria International
Petroleum N.L. since 1986. Mr. Pett has been Chairman of Victoria Petroleum N.L.
for 18 years. He is currently Chairman of Resolute Limited, an Australian
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mining and natural resources company, which provides office facilities and
administrative services to Victoria Petroleum N.L. on a pro-rata reimbursement
of expenses basis. He is a Director of Sapphire Mines N.L., an Australian
precious gem mining company, and of Kestrel Energy California, Inc. After the
merger of Kestrel Energy California in May 2000, Mr. Pett was also appointed as
its President. Mr. Pett was a Director of Victoria Exploration, Inc. until it
was merged into the Company in June 2001. Mr. Pett holds a Masters Degree in
Economics (Queens University, Canada).
JOHN T. KOPCHEFF, age 54, was appointed as a Director of the Company on
January 16, 1995. He served as Vice President - International from January 16,
1995 until June 30, 2002. He also held the same positions at Victoria
Exploration, Inc. until it was merged into the Company in June 2001. He was also
the Vice President - International and a Director at Kestrel Energy California,
Inc. until it was merged in May 2000. He remained as a Director and became its
Secretary. Mr. Kopcheff is a geologist with 32 years experience in petroleum in
Australia, Southeast Asia, United States, South America and the North Sea, both
in field geological operations and management. Mr. Kopcheff has been a Director
of Victoria International Petroleum N.L. since 1986, and a Director of Victoria
Petroleum N.L. since 1984. Prior to his appointment with the Company, he
provided various services to the Company relating to its international
exploration activities on a consulting basis. He received a Bachelor of Science
degree with honors from the University of Adelaide in 1970.
KENNETH W. NICKERSON, age 82, is an independent petroleum and mineral
geologist with over 52 years experience. He was appointed as a Director of the
Company on December 16, 1992. From 1981 until 1988, Mr. Nickerson served as
President, Director and Chief Operating Officer of Royal Resources Corporation,
a publicly held Denver based company engaged in the exploration and development
of oil and gas. Since then Mr. Nickerson has worked as a consulting geologist
for various energy companies. Mr. Nickerson is a 1948 graduate of the Colorado
School of Mines with a degree in geological engineering.
MARK A.E. SYROPOULO, age 50, was appointed as a Director on January 14,
1998. Mr. Syropoulo has been an independent corporate consultant since 1994 and
has during that time provided services to various entities in the natural
resources, information technology and investment sectors, principally in
Australia. He also acted as a consultant to the Company from May 1997 until
January 1998. Prior to 1994 he was managing director from 1987 to 1993 of Anglo
Pacific Resources Limited, a United Kingdom mining and oil company associated
with Anglovaal Holdings Limited, a major South African mining house. Mr.
Syropoulo is a graduate of mathematics and economics and an honors graduate in
economics of the University of Natal Durban, South Africa.
NEIL T. MACLACHLAN, age 60, was appointed as a Director on September 27,
2000. He is the Chairman and major shareholder in Markham Associates, a London
based corporate investment and advisory business. He is also a non-executive
director of Samson Exploration N.L., Geographe Resources Ltd., Titan Resources
Ltd. and Sapphire Mines NL, all publicly traded Australian mining companies, and
Golden Prospect Plc., a publicly traded United Kingdom mining investment company
listed in London on the Alternative Investment Market. Golden Prospect is one of
the principal shareholders of the Company, holding, directly and
9
indirectly, approximately 38% of its stock. Samson Exploration N.L. is another
principal shareholder of the Company holding approximately 27% of the Company's
stock. Because Golden Prospect owns 29.95% of Samson, the 27% held by Samson is
included in the 38% held by Golden Prospect. Mr. MacLachlan has over 26 years
investment banking experience gained in Europe, Southeast Asia and Australia.
Mr. MacLachlan was employed by Barrick Gold Corporation as Executive Vice
President Asia from 1993 to 1997. He was a former director of Wardley Holdings
and James Capel & Co. Limited, investment banking subsidiaries of the Hong Kong
and Shanghai Banking Corporation. Mr. MacLachlan graduated from Manchester
University in 1964 with a Bachelor of Science in Biochemistry and he took the
post graduate Business Studies course at London Polytechnic at Rutherford
College.
There is no arrangement or understanding between any of the executive
officers and any other persons pursuant to which he was or is to be selected as
an officer, nor is there any family relationship between or among any executive
officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 5, 2000, the Company sold six international permits with a net book
value of $143,179 for petroleum drilling in Western Australia and New Guinea to
Victoria Petroleum USA, Inc. (VP/USA), a Colorado corporation and wholly owned
subsidiary of VP, in exchange for 8,250,000 shares of VP Common Stock. The stock
was valued at $0.029 per share and resulted in a gain on the sale of $97,721.
Also, on May 5, 2000, KEC, VP and VP/USA entered into an Agreement and
Plan of Merger (Merger Agreement). Pursuant to the Merger Agreement, on May 12,
2000, the Company, as sole shareholder of KEC, acquired 66,750,000 shares of VP
common stock and VP/USA acquired all of the issued and outstanding shares of KEC
through a merger of KEC into VP/USA, with KEC as the surviving corporation. The
stock was valued at $0.029 per share and resulted in a gain on the sale of
$1,497,208, based upon sales of other assets totaling $242, accounts payable
totaling $2,000, and property and equipment with a net book value of $454,899.
During the year ended June 30, 2001, the Company sold 3,000,000 shares of
VP which resulted in a gain of $3,440, and during the year ended June 30, 2002,
the Company sold a total of 41,900,000 shares of VP stock and recorded a loss on
the sales of $561,282. As a result of the above transactions, the Company owns
4% of VP at June 30, 2002.
Victoria International Petroleum, N.L., another wholly owned subsidiary of
VP, has a current shareholding interest in the Company of 16.8% (11.4% fully
diluted for currently vested options and warrants).
On February 14, 2002, the Company borrowed $97,940 from VP and $255,382
from Lakes Oil N.L. ("Lakes") due May 15, 2002 with interest at 8%. The loans
were secured by shares of VP and seismic data owned by the Company. As of June
30, 2002, an aggregate $294,953 had been repaid and VP is owed $58,369.
10
VP advanced an additional $350,000 to the Company in February 2001 with
interest at 7.5%. The loan of $350,000 was assigned to an unrelated company and
subsequent converted, including interest of $10,500, to 515,000 shares of the
Company's Common Stock.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following sets forth in summary form the compensation received during
each of the Company's last three completed fiscal years by the Chief Executive
Officer of the Company, the former Chief Executive Officer, and one other
non-executive officer of the Company who received salary, bonus or other annual
compensation in total from the Company, in excess of $100,000 during the same
period.
===============================================================================
Annual Compensation
-------------------------------------------------------------------------------
Other Annual
NAME AND Fiscal Salary Compensation Options
PRINCIPAL POSITION Year ($) ($) (#)
-------------------------------------------------------------------------------
Barry D. Lasker, President and 2002 $165,000(1) $0 320,000
Chief Executive Officer 2001 $0 $0 0
2000 $0 $0 0
-------------------------------------------------------------------------------
Timothy L. Hoops, Former 2002 $43,754 $57,847 20,000
President and Chief Executive 2001 $144,000 $0 0
Officer(2) 2000 $144,000 $0 100,000
-------------------------------------------------------------------------------
Ira Pasternack, Vice President 2002 $86,250 $0 20,000
-Exploration(3) 2001 $120,000 $0 0
2000 $120,000 $0 0
-------------------------------------------------------------------------------
(1) Includes $10,000 for accrued salary which was deferred until fiscal 2003
and which remains unpaid as of the date of this Proxy Statement.
(2) Besides his salary, Mr. Hoops received fees as a director of Victoria
Petroleum N.L. in the amount of Australian $5,000 for fiscal 2002 and
expects to receive the same amount in fiscal 2003. Mr. Hoops resigned as
President and Chief Executive Officer on August 15, 2001, but remained as
a consultant through March 2002. On April 1, 2002, Mr. Hoops was rehired
as the Company's operations manager at a salary of $6,000 per month. As a
consultant, Mr. Hoops accrued $57,847 in consulting fees in fiscal 2002
through his employer, Peak Resource Management, Inc., of which $23,772 was
deferred until fiscal 2003 and which remains unpaid as of the date of this
Proxy Statement.
(3) Mr. Pasternack resigned as an officer effective June 30, 2002.
None of the named officers received additional compensation other than
noted above the aggregate amount of which was the lesser of either $50,000 or
10% of the total of annual salary, bonus and consulting fees reported for such
officer.
The Company reimburses its officers and directors for ordinary and
necessary business expenses incurred by them on behalf of the Company.
11
OPTION GRANTS FOR FISCAL YEAR ENDED JUNE 30, 2002
============================== =============== ====================== =============== ============== ===============================
Number Potential Realizable Value at
Of % of Total Assumed Annual Rates of
Securities Options Granted Exercise or Stock Price Appreciation
Underlying to Employees Base Price Expiration For Option Term
Name Options in Fiscal Year ($/share) Date 5%($)(1) 10%($)(2)
Granted
============================== =============== ====================== =============== ============== =============== ===============
Barry D. Lasker 300,000(3) 80% $1.14 8-27-11 $215,081 $545,059
President, Chief 20,000(4) 5% $0.71 1-19-12 $8.930 $22,631
Executive Officer
And Director
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Timothy L. Hoops 20,000(4) 5% $0.71 1-19-12 $8,930 $22,631
Former President and
Chief Executive
Officer and Director
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Ira Pasternack 20,000(4) 5% $0.71 1-19-12 $8,930 $22,631
Vice President -
Exploration
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Robert J. Pett 10,000(4) N/A $0.71 1-19-12 $4,465 $11,316
Chairman of the
Board and Director
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
John T. Kopcheff 10,000(4) N/A $0.71 1-19-12 $4,465 $11,316
Director
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Kenneth W. Nickerson 5,000(4) N/A $0.89 9-28-11 $2,799 $7,092
Director 10,000(4) $0.71 1-19-12 $4,465 $11,316
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Mark A.E. Syropoulo 5,000(4) N/A $0.89 9-28-11 $2,799 $7,092
Director 10,000(4) $0.71 1-19-12 $4,465 $11,316
------------------------------ --------------- ---------------------- --------------- -------------- --------------- ---------------
Neil T. MacLachlan 10,000(4) N/A $0.71 1-19-12 $4,465 $11,316
Director
============================== =============== ====================== =============== ============== =============== ===============
(1) This column represents the potential realizable value of each grant of
options, based on the assumption that the market price of shares of Common
Stock underlying the options will appreciate in value from the date of the
grant to the end of the option term at the annual rate of five percent.
(2) This column represents the potential realizable value of each grant of
options, based on the assumption that the market price of shares of Common
Stock underlying the options will appreciate in value from the date of the
grant to the end of the option term at the annual rate of ten percent.
(3) Of this grant, 87,719 were incentive stock options and the remainder were
nonqualified stock options.
(4) Of this grant, all were nonqualified stock options.
12
AGGREGATED OPTION EXERCISES FOR FISCAL YEAR ENDED JUNE 30, 2002
AND YEAR END OPTION VALUES
================================ =================== ============= ================================= ===============================
Number of Securities Value of Unexercised
Shares Acquired on Value Underlying Unexercised In-the-Money Options
Exercise(#) Realized Options at June 30, 2002 at June 30, 2002
Name ($) (#) ($)(1)
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Barry D. Lasker 0 N/A 320,000/0 $0/$0
President, Chief
Executive Officer and
Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Timothy L. Hoops 0 N/A 256,580/0 $0/$0
Former President and
Chief Executive
Officer, and Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Ira Pasternack, Vice President 0 N/A 120,000/0 $0/$0
- Exploration
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Robert J. Pett 0 N/A 140,208/0 $0/$0
Chairman of the
Board and Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
John T. Kopcheff 0 N/A 195,415/0 $0/$0
Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Kenneth W. Nickerson 0 N/A 57,409/0 $165/$0
Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Mark A.E. Syropoulo 0 N/A 160,000/0 $165/$0
Director
-------------------------------- ------------------- ------------- --------------------------------- -------------------------------
Neil T. MacLachlan 0 N/A 35,000/0 $0/$0
Director
================================ =================== ============= ================================= ===============================
(1) For all unexercised options held as of June 30, 2002, the aggregate dollar
value is the excess of the market value of the stock underlying those
options over the exercise price of those unexercised options. The price
used to calculate these figures is the closing price as of June 28, 2002
on the Nasdaq SmallCap Market, which was $0.70 per share.
13
EQUITY COMPENSATION PLAN INFORMATION
AS OF FISCAL YEAR END JUNE 30, 2002
------------------------------- ---------------------------- ---------------------------- ----------------------------
Number of Number of Securities
Securities to be Remaining Available
Issued Upon Weighted Average for Future Issuance
Exercise of Exercise Price of Under Equity
Outstanding Option, Outstanding Options, Compensation Plan
Warrants and Rights Warrants and Rights (Excluding Securities
Reflected in Column A)
------------------------------- ---------------------------- ---------------------------- ----------------------------
A B C
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plan 1,693,964 $1.39 539,036
approved by shareholders
------------------------------- ---------------------------- ---------------------------- ----------------------------
The following Audit Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of three directors and operates under a written charter which was
adopted in May 2000 by the Board of Directors and attached to the 2002 Proxy
Statement. The charter is reviewed annually and updated as needed in accordance
with applicable rules of the Securities and Exchange Commission and the Nasdaq
Stock Market. The Board of Directors has made the determination that each of the
members of the Audit Committee is independent, as defined by Nasdaq.
Management is responsible for the Company's internal controls, financial
reporting and compliance with laws and regulations and ethical business
standards. The independent auditors are responsible for performing an
independent audit of the Company's financial statements in accordance with
generally accepted auditing standards accepted in the United States and issuing
a report thereon. The Audit Committee members are not professional accountants
or auditors, and their functions are not intended to duplicate or to certify the
activities of management and the independent auditors, nor can the Audit
Committee certify that the independent auditor is "independent" under applicable
rules. The Audit Committee's primary responsibility is to monitor and oversee
the processes performed by management and the independent auditors. The Audit
Committee is also responsible for the appointment and compensation of the
Company's independent auditors.
In this context, the Audit Committee has reviewed and discussed the
Company's financial statements with both management and the independent
auditors. The Audit Committee also discussed with the independent auditors those
matters which are required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Company's independent auditors
also provided to the Audit Committee the written disclosure required by
Independence Standards Board Standard No. 1. (Independence Discussions with
14
Audit Committees), and the Audit Committee discussed with the independent
auditors their independence.
Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 2002 for filing
with the Securities and Exchange Commission. The Audit Committee also determined
that Wheeler Wasoff, P.C. be retained as the Company's independent auditors for
the fiscal year ending June 30, 2003.
October 14, 2002 Kenneth W. Nickerson
Mark A.E. Syropoulo
Robert J. Pett
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS
KPMG LLP was previously the principal accountants for the Company. On
August 22, 2002, that firm's appointment as principal accountants was terminated
and the Company engaged Wheeler Wasoff, P.C. as principal accountants. The
decision to change accountants was approved by the Audit Committee of the Board
of Directors and ratified by the Board of Directors.
In connection with the audits of the two fiscal years ended June 30, 2001
and the subsequent period through August 22, 2002, there were no disagreements
with KPMG LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements if
not resolved to their satisfaction would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement.
During the two most recent fiscal years and the subsequent period through
August 22, 2002, the Company did not consult with Wheeler Wasoff, P.C. regarding
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's financial statements.
The audit reports of KPMG LLP on the financial statements of the Company
as of and for the years ended June 30, 2001 and 2000 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles.
Although ratification by shareholders of the selection of Wheeler Wasoff,
P.C. is not required by the Colorado Business Corporation Act, or by the
Company's Articles of Incorporation, as amended, or Bylaws, the Board of
Directors believes that a decision of this nature should be confirmed by the
Company's shareholders. Accordingly, shareholders are being asked to consider
ratification of the selection of Wheeler Wasoff, P.C. for the fiscal year ending
15
June 30, 2003. If a significant number of shares are voted against the
ratification of this selection, or if the Audit Committee subsequently
determines for any reason that Wheeler Wasoff, P.C. should not serve as the
Company's auditors, the Audit Committee will reconsider its selection of Wheeler
Wasoff, P.C. for the fiscal year ending June 30, 2003.
It is expected that Wheeler Wasoff, P.C. will have a representative at the
Annual Meeting who will be given the opportunity to make any statement deemed
necessary and will be available to answer appropriate questions.
FEES PAID TO KPMG LLP
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by KPMG LLP for fiscal year 2002.
Audit Fees (1) $25,000.00
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees(2) $ 3,400.00
----------
Total $28,400.00
(1) Audit services of KPMG LLP for 2002 consisted of the examination of the
consolidated financial statements of the Company and the quarterly review
of financial information.
(2) "All Other Fees" includes $3,400.00 for audit-related services for filings
made with the Securities and Exchange Commission.
FEES PAID TO WHEELER WASOFF, P.C.
No fees were paid or accrued by the Company for audit or other services by
Wheeler Wasoff, P.C. during fiscal year 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE RATIFICATION OF THE SELECTION OF
WHEELER WASOFF, P.C. AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 2003
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO EXTEND THE TERM OF THE STOCK OPTION PLAN
The Stock Option Plan (the "Plan") was adopted by the Board of Directors
in October 1992 and subsequently approved by the Company's shareholders on
December 16, 1992. The Plan was adopted in order to grant nonqualified and
incentive stock options to officers, directors, key employees, advisors and
consultants of the Company and its subsidiaries. Pursuant to the terms of the
Plan, it will terminate December 16, 2002. On September 20, 2002, the
Compensation Committee (the "Committee) approved an amendment to the Plan that
would extend the term of the Plan for an additional ten years. The Company's
Board of Directors and the Committee (consisting of Kenneth W. Nickerson and
Mark A.E. Syropoulo, both of whom are outside directors) believe that extending
the term of the Plan is important to encourage stock
16
ownership by employees and management, to permit the Company to attract and
retain officers, directors, key employees, advisors and consultants, and to
continue to provide incentives and promote the financial success and progress of
the Company. In addition, the grant of stock options can be made without the
expenditure of the Company's limited cash or other liquid resources. Neither the
extension of the Plan nor a failure to extend the Plan will have any effect on
the duration of options previously granted under the Plan, which will remain in
effect for the period of time provided in the original option grants
irrespective of whether the Plan continues or is terminated. For tax purposes,
the extension of the term of the Plan is considered a "new" plan under the
Internal Revenue Code. Therefore, shareholder approval is required in order for
incentive stock options to continue to be granted under the Plan. Similarly,
under the Nasdaq Marketplace Rules, the extension of the term of the Plan may be
deemed to be the establishment of a "new" plan which requires shareholder
approval. Accordingly, the shareholders are being asked to approve the extension
of the Plan to December 16, 2012.
ADMINISTRATION, UNDERLYING SECURITIES, ELIGIBLE PERSONS AND AUTOMATIC GRANTS
UNDER THE PLAN
ADMINISTRATION
The Plan is administered by the Committee. The Plan can be administered by
the Board of Directors if and to the extent such administration is consistent
with applicable law. Subject to the Plan, the Committee has the authority to
determine to whom stock options may be granted, the time or times at which
options are granted, the number of shares covered by each such grant, and the
duration of the options. In addition, the Company will withhold or require the
payment by Optionee of any state, federal or local taxes resulting from the
exercise of an option, provided that, to the extent permitted by law, the
Committee may, in its discretion, permit some or all of such withholding
obligation to be satisfied by the delivery by the participant of, or the
retention by the Company of, shares of its Common Stock. All decisions and
interpretations made by the Committee are binding and conclusive on all
participants in the Plan.
UNDERLYING SECURITIES
The securities underlying stock options under the Plan are shares of the
Company's no par value Common Stock. Pursuant to the Plan, the maximum number of
shares of Common Stock that may be issued upon exercise or payment will not
exceed 2,233,000 shares. If any options granted under the Plan are surrendered,
or for any other reason cease to be exercisable in whole or in part, the shares
as to which the option ceases to be exercisable are available for options to be
granted to the same or other participants under the Plan.
ELIGIBLE EMPLOYEES AND OTHERS
Officers, directors, and employees of the Company and advisors and
consultants to the Company are eligible to receive options; provided that
advisors and consultants are eligible for grants only if they provide bona fide
services not rendered in connection with the offer or sale of securities or in a
capital-raising transaction. The Committee's discretion in granting options to
its members is limited. See "Formula Grants to Committee Members" below.
17
FORMULA GRANTS TO COMMITTEE MEMBERS
On the last trading day in September of each year each member of the
Committee receives an automatic grant of ten year, fully vested, nonqualified
stock options for 5,000 shares, exercisable at the closing price on the last
trading day in September. The Board of Directors has the discretion to grant
options to members of the Committee only to the extent permitted by applicable
law.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE AMENDMENT TO THE STOCK OPTION PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the Common
Stock of the Company, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the exchange on which the Common
Stock is listed for trading. Those persons are required by regulations
promulgated under the Exchange Act to furnish the Company with copies of all
reports filed pursuant to Section 16(a). Golden Prospect Plc, one of the
Company's principal shareholders, failed to make a timely filing of one
ownership report to report one transaction. Samson Exploration N.L., another of
the Company's principal shareholders, failed to make a timely filing of one
ownership report to report one transaction. Also, the Company's President, Barry
D. Lasker, failed to make a timely filing of one report to report three
transactions.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 2002 accompanies this Proxy Statement. The audited financial statements of
the Company are included in the Form 10-KSB. Copies of the exhibits to the Form
10-KSB are available from the Company upon written request of a shareholder and
payment of the Company's out-of-pocket expenses addressed to Melissa Temple, 999
18th Street, Suite 2490, Denver, Colorado 80202. The Commission also maintains a
web site at http://www.sec.gov/edgarhp.htm that contains the Form 10-KSB the
exhibits filed with the Form 10-KSB and other information concerning the Company
which have been electronically filed by the Company with the Commission.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE 2003 ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders of the Company intended to be presented by such
shareholders at the next annual meeting of shareholders to be held after the
2002 Annual Meeting must be received at the offices of the Company, 999 18th
Street, Suite 2490, Denver, Colorado 80202, no later than June 30, 2003, in
order that they may be included in the proxy statement and proxy for the 2003
Annual Meeting. In addition, any such proposals must satisfy the conditions
18
established by the SEC for shareholder proposals to be included in the proxy
statement and proxy for that meeting. If the date of the 2003 Annual Meeting is
advanced by more than 30 days or delayed (other than as result of adjournment)
by more than 30 days from the anniversary of the 2002 Annual Meeting, any such
proposals must be submitted no later than the close of business on the later of
the 60th day prior to the 2003 Annual Meeting or the 10th day following the day
on which public announcement of the date of such meeting is first made.
OTHER MATTERS
The Board of Directors knows of no other matter to be brought before the
shareholders' meeting. If other matters properly come before the meeting, the
persons named in the accompanying Proxy will vote in accordance with their best
judgment the Proxies solicited and received by the Company.
19
APPENDIX I
PROXY
KESTREL ENERGY, INC.
999 18TH STREET, SUITE 2490
DENVER, COLORADO 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Barry D. Lasker and Timothy L. Hoops as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all shares of common stock of
Kestrel Energy, Inc. held of record by the undersigned on October 22, 2002 at
the annual meeting of shareholders to be held on December 5, 2002 or any
adjournment thereof.
1. TO ELECT SEVEN DIRECTORS
FOR all nominees listed below
------
WITHHOLD AUTHORITY to vote for all nominees listed below
------
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE STRIKE A
LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW. TO CUMULATE VOTES FOR ANY
INDIVIDUAL NOMINEE, WRITE IN THE NUMBER OF CUMULATIVE VOTES TO BE CAST OPPOSITE
SUCH NOMINEE'S NAME. FOR AN EXPLANATION OF CUMULATIVE VOTING, SEE "VOTING OF
SHARES" IN THE ENCLOSED PROXY STATEMENT.)
NOMINEE CUMULATIVE VOTES NOMINEE CUMULATIVE VOTES
------- ---------------- ------- ----------------
Barry D. Lasker ---------------- Robert J. Pett ----------------
NOMINEE CUMULATIVE VOTES NOMINEE CUMULATIVE VOTES
------- ---------------- ------- ----------------
Kenneth W. Nickerson ---------------- Neil T. MacLachlan ----------------
NOMINEE CUMULATIVE VOTES NOMINEE CUMULATIVE VOTES
------- ---------------- ------- ----------------
John T. Kopcheff ---------------- Mark A.E. Syropoulo ---------------
NOMINEE CUMULATIVE VOTES
------- ----------------
Timothy L. Hoops ----------------
2. TO APPROVE AND RATIFY THE SELECTION OF WHEELER WASOFF, INC. AS THE
COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
YEAR ENDING JUNE 30, 2003
FOR AGAINST ABSTAIN
------- ---------- -----------
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S STOCK OPTION PLAN TO EXTEND THE
TERM OF THE PLAN FOR AN ADDITIONAL TEN YEARS
FOR AGAINST ABSTAIN
------- ---------- -----------
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR proposals 1, 2 and 3 above.
Please sign exactly as your name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated _______________________, 2002
--------------------------------------
Signature
--------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
APPENDIX II
KESTREL ENERGY, INC.
STOCK OPTION PLAN
AS AMENDED DECEMBER 5, 2002
Section 1. PURPOSE. The purpose of the Kestrel Energy, Inc. (the "Company")
Stock Option Plan (the "Plan") is to provide incentives for selected persons to
promote the financial success and progress of the Company by granting such
persons options to purchase shares of stock of the Company ("Option").
Section 2. GENERAL PROVISIONS OF THE PLAN.
A. ADMINISTRATION. The Plan shall be administered by a committee
comprised of two or more directors designated by the Board of Directors of the
Company (the "Committee"). Notwithstanding the foregoing, if it would be
consistent with all applicable laws, including without limitation Rule 16b-3, 17
C.F.R. 240.16b-3 ("Rule 16b-3") promulgated under the Securities Exchange Act of
1934 (the "Exchange Act"), then the Plan may be administered by the Board of
Directors, and, if so administered, all subsequent references to the Committee
shall refer to the Board of Directors. Any action of the Committee shall be
taken by majority vote or by written consent of the Committee members.
B. AUTHORITY OF THE COMMITTEE. Subject to other provisions of the
Plan, and with a view towards furtherance of its purpose, the Committee shall
have sole authority and absolute discretion:
1. to construe and interpret the Plan;
2. to define the terms used herein;
3. to prescribe, amend and rescind rules and regulations
relating to the Plan;
4. to determine the persons to whom Options shall be granted
under the Plan;
5. to determine the time or times at which Options shall be
granted under the Plan;
6. to determine the number of shares subject to each Option,
the price and the duration of each Option;
7. to determine all of the other terms and conditions of
Options; and
8. to make all other determinations necessary or advisable for
the administration of the Plan and to do everything necessary or appropriate to
administer the Plan.
All decisions, determinations and interpretations made by the Committee shall be
binding and conclusive on all participants in the Plan and on their legal
representatives, heirs and beneficiaries.
C. NUMBER OF SHARES SUBJECT TO THE PLAN. The aggregate number of shares
of Common Stock subject to the Plan shall be 2,233,000, subject to adjustment as
provided in the Plan. If any Options granted under the Plan expire or terminate
for any reason before they have been exercised in full, the unpurchased shares
shall again be available for the purposes of the Plan.
D. ELIGIBILITY AND PARTICIPATION. Subject to the terms of the Plan,
Options may be granted only to such employees, officers, directors, consultants
and advisors of the Company as the Committee shall select from time to time in
its sole discretion; provided, however, that consultants and advisors shall be
eligible only if they provide bona fide services that are not rendered in
connection with the offer or sale of securities in a capital-raising
transaction. A person may be granted more than one Option under the Plan.
Furthermore, notwithstanding any contrary provision of the Plan, the Committee
shall have no discretion to determine the amount, price or timing of grants
hereunder to Committee members, except to the extent that the Committee's
exercise of such authority is consistent with all applicable laws, including,
without limitation, Rule 16b-3. Grants to Committee members shall be made in
accordance with Section 6 hereof. Only employees of the Company shall be
eligible to receive Incentive Stock Options.
E. EFFECTIVE DATE OF PLAN. The Plan shall be submitted to the
shareholders of the Company for their approval and adoption at a meeting to be
held on or about December 16, 1992, or at any adjournment thereof. The Plan
shall be effective upon approval and adoption by the shareholders. To the extent
required by paragraph F, subsequent amendments to the Plan shall be submitted to
the shareholders and such amendments shall be effective upon such approval. All
other amendments shall be effective upon adoption by the Committee.
F. TERMINATION AND AMENDMENT OF PLAN. The Plan shall terminate ten years
after the date on which the shareholders approve the Plan, unless sooner
terminated by the Committee or the Board of Directors. No Options shall be
granted under the Plan after that date. Subject to the limitation contained in
paragraph E of this Section 2, the Committee or the Board of Directors may at
any time amend or revise the terms of the Plan, including the form and substance
of the Options to be used hereunder, provided that no amendment or revision
shall be made without shareholders' approval which (i) increases the aggregate
number of shares that may be issued pursuant to Options granted under the Plan,
except as provided under paragraph G of this Section 2; or (ii) effects any
change to the Plan which is required to be approved by shareholders by law.
2
G. ADJUSTMENTS. If the outstanding shares of the Company's Common Stock
are increased, decreased, changed into or exchanged for a different number or
kind of shares or securities through merger, consolidation, combination,
exchange of shares, other reorganization, recapitalization, reclassification,
stock dividend, stock split or reverse stock split, an appropriate and
proportionate adjustment shall be made in the aggregate number and kind of
shares reserved to the Plan. A corresponding adjustment changing the number or
kind of shares allocated to unexercised Options or portions thereof, which shall
have been granted prior to any such change, shall likewise be made. Any such
adjustment in outstanding Options shall be made without change in the aggregate
purchase price applicable to the unexercised portion of the Option, but with a
corresponding adjustment in the price for each share covered by the Option.
H. PRIOR OPTIONS AND OBLIGATIONS. No amendment, suspension or
termination of the Plan shall, without the consent of the person who has
received an Option, alter or impair any of that person's Options or rights or
obligations under any Option granted under the Plan prior to that amendment,
suspension or termination.
I. PRIVILEGES OF STOCK OWNERSHIP. Notwithstanding the exercise of any
Option granted hereunder, no person shall have any of the rights or privileges
of a shareholder of the Company in respect of any shares of stock issuable upon
the exercise of his or her Option until certificates representing the shares
have been issued and delivered. No shares shall be required to be issued and
delivered upon exercise of any Option until there has been full compliance with
all of the requirements of law and of all regulatory agencies having
jurisdiction over the issuance and delivery of the securities.
J. RESERVATION OF SHARES OF COMMON STOCK. During the term of the Plan,
the Company will at all times reserve and keep available for issuance a
sufficient number of shares of its Common Stock to satisfy the requirements of
the Plan. In addition, the Company will from time to time, as is necessary to
accomplish the purposes of the Plan, seek or obtain from any regulatory agency
having jurisdiction all requisite authority necessary to issue shares of Common
Stock hereunder. The inability of the Company to obtain from any regulatory
agency having jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance of any shares of its stock hereunder shall
relieve the Company of any liability in respect of the nonissuance of the stock
as to which the requisite authority shall not have been obtained.
K. TAX WITHHOLDING. The exercise of any Option is subject to the
condition that if at any time the Company shall determine, in its discretion,
that the satisfaction of withholding tax or other withholding liabilities under
any state or federal law is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of shares pursuant
thereto, then in such event, the exercise of the Option shall not be effective
unless such withholding shall have been effected or obtained in a manner
acceptable to the Company. The Committee may, in its discretion, accept payment
of such withholding taxes and liabilities from an Optionee in the form of shares
of the Company's Common Stock or other
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property and may elect to deduct shares of Common Stock that would have
otherwise been delivered to an Optionee upon exercise to satisfy all or a part
of such taxes and liabilities.
L. FAIR MARKET VALUE. The "fair market value" of the Common Stock on any
given date means (a) if there is an established market for the Company's Common
Stock on a stock exchange, in an over-the-counter market or otherwise, the
closing price on the date of grant, or (b) as otherwise specified by the
Committee. In the case of automatic grants to Committee members, the fair market
value shall be the closing price on the date of grant.
Section 3. OPTION TERMS AND CONDITIONS. Options granted under this plan may
be Incentive Stock Options (within the meaning of Section 422 of the Internal
Revenue Code (the "Code")) or nonqualified stock options. The terms and
conditions of Options granted under the Plan may differ from one another as the
Committee shall in its discretion determine so long as all Options granted under
the Plan satisfy the requirements of the Plan; provided, however, that any
Options designated as Incentive Stock Options must comply with the provisions of
the Plan specifically relating to Incentive Stock Options and the Code.
Section 4. DURATION OF OPTIONS. Each Option granted hereunder shall expire
on the date fixed by the Committee, which shall be not later than ten years
after the date of grant; provided, however, that in the case of Incentive Stock
Options granted to a 10% shareholder, no option shall be exercisable more than
five years after the date of grant. In addition, each Option shall be subject to
early termination as provided in the Plan.
Section 5. OPTION PRICE. The option price for shares acquired pursuant to
the exercise of any Option, in whole or in part, shall be determined by the
Committee at the time of grant. Such option price may be less than the fair
market value of the Company's Common Stock on the valuation date or valuation
period, but in no event shall the option price be less than fifty percent (50%)
of the fair market value of the shares on the valuation date or valuation
period; provided, however that the exercise price of Incentive Stock Options
shall be fixed by the Committee at not less than 100% of the fair market value
of the Common Stock on the valuation date or valuation period; provided further,
that in the case of Incentive Stock Options granted to a 10% shareholder, the
exercise price of the option shall not be less than 110% of the fair market
value of the Common Stock on the valuation date or valuation period.
Section 6. GRANTS TO COMMITTEE MEMBERS. Except as otherwise provided in
paragraph D of Section 2 hereof, the Committee shall have no discretion to
determine the amount, price or timing of grants of Options to Committee members.
Grants of Options to Committee members shall be made at the discretion of the
Board of Directors (with members of the Committee abstaining) or in accordance
with a formula established by the Board of Directors; provided, however, that if
the Board of Directors fails to make a discretionary grant of Options or
otherwise establish a formula by which Options are granted to Committee members
in any fiscal year of the Company, then automatic grants of Options to Committee
members shall made on the last trading day in September. Such automatic grants
to Committee members shall be
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nonqualified Options for 5,000 shares per Committee member and the exercise
price shall be the fair market value (determined in accordance with Section 2.L.
above).
Section 7. LIMITATIONS ON ACQUIRING VOTING STOCK. No Optionee who is not an
officer or director of the Company is eligible to receive or exercise any Option
which, if exercised, would result in that person becoming the beneficial owner,
as defined in the Exchange Act, of more than 5% of the outstanding voting stock
of the Company without the unanimous consent of the Board of Directors.
Section 8. EXERCISE OF OPTIONS. Each Option shall be exercisable in one or
more installments during its term, and the right to exercise may be cumulative,
as determined by the Committee. No Option may be exercised for a fraction of a
share of Common Stock. The option price shall be paid at the time of exercise of
the Option (i) in cash; (ii) by certified or cashier's check; (iii) if permitted
by the Committee, with shares of the Company's issued and outstanding Common
Stock; or (iv) by any other means permitted by the Committee in its discretion
after determination that such means are consistent with all applicable laws and
regulations. If any portion of the purchase price at the time of exercise is
paid in shares of the Company's Common Stock, those shares shall be tendered at
their fair market value on the date of exercise.
The Committee may also permit an Optionee to effect a net exercise
of an option without tendering any shares of the Company's stock as payment for
the Option. In such an event, the Optionee will be deemed to have paid for the
exercise of the Option with shares of the Company's stock and shall receive from
the Company a number of shares equal to the difference between the shares that
would have been tendered and the number of Options exercised. Members of the
Committee may effect a net exercise of their Options only with the approval of
the Board of Directors.
The Committee may also cause the Company to enter into arrangements
with one or more licensed stock brokerage firms whereby Optionees may exercise
options without payment therefor but with irrevocable orders to such brokerage
firm to immediately sell the number of shares necessary to pay the exercise
price for the option and the withholding taxes, if any, and then to transmit
that portion of the proceeds from such sales to the Company to pay such
obligations.
Section 9. ACCELERATION OF OPTIONS. Notwithstanding the first sentence of
Section 8 hereof, if the Company or its shareholders enter into an agreement to
dispose of all or substantially all of the assets or stock of the Company by
means of a sale, merger or other reorganization, liquidation, or otherwise, any
Option granted pursuant to the Plan shall become immediately exercisable with
respect to the full number of shares subject to that Option during the period
commencing as of the date of the agreement to dispose of all or substantially
all of the assets or stock of the Company and ending when the disposition of
assets or stock contemplated by that agreement is consummated or the Option is
otherwise terminated in accordance with its provisions or the provisions of the
Plan, whichever occurs first; provided that no Option shall be
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immediately exercisable under this Section on account of any agreement of merger
or other reorganization where the shareholders of the Company immediately before
the consummation of the transaction will own at least 50% of the total combined
voting power of all classes of stock entitled to vote of the surviving entity
(whether the Company or some other entity) immediately after the consummation of
the transaction. In the event the transaction contemplated by the agreement
referred to in this Section 9 is not consummated, but rather is terminated,
cancelled or expires, the Options granted pursuant to the Plan shall thereafter
be treated as if that agreement had never been entered into.
Section 10. WRITTEN NOTICE REQUIRED. Any Option granted pursuant to the
Plan shall be exercised when written notice of that exercise has been given to
the Company at its principal office by the person entitled to exercise the
Option and payment for the shares with respect to which the Option is exercised
has been received by the Company in accordance with Section 8 hereof.
Section 11. LIMITATION ON EXERCISE OF INCENTIVE STOCK OPTIONS. To the
extent required by the Code, the aggregate fair market value (determined at the
time the Option is granted) of Common Stock for which Incentive Stock Options
are exercisable for the first time by a participant during any calendar year
(including all plans of the Company and its subsidiaries) shall not exceed
$100,000.
Section 12. COMPLIANCE WITH SECURITIES LAWS. Shares shall not be issued
with respect to any Option granted under the Plan unless the exercise of that
Option and the issuance and delivery of the shares pursuant thereto shall comply
with all relevant provisions of state and federal law, including without
limitation the Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
shares may then be listed, which compliance shall be determined by counsel for
the Company. Further, each Optionee shall consent to the imposition of a legend
on the certificate representing the shares of Common Stock issued upon the
exercise of the Option restricting their transferability if and to the extent
required by law, the terms of the Option or the Plan.
Section 13. EMPLOYMENT OF OPTIONEE. Each Optionee, if requested by the
Committee, must agree in writing as a condition of the granting of an Option, to
remain in the employ of the Company or to remain as a consultant or advisor to
the Company following the date of grant for a period or periods specified by the
Committee, which period(s) shall in no event exceed an aggregate of four years.
Nothing in the Plan or in any Option granted hereunder shall confer upon any
Optionee any right to continued employment or retainer by the Company, or limit
in any way the right of the Company to terminate or alter the terms of that
employment or consulting arrangement at any time.
Section 14. OPTION RIGHTS UPON TERMINATION OF EMPLOYMENT, DIRECTOR,
CONSULTANT OR ADVISOR STATUS. If an Optionee ceases to be employed by the
Company or ceases to serve as a director, consultant or advisor of the Company
for any reason other than death, his or her Option
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shall immediately terminate; provided, however, that the Committee may, in its
discretion, allow the Option to remain exercisable (to the extent exercisable on
the date of termination of employment or retainer) for up to one additional year
for each year of service to the Company by the Optionee (up to a maximum of five
years after the date of termination), unless either the Option or the Plan
otherwise provides for earlier termination; and provided further that, for
purposes of determining when a director no longer serves the Company, the period
during which post-retirement or similar benefits, if any, are paid to the
director by the Company shall be deemed to be continued service.
Section 15. OPTION RIGHTS UPON DEATH OF OPTIONEE. Except as otherwise
limited by the Committee at the time of the grant of an Option, if an Optionee
dies while he or she is an employee, director, consultant or advisor of the
Company, his or her Option shall remain exercisable for one year after the date
of death, unless either the Option or the Plan otherwise provides for earlier
termination. During such exercise period after death, the Option may be fully
exercised, to the extent that it remained unexercised on the date of death, by
the person or persons to whom the Optionee's rights under the Option shall pass
by will or by laws of descent and distribution.
Section 16. WAIVER OF VESTING RESTRICTIONS IN THE EVENT OF RETIREMENT.
Notwithstanding any provision of the Plan, in the event an Optionee retires as
an employee or director of the Company, the Committee shall have the discretion
to waive any vesting restrictions on the retiree's Options.
Section 17. OPTIONS NOT TRANSFERABLE. Options granted pursuant to the Plan
may not be sold, pledged, assigned or transferred in any manner other than by
will or the laws of descent and distribution and may be exercised during the
lifetime of an Optionee only by that Optionee or by his or her guardian or legal
representative.
Section 18. REPORTS TO OPTIONEES. The Company shall furnish to each
Optionee a copy of the annual report sent to the Company's shareholders. Upon
written request, the Company shall furnish to each Optionee a copy of its most
recent Form 10-K Annual Report and each quarterly report to shareholders issued
since the end of the Company's most recent fiscal year.
Section 19. READOPTION AND EXTENSION OF PLAN. On September 20, 2002, the
Committee and the Board of Directors readopted the Plan and approved the
extension of its term for an additional ten years to December 16, 2012. The
extension of the Plan was approved by the shareholders on December 5, 2002.
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