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 Only
[X] Definitive Proxy Statement (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.
--------------------------------------------------------------------------------
(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: _____________________________________________________________
KESTREL ENERGY, INC.
1726 COLE BOULEVARD, SUITE 210
LAKEWOOD, COLORADO 80401
(303) 295-0344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 4, 2003
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 4, 2003, at the offices of the Company at 1726 Cole
Boulevard, Suite 210, Lakewood, 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, 2004; and
3. 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 21, 2003 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, AND APPROVE AND RATIFY THE SELECTION OF
WHEELER WASOFF, P.C.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
October 27, 2003 Barry D. Lasker
President
2
KESTREL ENERGY, INC.
1726 COLE BOULEVARD, SUITE 210
LAKEWOOD, COLORADO 80401
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 4, 2003
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 1726 COLE
BOULEVARD, SUITE 210, LAKEWOOD, COLORADO ON THURSDAY, DECEMBER 4, 2003 AT 10:00
A.M., MOUNTAIN STANDARD TIME, AND AT ANY ADJOURNMENT THEREOF. It is anticipated
that this Proxy Statement and the accompanying Proxy will be mailed to the
Company's shareholders on or about October 27, 2003.
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 21, 2003,
will be entitled to notice of, and to vote at, the Annual Meeting and at any
adjournment thereof. On that date, there were 9,798,400 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. The approval and ratification of the selection of Wheeler
Wasoff, P.C. requires 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 proposal 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
21, 2003 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 by each person or entity 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, warrants and a convertible note within 60 days of such date.
===============================================================================
Number of Shares of Common Stock Beneficially Owned
-------------------------------------------------------------------------------
Voting and Investment Power
-------------------------------------------------------------------------------
Name and Address Direct Indirect Total Percent Owned
Shares
-------------------------------------------------------------------------------
Victoria International 1,491,517(1) --- 1,491,517 15.2%
Petroleum N.L.
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
Victoria Petroleum N.L. --- 1,491,517(1) 1,491,517 15.2%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
Timothy L. Hoops 284,490(2) 1,491,517(3) 1,776,007 17.7%
1726 Cole Blvd., Suite 210
Lakewood, CO 80401
-------------------------------------------------------------------------------
Robert J. Pett 137,708(4) 1,491,517(5) 1,629,225 16.4%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
John T. Kopcheff 209,415(6) 1,491,517(7) 1,700,932 17.0%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
4
===============================================================================
Number of Shares of Common Stock Beneficially Owned
-------------------------------------------------------------------------------
Voting and Investment Power
-------------------------------------------------------------------------------
Name and Address Direct Indirect Total Percent Owned
Shares
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Golden Prospect Plc 849,000 2,007,500(8) 2,956,500 30.2%
1st Floor
143-149 Great Portland St.
London W2N 5FB
England
-------------------------------------------------------------------------------
Samson Exploration N.L. 2,007,500 --- 2,007,500 20.5%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-------------------------------------------------------------------------------
Nieuport Pty Ltd 1,005,000(9) --- 1,005,000 8.9%
PO Box 332
Greenwood 6924
Western Australia
-------------------------------------------------------------------------------
The Equitable Life 840,000 --- 840,000 8.6%
Assurance Society
City Place House
55 Basinghall St.
London EC2V 5DR
England
-------------------------------------------------------------------------------
Barry D. Lasker 861,000(10) 861,000 8.1%
1726 Cole Blvd., Suite 210
Lakewood, CO 80401
-------------------------------------------------------------------------------
Elstree Nominees Pty Ltd 515,000 --- 515,000 5.3%
8 Elstree Avenue
Meora 6050
Western Australia
-------------------------------------------------------------------------------
(1) Victoria International Petroleum N.L. ("VIP"), the record holder of the
shares, is a wholly owned subsidiary of Victoria Petroleum N.L. ("VP"),
which is therefore deemed to be another beneficial owner of the shares.
(2) Includes vested options to purchase up to 256,580 shares.
(3) Mr. Hoops is a director of VIP and of VP. As a result, all shares held by
VIP directly and VP indirectly are listed as indirectly held by Mr. Hoops.
(4) Includes vested options to purchase up to 127,708 shares.
(5) Mr. Pett is the Chairman and a director of VIP and a director of VP. As a
result, all shares held by VIP directly and VP indirectly are listed as
indirectly held by Mr. Pett.
(6) Includes vested options to purchase up to 195,415 shares.
(7) Mr. Kopcheff is a director of VIP and VP. As a result, all shares held by
VIP directly and VP indirectly are listed as indirectly held by Mr.
Kopcheff.
(8) Golden Prospect Plc owns 29.95% of Samson Exploration N.L. and is
therefore deemed to be a beneficial owner of the shares held by Samson.
(9) Includes a warrant to purchase up to 335,000 shares. By the terms of the
warrant issued to
5
Nieuport Pty Ltd, the warrant is only exercisable by Nieuport if and to
the extent that, on the date of any exercise or attempt to exercise the
warrant, Nieuport is not the beneficial owner (within the meaning
ascribed to the term by Section 13(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") and has not been the beneficial owner of
more than 8.99% of the Common Stock (calculated as required by Section
13(d) of the Exchange Act) for a period of 60 days prior to the date of
such exercise or attempted exercise.
(10) Consists of vested options to purchase up to 340,000 shares and a $200,000
convertible promissory note initially convertible into 500,000 shares.
The following table sets forth the number of shares beneficially owned on
October 21, 2003 by the Company's executive officers and directors, and by all
of the executive officers and directors as a group. For purposes of this
disclosure, the amount of the Company's Common Stock beneficially owned is the
aggregate number of shares of the Common Stock outstanding on such date plus an
amount equal to the aggregate amount of Common Stock which could be issued upon
the exercise of stock options and a convertible note within 60 days of such
date.
===============================================================================
Position(s) Number of Shares of
With the Common Stock
Name and Address Company Beneficially Owned Percent Owned
-----------------------------------------------------------------------------------------------------------------
Barry D. Lasker President, Chief 861,000(1) 8.1%
1726 Cole Blvd., Suite 210 Executive Officer and
Lakewood, CO 80401 Director
-----------------------------------------------------------------------------------------------------------------
Timothy L. Hoops Director 1,776,007(2)(3) 17.7%
1726 Cole Blvd., Suite 210
Lakewood, CO 80401
-----------------------------------------------------------------------------------------------------------------
Robert J. Pett Chairman of the Board 1,629,225(4)(5) 16.4%
2 The Esplanade, 36th Flr. and Director
Perth 6000
Western Australia
-----------------------------------------------------------------------------------------------------------------
John T. Kopcheff Director 1,700,932(6)(7) 17.0%
2 The Esplanade, 36th Flr.
Perth 6000
Western Australia
-----------------------------------------------------------------------------------------------------------------
Kenneth W. Nickerson Director 65,909(8) <1%
10780 Hanson St.
Johannesburg, MI 49751
-----------------------------------------------------------------------------------------------------------------
Mark A.E. Syropoulo Director 208,000(9) 2.1%
Lot 42 Gumboil Road
Cooroy Queensland 4563
Australia
-----------------------------------------------------------------------------------------------------------------
Neil T. MacLachlan Director 189,800(10) 1.9%
1 Victoria Square
London SWIW OQY
England
-----------------------------------------------------------------------------------------------------------------
All Directors and Executive 3,447,839(11) 30.1%
Officers as a Group (7 persons)
===============================================================================
6
(1) Includes vested options to purchase up to 320,000 shares and a $200,000
convertible note initially convertible into 500,000 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 held by VIP
directly and by VP indirectly are listed as beneficially owned by Mr.
Hoops.
(3) Includes vested options to purchase up to 256,580 shares.
(4) Mr. Pett is the Chairman and a director of VIP and a director of VP. As a
result, all shares held by VIP directly and VP indirectly are listed as
held by Mr. Pett.
(5) Includes vested options to purchase up to 127,708 shares.
(6) Mr. Kopcheff is a director of VIP and VP. As a result, all shares held by
VIP directly and VP indirectly are listed as beneficially owned by Mr.
Kopcheff.
(7) Includes vested options to purchase up to 195,415 shares. (8) Consists of
vested options to purchase up to 65,909 shares.
(9) Includes vested options to purchase up to 170,000 shares, and 38,000
shares owned indirectly by Syrops & Co. Pty. Ltd.
(10) Includes vested options to purchase up to 35,000 shares, and 55,000 shares
owned indirectly by a trust.
(11) Includes vested options and a convertible promissory note to purchase up
to 1,670,612 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 43 President, Chief Since 2001
Executive Officer,
and Director
Timothy L. Hoops 47 Operations Manager Since 1992
and Director
Robert J. Pett 56 Chairman of the Board Since 1992
7
John T. Kopcheff 55 Director Since 1995
Kenneth W. Nickerson 83 Director Since 1992
Mark A. E. Syropoulo 51 Director Since 1998
Neil T. MacLachlan 61 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.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held one meeting and acted 10 times by unanimous
written consent during the fiscal year ended June 30, 2003. The committees of
the Board include an Audit Committee, a Compensation Committee and an Executive
Committee.
The Audit Committee was comprised of Messrs. Nickerson, Syropoulo and Pett
during fiscal 2003. It held two meetings and acted five times by unanimous
written consent during the fiscal year. The Audit Committee first adopted its
charter in fiscal 2000 and amended it October 21, 2003. 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 amended 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. A copy of the amended
charter is attached hereto as Appendix A.
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 2003 were
Messrs. Nickerson and Syropoulo. The Committee acted one time by unanimous
written consent during fiscal 2003.
The Executive Committee was comprised of Messrs. Lasker, Syropoulo and
Pett in fiscal 2003. 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
acted one time by unanimous written consent during fiscal 2003.
8
DIRECTORS' REMUNERATION
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 30, 2002, both Messrs.
Nickerson and Syropoulo, as members of the Compensation Committee, received
fully vested ten year options to purchase 5,000 shares of Common Stock at an
exercise price of $0.33 per share, the closing price on the date of grant.
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 43, 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 47, 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. On July 1, 2002, Mr. Hoops was rehired as the
Company's Operations Manager. Mr. Hoops is a petroleum geologist with 24 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
9
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 56, 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 and he has been Chairman of Victoria Petroleum N.L.
for 19 years. He is currently Chairman of Resolute Limited, an Australian mining
and natural resources company, which provides office facilities and
administrative services to Victoria Petroleum N.L. on a pro-rata reimbursement
of expenses basis. He is a Director of Sapphire Mines N.L., an Australian
precious gem mining company, and 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 55, was appointed as a Director 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 33 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 83, is an independent petroleum and mineral
geologist with over 53 years experience. He was appointed as a Director 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 51, 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. From 1987 to 1993, Mr. Syropoulo was managing director 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.
10
NEIL T. MACLACHLAN, age 61, 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 indirectly,
approximately 30% of its stock. Samson Exploration N.L. is another principal
shareholder of the Company holding approximately 22% of the Company's stock.
Because Golden Prospect owns 29.95% of Samson, the 22% held by Samson is
included in the 30% held by Golden Prospect. Mr. MacLachlan has over 27 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 executive officer, nor is there any family relationship between or among any
executive officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of June 30, 2002, the Company owed approximately $516,000 on its line
of credit with Wells Fargo Bank, which line was secured by deeds of trust on
various of the Company's oil and gas producing properties. On August 6, 2002 the
Company borrowed $500,000 from Samson Exploration N.L., a principal shareholder,
and used the proceeds of the loan to pay off the Wells Fargo loan. Interest
under the Samson loan was 10% per annum in addition to an up front financing fee
of 10%.
On January 24, 2003, the Company borrowed $400,000 from R&M Oil and Gas,
Ltd., of which Timothy L. Hoops, one of the Company's Directors and its
Operations Manager, is a partner. That loan is due on January 31, 2005, bears
interest at 12.5% per annum and is secured by the Company's oil and gas
interests in Grady County, Oklahoma. In the event of a default under the terms
of the R&M loan, and the sale of the collateral securing the loan, the Company
would receive any remaining proceeds after payment to R&M of its expenses in
connection with such sale(s) and any indebtedness due and payable to R&M under
the loan. The proceeds from the R&M loan were used to retire the outstanding
debt to Samson Exploration N.L. and reduce the Company's accounts payable
position at that time. The R&M loan was approved unanimously by the Board of
Directors with Mr. Hoops abstaining, which evaluated its fairness as an arms
length transaction.
On February 4, 2003, the Company repaid Samson Exploration N.L. in full,
including all accrued interest and fees, with $327,143.15 in cash and the
transfer of the Company's remaining 25,000,000 shares of Victoria Petroleum N.L.
common stock.
11
On May 5, 2003, the Company entered into a Line of Credit Agreement with
Barry D. Lasker, President, CEO and a Director of Kestrel for a maximum of
$200,000. Under the terms of the agreement all outstanding amounts are due on
May 4, 2005 and bear interest at 10% per annum. The loan can also be converted,
at Mr. Lasker's election, into shares of Common Stock at $0.40 per share. The
initial proceeds of the loan consisted of $40,000 cash and forgiveness of
approximately $152,000 of unpaid wages and unreimbursed business expenses owed
to Mr. Lasker by the Company. The Lasker loan is secured by the Company's oil
and gas interests in Campbell County, Wyoming. In the event of a default under
the terms of the Lasker loan, and the sale of the collateral securing the loan,
the Company would receive any remaining proceeds after payment to Mr. Lasker of
his expenses in connection with such sale(s) and the indebtedness due and
payable to him under the loan. Like the R&M loan, the Lasker loan was approved
as an arms length transaction by the entire Board of Directors with Mr. Lasker
abstaining.
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 2003 $180,000(1) $0 0
Chief Executive Officer 2002 $165,000(2) $0 320,000
2001 $0 $0 0
-------------------------------------------------------------------------------
Timothy L. Hoops, Operations 2003 $72,000 $23,639 0
Manager, former President 2002 $43,754 $57,847 20,000
and Chief Executive Officer(3) 2001 $144,000 $0 0
-------------------------------------------------------------------------------
Ira Pasternack, Former Vice 2003 $15,000 $4,080 0
President -Exploration(4) 2002 $86,250 $0 20,000
2001 $120,000 $0 0
-------------------------------------------------------------------------------
(1) Includes $60,000 for accrued salary which was rolled into a line of credit
to the Company by Mr. Lasker. See "Certain Relationships and Related
Transactions."
(2) Includes $10,000 for accrued salary which was rolled into a line of credit
to the Company by Mr. Lasker. See "Certain Relationships and Related
Transactions."
(3) Besides his salary, Mr. Hoops received fees as a director of Victoria
Petroleum N.L. in the amount of Australian $5,000 for fiscal 2003 and
expects to receive the same amount in fiscal 2004. Mr. Hoops resigned as
President and Chief Executive Officer on August 15, 2001, but remained as a
consultant. On July 1, 2002, Mr. Hoops was also rehired as the Company's
Operations Manager. 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. In fiscal 2003 he received
$23,639 on one joint venture with the Company in Nebraska through Peak
Resources of
12
which $2,828 remains unpaid as of the date of this Proxy Statement.
(4) Mr. Pasternack resigned as an officer effective June 30, 2002, but continued
as an employee until October 15, 2002. Since that date, Mr. Pasternack
remained as a consultant. The other annual compensation received in fiscal
2003 is related to those consulting activities.
None of the named officers received additional compensation other than
noted above the aggregate amount of which was the lesser of either $50,000 or
10% of the total of annual salary, bonus and consulting fees reported for such
officer.
The Company reimburses its officers and directors for ordinary and
necessary business expenses incurred by them on behalf of the Company.
13
OPTION GRANTS FOR FISCAL YEAR ENDED JUNE 30, 2003
================================================================================
Number Potential Realizable Value at
Of % of Total Assumed Annual Rates of
Securities Options Granted Exercise or Stock Price Appreciation
Underlying to Employees Base Price Expiration For Option Term
Name Options in Fiscal Year ($/share) Date 5%($)(1) 10%($)(2)
Granted
=================================================================================================================================
Barry D. Lasker -0- 0% N/A N/A N/A N/A
President, Chief
Executive Officer
And Director
---------------------------------------------------------------------------------------------------------------------------------
Timothy L. Hoops -0- 0% N/A N/A N/A N/A
Operations Manager,
former President and
Chief Executive
Officer and Director
---------------------------------------------------------------------------------------------------------------------------------
Ira Pasternack -0- 0% N/A N/A N/A N/A
Former Vice President -
Exploration
---------------------------------------------------------------------------------------------------------------------------------
Robert J. Pett -0- N/A N/A N/A N/A N/A
Chairman of the
Board and Director
---------------------------------------------------------------------------------------------------------------------------------
John T. Kopcheff -0- N/A N/A N/A N/A N/A
Director
---------------------------------------------------------------------------------------------------------------------------------
Kenneth W. Nickerson 5,000(3) N/A $0.33 9-30-12 $2,688 $4,279
Director
---------------------------------------------------------------------------------------------------------------------------------
Mark A.E. Syropoulo 5,000(3) N/A $0.33 9-30-12 $2,688 $4,279
Director
---------------------------------------------------------------------------------------------------------------------------------
Neil T. MacLachlan -0- N/A N/A N/A N/A N/A
Director
================================================================================
(1) This column represents the potential realizable value of each grant of
options, based on the assumption that the market price of shares of Common
Stock underlying the options will appreciate in value from the date of the
grant to the end of the option term at the annual rate of five percent.
(2) This column represents the potential realizable value of each grant of
options, based on the assumption that the market price of shares of Common
Stock underlying the options will appreciate in value from the date of the
grant to the end of the option term at the annual rate of ten percent.
(3) Of this grant, all were nonqualified stock options.
14
AGGREGATED OPTION EXERCISES FOR FISCAL YEAR ENDED JUNE 30, 2003
AND YEAR END OPTION VALUES
================================================================================
Number of Securities Value of Unexercised
Shares Acquired on Value Underlying Unexercised In-the-Money Options
Exercise(#) Realized Options at June 30, 2003 at June 30, 2003
Name ($) (#) ($)(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
Operations Manager
former President and
Chief Executive
Officer, and Director
---------------------------------------------------------------------------------------------------------------------------------
Ira Pasternack, Former Vice 0 N/A 120,000/0 $0/$0
President - Exploration
---------------------------------------------------------------------------------------------------------------------------------
Robert J. Pett 0 N/A 127,708/0 $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 55,909/5,000 $150/$0
Director
---------------------------------------------------------------------------------------------------------------------------------
Mark A.E. Syropoulo 0 N/A 160,000/5,000 $150/$0
Director
---------------------------------------------------------------------------------------------------------------------------------
Neil T. MacLachlan 0 N/A 35,000/0 $0/$0
Director
================================================================================
(1) For all unexercised options held as of June 30, 2003, the aggregate dollar
value is the excess of the market value of the stock underlying those
options over the exercise price of those unexercised options. The price
used to calculate these figures is the closing price as of June 30, 2003
as reported on the OTC Bulletin Board, which was $0.36 per share.
15
EQUITY COMPENSATION PLAN INFORMATION
AS OF FISCAL YEAR END JUNE 30, 2003
--------------------------------------------------------------------------------
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 1,942,984 $1.37 270,114
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 recently amended, a copy of
which is attached hereto as Appendix A. The charter is reviewed annually and
updated as needed in accordance with applicable rules of the Securities and
Exchange Commission and The Sarbanes-Oxley Act of 2002 (the "Sarbanes Act"). The
Board of Directors has made the determination that each of the members of the
Audit Committee is independent by reference to Nasdaq listing standards.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent auditors, Wheeler Wasoff,
P.C., 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 independent
auditors have full access to the Audit Committee and meet with the Audit
Committee during at least one of the Audit Committee's quarterly meetings, with
an without management being present, to discuss appropriate matters. 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
16
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 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, 2003 for filing
with the Securities and Exchange Commission. While, the Committee also
determined that Wheeler Wasoff, P.C. be retained as the Company's independent
auditors for the fiscal year ending June 30, 2004, it also reserved the right to
consider retaining a different independent auditor for that year if, after a
review of the services provided and fees charged by Wheeler Wasoff, P.C., the
Committee determined that a new independent auditor could provide a higher level
of service at a competitive price. It is the Committee's intent to conduct such
a review of Wheeler Wasoff, P.C. in the next few months, including an evaluation
of the services available from and fees charged by, other independent accounting
firms.
October 21, 2003 Kenneth W. Nickerson
Mark A.E. Syropoulo
Robert J. Pett
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
APPROVAL AND RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS
Although approval and 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
approval and ratification of the selection of Wheeler Wasoff, P.C. for the
fiscal year ending June 30, 2004. If a significant number of shares are voted
against the approval and 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, 2004.
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.
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.
17
FEES PAID TO WHEELER WASOFF, P.C.
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by Wheeler Wasoff, P.C. for fiscal year 2003.
Audit Fees(1) $32,837.37
Financial Information Systems Design and Implementation Fees $ 0
All Other Fees(2) $ 2,750.00
----------
Total $35,587.37
(1) Audit services of Wheeler Wasoff, P.C. for fiscal 2003 consisted of the
examination of the consolidated financial statements of the Company and
the quarterly review of financial information.
(2) "All Other Fees" consists of $2,750.00 for audit-related services for
filings made with the Securities and Exchange Commission.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE APPROVAL AND RATIFICATION OF THE SELECTION OF
WHEELER WASOFF, P.C. AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
FISCAL YEAR ENDING JUNE 30, 2004
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
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). Victoria International Petroleum N.L.,
one of the Company's principal shareholders, failed to make a timely filing of
six ownership reports to report six transactions.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company's Annual Report on Form 10-KSB for the fiscal year ended June
30, 2003 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,
1726 Cole Boulevard, Suite 210, Lakewood, Colorado 80401. The Securities and
Exchange 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.
18
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE 2004 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
2003 Annual Meeting must be received at the offices of the Company, 1726 Cole
Boulevard, Suite 210, Lakewood, Colorado 80401, no later than June 29, 2004, in
order that they may be included in the proxy statement and proxy for the 2004
Annual Meeting. In addition, any such proposals must satisfy the conditions
established by the Securities and Exchange Commission for shareholder proposals
to be included in the proxy statement and proxy for that meeting. If the date of
the 2004 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 2003
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 2004 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
2003 Annual 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 A
AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF
KESTREL ENERGY, INC.
This Charter outlines the purpose, composition and responsibilities of the
Audit Committee (the "Committee") of Kestrel Energy, Inc. (the "Company"), and
how these responsibilities are to be discharged. The Committee shall review and
update this Charter on the annual basis, as conditions dictate.
ARTICLE I
PURPOSE
PRIMARY PURPOSE. The primary function of the Committee is to assist the
Board of Directors in fulfilling its oversight responsibilities of financial
reporting and internal financial and accounting control of the Company by
reviewing:
- the financial reports and other financial information provided by the
Company to any governmental body or public;
- the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board
of Directors have established; and
- the Company's auditing, accounting and financial reporting generally.
Consistent with this function, the Committee should encourage continuous
improvement of and should foster adherence to the Company's policies, procedures
and practices at all levels.
ARTICLE II
COMPOSITION OF THE COMMITTEE
2.01. NUMBER AND ELECTION. The Committee shall be comprised of three or
more Directors of the Company as determined by the Board of Directors. The
Committee members shall be elected by the Board of Directors at the meeting
following the annual shareholders' meeting of the Company or until their
successors are duly elected and qualified at a Board of Directors meeting.
A-1
2.02. INDEPENDENT DIRECTORS. The majority of the Committee shall be
independent directors who are free from any relationship with the Company that,
in the opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. For the purposes of this
Charter, independence shall be determined by reference to Nasdaq listing
standards unless the Board of Directors determines that considering all the
facts and circumstances, a director should be considered "independent"
notwithstanding a failure to meet the Nasdaq listing standards definition.
2.03. QUALIFICATIONS. Every member of the Committee shall be familiar with
basic finance and accounting practices and with the business of the Company and
its industry to the extent necessary to effectively perform his or her functions
as a member of the Committee. Committee members may enhance their familiarity
with finance and accounting by participating in educational programs conducted
by the Company or an outside consultant.
2.04. CHAIRMAN. Unless a Chairman of the Committee is elected by the Board
of Directors, the members of the Committee may designate a Chairman by majority
vote of all the Committee's members. The Chairman shall be an independent
director and shall possess adequate knowledge in accounting, finance, and the
business and affairs of the Company to qualify as a financial expert under SEC
and Nasdaq rules unless the Board of Directors determines that considering all
the facts and circumstances, a director should be considered a "financial
expert" notwithstanding a failure to meet the SEC and Nasdaq rules.. The
Chairman shall preside over all the meetings of the Committee and shall
supervise and direct the activities of the Committee, including contacts with
legal counsel and the independent auditors.
ARTICLE III
COMPENSATION
The Board of Directors shall establish the compensation of the Committee
members for service on the Committee.
ARTICLE IV
MEETINGS
4.01. REGULAR MEETINGS. The Committee shall meet four times annually, or
more frequently as circumstances dictate. The Committee may provide by
resolution the date, time and place for the holding of regular meetings without
other notice. The Committee may ask members of Company management or others to
attend meetings and provide pertinent information as necessary. The Committee
may at any time choose to exclude members of the Company's management from all
or a portion of its meetings, including the exclusion of a member of the
Committee from the Committee's discussions with legal counsel or the independent
auditors.
4.02. SPECIAL MEETINGS. In addition to or as part of the regular Committee
meetings, the Committee members may meet periodically with the management of the
Company, the
A-2
Company's internal accounting department and the Company's independent auditors
to discuss any financial, accounting and audit matters, including preparation
and review of the annual and quarterly financial statements. The Committee may
meet with these groups in separate sessions if the Committee or each of these
groups believe that such meetings should be conducted privately.
4.03. MINUTES. The Committee shall keep minutes of all of its meetings as
a Committee.
ARTICLE V
RESPONSIBILITIES AND DUTIES
5.01. PRIMARY RESPONSIBILITIES. The Committee shall serve as an
independent and objective party to monitor the Company's financial reporting
process and internal control system, review and appraise the efforts of the
Company's independent auditors and accounting department and provide an open
avenue of communication among the independent auditors, financial and senior
management, the accounting department, and the Board of Directors. To fulfill
its responsibilities, the Committee shall carry out activities enumerated below.
5.02. REVIEW OF DOCUMENTS AND REPORTS. The Committee shall review the
Company's annual and quarterly financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification, report, opinion, or review rendered by the
independent auditors. When practicable, prior to the filing of the Company's
10-QSBs, and prior to the public release of quarterly or annual earnings, the
Committee, or its Chairman representing the Committee, shall review such reports
or releases with management and, if appropriate, the independent auditors. In
addition, the Committee shall review any internal reports to management prepared
by the accounting department and management's responses, if any, to such
reports.
5.03. INDEPENDENT ACCOUNTANTS. The Committee shall select the independent
auditors, consider their independence and effectiveness, pre-approve all
permissible non-audit services and all audit, review or attest engagements
required under the securities law, review the performance of the independent
auditors and approve any proposed discharge of the independent auditors when
circumstances warrant. On an annual basis, the Committee should review and
discuss with the independent auditors all significant relationships the auditors
have with the Company to ensure their continuing independence. The Committee
shall obtain a formal written statement from the independent auditors
delineating all relationships between the auditor and the Company, consistent
with Independence Standards Board Standard 1.
5.04. FINANCIAL REPORTING PROCESSES. The Committee shall review the
integrity of the Company's financial reporting processes, both internal and
external, and consult with the independent auditors with respect to the quality
and appropriateness of the Company's accounting principles as applied to
financial reporting. If, upon its review and consultation with the management,
the accounting department and the independent auditors, the Committee determines
that major changes to the Company's auditing and accounting principles and
practices
A-3
are required, the Committee shall approve such changes or improvements, if
appropriate. The Committee shall monitor the implementation of such changes and
improvements.
5.05. REPORTING TO THE COMMITTEE. The Committee shall establish regular
and separate systems of reporting to the Committee by each of management, the
independent auditors and the accounting department regarding any significant
judgments made in management's preparation of the financial statements and the
view of each of the above groups as to appropriateness of such judgments.
5.06. PROCESSES IMPROVEMENT. Following completion of the annual audit, the
Committee shall review separately with each of management, the independent
auditors and the accounting department any significant difficulties and
disagreements among these groups encountered during the course of preparation of
financial statements or audit, including any restrictions on the scope of
auditor's work or access to required information.
5.07. ETHICAL AND LEGAL COMPLIANCE. The Committee shall consider whether
management has the proper review system in place to ensure that the Company's
financial statements, reports and other financial information, as disseminated
to governmental organizations and the public, satisfy legal requirements. In
addition, the Committee shall meet with the Company's legal counsel to review
any legal matters that could have significant impact on the Company's financial
statements, reports and other financial information disseminated to the
governmental organizations and the public.
5.08. OTHER ACTIVITIES. The Committee may perform any other activities
consistent with this Charter and the Company's Bylaws, as the Committee or the
Board of Directors deem necessary or appropriate.
5.09. MANAGEMENT'S ASSISTANCE. The Committee shall coordinate with the
Board of Directors and management to ensure that the Committee's members have
access to the information necessary to effectively monitor the Company's
financial reporting, internal financial and accounting controls and internal and
external auditing.
ARTICLE VI
REPORTS
6.01. ANNUAL REPORT. The Committee may prepare and present to the Board of
Directors periodic reports summarizing its activities, conclusions and
recommendations and its future agendas. The Committee may elect to submit
written reports or make regular oral reports to the Board of Directors at
meetings of the Board as recorded in the minutes of such meetings.
6.02. OTHER REPORTS. The Committee shall prepare such other reports or
statements as it or the Board of Directors deems necessary or as may be required
by law. For example, the Committee may issue one or more statements or reports
which may be included in the annual report on Form 10-KSB, annual report to
shareholders, or proxy statement concerning the fact
A-4
that the Committee has adopted this Charter or that it has satisfied its
responsibilities in compliance with this Charter.
A-5
PROXY
KESTREL ENERGY, INC.
1726 COLE BOULEVARD, SUITE 210
LAKEWOOD, COLORADO 80401
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 21, 2003 at
the annual meeting of shareholders to be held on December 4, 2003 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, 2004
FOR AGAINST ABSTAIN
------- ---------- -----------
3. 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 and 2 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 _______________________, 2003
------------------------------------
Signature
------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE