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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
Blue Ridge Energy, Inc.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(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: ...........................................................
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BLUE RIDGE ENERGY, INC.
632 ADAMS STREET, SUITE 710
BOWLING GREEN, KENTUCKY 42101
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 7, 2001
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Blue
Ridge Energy, Inc. (the "Company") will be held at 10 a.m., Central Daylight
Time, on August 7, 2001 at 632 Adams Street, Suite 710, Bowling Green, Kentucky
42101 for the following purposes:
(1) To elect six directors to serve a term of one year;
(2) To consider and approve the Company's 2001 Stock Option Plan; and
(3) To transact such other business as may properly be brought before
the Annual Meeting or any adjournment(s) thereof.
Information regarding the matters to be acted upon at the Annual
Meeting is contained in the Proxy Statement accompanying this Notice. The Annual
Meeting may be adjourned from time to time without notice other than the
announcement of the adjournment at the Annual Meeting or any adjournment(s)
thereof. All business for which notice is hereby given may be transacted at any
such adjourned Annual Meeting.
All stockholders are encouraged to read the accompanying Proxy
Statement carefully prior to completion of the enclosed proxy card for further
information concerning the proposals that will be presented at the Annual
Meeting.
Only holders of record of outstanding shares of the Company's Common
Stock at the close of business on June 30, 2001 are entitled to notice of and to
vote at the Annual Meeting or any adjournment(s) thereof. A list of stockholders
entitled to vote will be made available. All stockholders are invited to attend
the Annual Meeting in person; however, to ensure your representation, whether or
not you plan to attend the Annual Meeting, please promptly complete, date, sign
and return the enclosed proxy card.
James T. Cook, Jr.
Corporate Secretary
Bowling Green, Kentucky
July 26, 2001
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BLUE RIDGE ENERGY, INC.
632 ADAMS STREET, SUITE 710
BOWLING GREEN, KENTUCKY 42101
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PROXY STATEMENT
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THE ANNUAL MEETING
This Proxy Statement is furnished to stockholders of Blue Ridge Energy,
Inc. (the "Company") in connection with the solicitation of proxies by and on
behalf of the Board of Directors of the Company for use at the Annual Meeting of
Stockholders to be held at 10 a.m., Central Daylight Time, on August 7, 2001, at
632 Adams Street, Suite 710, Bowling Green, Kentucky 42101 and at any
adjournment(s) thereof (the "Annual Meeting"). Commencing on or about July 26,
2001, this Proxy Statement and the enclosed proxy card are being mailed to
stockholders of record of the Company as of June 30, 2001 (the "Record Date").
The Company will bear the cost of this solicitation which, in addition to mail,
may include personal interviews, telephone calls or telegrams by directors,
officers and regular employees of the Company and its affiliates.
VOTING
The stock transfer book will not be closed but only record holders of
outstanding shares of the Company's Common Stock, par value $.005 per share (the
"Common Stock"), at the close of business on the Record Date, June 30, 2001, are
entitled to notice of and to vote at the Annual Meeting. As of such record date,
7,147,094 shares of Common Stock were outstanding and entitled to be voted. The
holders of Common Stock are entitled to cast one vote for each share of Common
Stock owned of record. Cumulative voting is not permitted with respect to any
proposal to be acted upon at the Annual Meeting.
The presence in person or by proxy of the holders of shares of Common
Stock entitled to cast a majority of the votes entitled to be cast at the Annual
Meeting will constitute a quorum. If a quorum should not be present, the Annual
Meeting may be adjourned from time to time until a quorum is obtained.
Stockholders are urged to sign the accompanying proxy card and return it
promptly.
The accompanying proxy card is designed to permit each stockholder of
record at the close of business on the Record Date to vote in the election of
directors and with regard to the 2001 Stock Option Plan as described in the
Proxy Statement. The proxy card provides a space for a stockholder to vote in
favor of or withhold voting for any or all nominees for the Board of Directors,
to vote for or against the approval of the 2001 Stock Option Plan or to abstain
from voting for any proposal if the stockholder chooses to do so.
To ensure representation at the Annual Meeting, each holder of
outstanding shares of Common Stock entitled to be voted at the Annual Meeting is
requested to complete, date, sign and return to the Company the enclosed proxy
card, which requires no postage if mailed in the United States. Stockholders are
urged to sign the accompanying proxy card and return it promptly. Banking
institutions, brokerage firms, custodians, trustees, nominees and fiduciaries
who are record holders of Common Stock entitled to be voted at the Annual
Meeting are requested to forward all proxy cards, this Proxy Statement and the
accompanying materials to the beneficial owners of such shares and to seek
authority as required to execute proxies with respect to such shares. Upon
request, the Company will reimburse such record holders for their reasonable
out-of-pocket forwarding expenses. The costs of this solicitation will be borne
by the Company, including the costs of preparing, assembling and mailing the
enclosed proxy card and this Proxy Statement.
If properly executed and received by the Company before voting at the
Annual Meeting, or any
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adjournment(s) thereof, any proxy representing shares of Common Stock entitled
to be voted at the Annual Meeting that specifies how it is to be voted will be
voted accordingly. Shares as to which authority to vote has been withheld with
respect to the election of any nominee for director will not be counted as a
vote for such nominee and neither an abstention nor a broker nonvote will be
counted as a vote for a proposal. Any properly executed proxy received that does
not specify how it is to be voted on a proposal for which a specification may be
made will be voted FOR such proposal or nominee at the Annual Meeting and any
adjournment(s) thereof.
Each stockholder returning a proxy card to the Company has the right to
revoke it at any time before it is voted by submitting a later dated proxy in
proper form, by notifying the Secretary of the Company in writing (signed and
dated by the stockholder) of such revocation, or by appearing at the Annual
Meeting and voting the shares in person.
When a signed proxy card is returned with choices specified with
respect to voting matters, the shares represented will be voted by the Proxy
designated on the proxy card in accordance with the stockholder's instructions.
The Proxy is Robert D. Burr, Chairman of the Board of the Company. A stockholder
wishing to name another person as his or her proxy may do so by crossing out the
name of the designated Proxy and inserting the name(s) of such person(s) to act
as his or her proxy. In that case, the stockholder must sign the proxy card and
deliver it to the person(s) designated as his or her proxy and the person(s) so
named must be present and vote at the Annual Meeting. Proxy cards marked to
reflect such proxies should not be mailed to the Company.
PROPOSAL NO. 1 -- TO ELECT SIX DIRECTORS TO SERVE FOR A TERM OF ONE YEAR
The affirmative vote of the holders of a majority of the combined
voting power of all of the issued and outstanding shares of Common Stock voted
at the Annual Meeting is required to elect each director.
In accordance with the Company's Bylaws, the Board of Directors has
fixed the number of directors at six. The terms of all current directors, Robert
D. Burr, Edward L. Stillie, James T. Cook, Jr., Gregory B. Shea, Russell L. Vera
and Harry J. Peters, expire in 2001 and their successors will be elected at the
Annual Meeting.
The Board of Directors has nominated Robert D. Burr, Edward L. Stillie,
James T. Cook, Jr., Gregory B. Shea, Russell L. Vera and Harry J. Peters for
election as directors at the Annual Meeting to serve a term of one year. THE
BOARD RECOMMENDS THAT STOCKHOLDERS VOTE FOR EACH OF THESE NOMINEES.
Gregory B. Shea and Russell L. Vera are both son-in-laws of Robert D.
Burr and James T. Cook, Jr. is the brother-in-law of Robert D. Burr. Each of the
nominees has consented to being named as a nominee and to serve as a director if
elected. However, if, for any reason any nominee for director is not a candidate
at the election, the enclosed proxy will be voted for the election of a
substitute nominee at the discretion of the person or persons voting the
enclosed proxy. The Board of Directors has no reason to believe that any nominee
named herein will be unable to serve.
Information regarding the nominees and the directors of the Company,
who are also all of the executive officers of the Company, is provided below. If
elected, the term of each director would expire in 2002.
Nominees Age Principal Occupation Director Since
- -------- --- -------------------- --------------
Robert D. Burr 55 Chairman of the Board 1996
Edward L. Stillie 56 Director, President & Chief Executive Officer 2000
James T. Cook, Jr. 48 Director, Senior Vice President-Finance, Secretary and Treasurer 1996
Harry J. Peters 58 Director, Senior Vice President-Acquisitions 2000
Gregory B. Shea 39 Director, Senior Vice President-Operations 1999
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Russell L. Vera 39 Director, Senior Vice President-Exploration and Development 2000
ROBERT D. BURR, age 55, Bowling Green, Kentucky, has been Chairman of
the Board of the Company since May 1996. He served as President and Chief
Executive Officer from May 1996 until March 1, 2000. Mr. Burr has also been the
Chairman of the Board, President and Chief Executive Officer of Blue Ridge
Group, Inc. since August 1993. Mr. Burr is a native of Port Arthur, Texas and
attended McNeese State College, Lake Charles, Louisiana. He has been active for
over 25 years in the oil and gas business with a myriad of companies.
EDWARD L. STILLIE, age 56, Bowling Green, Kentucky, joined the Company
on March 1, 2000 as President and Chief Executive Officer and became a director
of the Company on April 10, 2000. For the past 20 years, he has been a senior
executive with several nationally prominent companies. Most recently, he was
National Marketing Director and Senior Vice President for Houston-based Swift
Energy Company from October 30, 1994 to March 1, 2000. He holds a Bachelor of
Science Degree in Business and Public Administration from the University of
Maryland and a Masters Degree in Business Administration from the University of
Central Michigan.
JAMES T. COOK, age 48, Bowling Green, Kentucky, has been Senior Vice
President -Finance, Secretary and Treasurer and a director of the Company since
May 1996. He is an accountant by training and a graduate of Stephen F. Austin
State University, Nacogdoches, Texas. From 1983 to 1989, he was Vice President,
Finance and Treasurer of the Shanley Corp., Dallas, Texas, a publicly owned oil
and gas exploration company. From 1990 to 1994, he served in various financial
capacities for a group of Florida-based companies with interests in Caribbean
resorts, stores and a manufacturer of bath products. Since June 1, 1995, he has
been a director and the Senior Vice President-Finance and Chief Financial
Officer of Blue Ridge Group, Inc. In 1997, Mr. Cook became the brother-in-law of
Mr. Burr.
HARRY J. PETERS, age 58, Bowling Green, Kentucky, has been Senior Vice
President, Acquisitions since August 2000. Mr. Peters served the Company as
Senior Vice President-Sales and Marketing from April 2000 to July 2000 and has
served as a director since April 2000. A native of New York, he has over 30
years of experience in sales and marketing, both domestic and international.
Over the years, he has developed close working relationships with investment
bankers, institutional investors and securities dealers while directing market
financing of reserve purchases, and raising drilling risk capital and venture
capital for wells in Texas, Kentucky, Oklahoma, Louisiana, Colorado, West
Virginia and Utah. Mr. Peters has been a director and Senior Vice
President-Sales and Marketing of Blue Ridge Group, Inc. since April of 1999. He
is a graduate of St. Michaels College in Sante Fe, New Mexico.
GREGORY B. SHEA, age 39, Bowling Green, Kentucky, has been a director
and Senior Vice President- Operations of the Company since August 1999. Since
that time, Mr. Shea has managed Blue Ridge Group, Inc.'s Kentucky drilling and
field operations. Mr. Shea has been President of Blue Ridge Builders, Inc., a
residential and commercial builder in Bowling Green, Kentucky and a
majority-owned subsidiary of Blue Ridge Group, Inc. since November 1994. He was
elected a director of Blue Ridge Group, Inc. in February 1995. He is a native of
Plano, Texas. Between 1981 and 1986, he attended the University of North Texas.
Mr. Shea is a son-in-law of Mr. Burr.
RUSSELL L. VERA, age 39, Bowling Green, Kentucky, became a director and
Senior Vice President - Exploration and Development of the Company on April 10,
2000. A native of Gonzales, Texas, Mr. Vera attended the University of Houston
for four years. He served as President of Fortune Exploration, Inc., Irving,
Texas, an independent oil and gas producer, from 1989 until 1992, and President
of Oak Ridge Exploration, Inc., Shreveport, Louisiana, in 1992. He has served as
President of Fortune Exploration of Kentucky, Inc. since 1992. Mr. Vera is a
son- in-law of Mr. Burr.
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COMPLIANCE WITH SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than 10% stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms filed
by them.
Based solely upon a review of the copies of such forms furnished to the
Company or written representations that no other reports were required, the
Company believes that during the 2000 fiscal year, all filing requirements
applicable to its officers, directors and greater than 10% stockholders have
been complied with except that the report on Form 3 for each of the Company's
executive officers (Messrs. Stillie, Burr, Cook, Shea, Vera and Peters) was
filed late.
EXECUTIVE COMPENSATION
The following compensation was paid directly to the executive officers
of the Company during the years ended December 31, 2000, 1999 and 1998:
Annual Compensation Long-Term Compensation
---------------------------------- -----------------------------------
Other Securities
----- ----------
Annual Restricted Underlying
------ ---------- ----------
Name and Compen- Stock Options LTIP All Other
- ---------- ------- ----- ------- ---- ---------
Principal Position Year Salary Bonus sation Awards SARs Payouts Compensation
- ----------------- ---- ------ ----- ------ ------ ---- ------- ------------
Edward L. Stillie 2000 $155,000 $0 $0 $0 0 $0 $0
President and 1999 $0 $0 $0 $0 0 $0 $0
CEO 1998 $0 $0 $0 $0 0 $0 $0
Robert D. Burr 2000 $0 $0 $0 $0 0 $0 $0
Chairman of the 1999 $0 $0 $0 $0 0 $0 $0
Board 1998 $0 $25,000 $0 $0 0 $0 $0
James T. Cook, Jr. 2000 $0 $0 $0 $0 0 $0 $0
Sr. Vice President- 1999 $0 $0 $0 $0 0 $0 $0
Finance, Secretary 1998 $0 $0 $0 $0 0 $0 $0
and Treasurer
Gregory B. Shea 2000 $0 $0 $0 $0 0 $0 $0
Senior Vice 1999 $0 $0 $0 $0 0 $0 $0
President - 1998 $0 $0 $0 $0 0 $0 $0
Operations
Russell L. Vera 2000 $0 $0 $0 $0 0 $0 $0
Senior Vice 1999 $0 $0 $0 $0 0 $0 $0
President - 1998 $0 $0 $0 $0 0 $0 $0
Exploration and
Development
Harry J. Peters 2000 $0 $0 $0 $0 0 $0 $0
Senior Vice 1999 $0 $0 $0 $0 0 $0 $0
President - 1998 $0 $0 $0 $0 0 $0 $0
Acquisitions
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth each stockholder who is known to the Company
to be the beneficial owner of more than 5% of the Common Stock of the Company at
June 30, 2001.
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
-------------- ------------------ --------------------- ----------------
Indirect Ownership:
Common Stock Robert D. Burr
632 Adams Street, Suite 710 4,165,137(1)(4) 58.1%
Bowling Green, KY 42101
Common Stock Russell L. Vera
632 Adams Street, Suite 710 943,282(2)(4) 13.2%
Bowling Green, KY 42101
Direct Ownership:
Common Stock Blue Ridge Group, Inc.
632 Adams Street, Suite 710 4,140,137(3) 57.9%
Bowling Green, KY 42101
(1) By virtue of his position as Chairman of the Board of Blue Ridge Group,
Inc., Mr. Burr may be deemed to beneficially own the 4,140,137 shares of the
Company's Common Stock owned by Blue Ridge Group, Inc. Mr. Burr disclaims
beneficial ownership of these shares except to the extent described in the
following sentence. Mr. Burr beneficially owns approximately 22.2% of the
outstanding shares of Blue Ridge Group, Inc., which beneficially owns
approximately 57.9% of the Company. Mr. Burr also holds vested options for
25,000 shares.
(2) Mr. Vera's beneficial ownership of the Company's Common Stock is
attributable to his ownership of 22.2% of Blue Ridge Group, Inc., which owns a
57.9% interest in the Company. In addition, Mr. Vera holds vested options for
25,000 shares.
(3) Blue Ridge Group, Inc.'s beneficial ownership is attributable to its direct
ownership of 4,140,137 shares of the Company's Common Stock.
(4) Mr. Burr and Mr. Vera (Mr. Burr's son-in-law) have disclaimed beneficial
ownership of each other's respective shares of Common Stock.
The table below sets forth the beneficial ownership of the Company's
Common Stock by each executive officer, director and director nominee of the
Company as of June 30, 2001.
Name and Address of Amount and Nature of
------------------- --------------------
Title of Class Beneficial Owner (1) Beneficial Ownership(2) Percent of Class
- -------------- ---------------- -------------------- ----------------
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Common Stock Robert D. Burr(3)(5) 4,165,137 58.1%
Common Stock Edward L. Stillie 33,334 0.5%
Common Stock James T. Cook, Jr. 77,942 1.1%
Common Stock Gregory B. Shea 169,852 2.4%
Common Stock Russell L. Vera(4)(5) 943,282 13.2%
Common Stock All directors and officers 4,273,472 58.7%
as a group (6 persons)
(1) The address for all directors and officers is 632 Adams Street, Suite 710,
Bowling Green, Kentucky 42101.
(2) Beneficial ownership includes vested options for the following shares: Mr.
Burr - 25,000; Mr. Stillie - 33,334; Mr. Cook - 16,667; Mr. Peters - 16,667; Mr.
Shea - 16,667; and Mr. Vera - 25,000. Beneficial ownership of all directors and
officers reflects the 4,140,137 shares held by Blue Ridge Group, Inc. (without
attributing such shares to more than one person) plus the vested options for
133,335 shares held by the directors and officers.
(3) By virtue of his position as Chairman of the Board of Blue Ridge Group,
Inc., Mr. Burr may be deemed to beneficially own the 4,140,137 shares of the
Company's Common Stock owned by Blue Ridge Group, Inc. Mr. Burr disclaims
beneficial ownership of these shares except to the extent described in the
following sentence. Mr. Burr beneficially owns approximately 22.2% of the
outstanding shares of Blue Ridge Group, Inc., which beneficially owns
approximately 57.9% of the Company. Mr. Burr also holds vested options for
25,000 shares.
(4) Mr. Vera's beneficial ownership of the Company's Common Stock is
attributable to his ownership of 22.2% of Blue Ridge Group, Inc., which owns a
57.9% interest in the Company. In addition, Mr. Vera holds vested options for
25,000 shares.
(5) Mr. Burr and Mr. Vera (Mr. Burr's son-in-law) have disclaimed beneficial
ownership of each other's respective shares of Common Stock.
BOARD MEETINGS AND BOARD COMPENSATION
During the year ended December 31, 2000, the Board of Directors of the
Company met on six occasions, either in person or telephonically. The Company
does not have any director committees such as an audit committee or compensation
committee. Each of the Company's directors attended at least 75% of the meetings
of the Board of Directors held in 2000.
During 2000, none of the directors received compensation for their
services as directors of the Company.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS
On March 1, 2000, the Company entered into a five-year employment
agreement with Mr. Stillie, its President and Chief Executive Officer. Mr.
Stillie's primary duties are to: (1) raise capital; and (2) serve in a
management capacity for the Company. The agreement provides for such
compensation as the Board of Directors deems appropriate and a graduated stock
bonus plan to award Mr. Stillie up to 20,000 shares of the Company's Common
Stock, per year, based on performance.
The agreement may be terminated by either party upon 60 days written
notice. Such termination by the Company will require the affirmative vote of a
majority of the members of the Board of Directors then in
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office who have been or will have been directors for the two year period ending
on the date of the meeting or written consent to take such action is first
provided. In the case of termination by the Company, Mr. Stillie will continue
to receive his salary and insurance benefits for six months from the day he last
worked on the Company's behalf. Mr. Stillie will not receive such compensation
if the Company terminates his employment for cause.
In the event that Mr. Stillie's employment is terminated (either by the
Company or by his resignation) after, by, on account of, or in connection with a
"Change of Control" as defined by the agreement, the Company will: (1) pay Mr.
Stillie a lump sum equal to 12 months salary plus an additional two weeks salary
for every year of service to the Company; and (2) continue at the Company's
expense such medical and dental coverage as then in effect for the remainder of
the term of the agreement; and (3) pay one year's premium on the group life
insurance policies carried on Mr. Stillie's life. In the event of termination
due to Mr. Stillie's death or permanent disability, the Company will pay to Mr.
Stillie or his estate any compensation or bonuses payable under the terms of the
agreement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK TRANSACTIONS
Blue Ridge Group, Inc., the Company's principal shareholder, previously
held warrants to purchase 4,000,000 shares of the Company's Common Stock at $.05
per share. On June 29, 2001, Blue Ridge Group, Inc. exercised warrants to
purchase 1,000,000 shares at $.05 per share and on April 2, 2001, warrants to
purchase 3,000,000 shares held by the Company at $.05 per share were canceled.
Under an existing arrangement with one of the Company's partnerships
(Home Stake Joint Venture), the Company had agreed to provide certain workover
funds and had the rights to 100% of the partnership's revenues from the well
until the workover funds had been recovered. Thereafter, the Home Stake Joint
Venture would revert to its original working interest position. During 1999, the
Company issued 250,000 shares of its Common Stock in exchange for the
partnership's reversionary interest in the well.
LOANS TO BLUE RIDGE GROUP, INC.
During 1998, the Company agreed to participate with Blue Ridge Group,
Inc. in the acquisition and development of oil and gas properties in the
Appalachian Basin of Kentucky. The Company advanced $1,300,000, bearing interest
at 12% per annum, to Blue Ridge Group, Inc. related to these acquisitions.
During the years ended 1998 and 1999, the Company earned interest
income under this arrangement of $73,400 and $27,153, respectively. During 1999,
Blue Ridge Group, Inc. reduced this obligation through the sale of a drilling
rig and ancillary equipment to the Company and performance of services in the
drilling and completion of various oil and gas wells under the terms of turnkey
drilling contracts. As of December 31, 1999, the balance had been reduced to
$627,304. Blue Ridge Group, Inc. fulfilled the remainder of its obligation to
the Company in 2000, such that there is no remaining balance due to the Company,
through the performance of additional services under the terms of turnkey
drilling contracts and cash payments.
CONTRACTUAL AGREEMENTS
The Company has entered into turnkey drilling contracts with Blue Ridge
Group, Inc. and other affiliates for the acquisition, drilling, completing and
equipping of oil and gas wells for the Company and a majority of the gas
drilling partnerships that the Company has sponsored. A summary of the amounts
involved in these contracts during 2000 and 1999 is as follows:
Year Ended December 31, 2000 $1,606,339
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Year Ended December 31, 1999 $3,616,100
Blue Ridge Group, Inc. provides various management, administrative,
accounting and geological services for the Company at a rate of $20,000 per
month. This rate has been determined on a proportional basis because specific
identification of expenses is not practical. Management believes that this cost
allocation method of expenses is reasonable.
The Company also reimburses Blue Ridge Group, Inc. for marketing costs
paid on its behalf. There were no such reimbursements in 2000 and $176,540 of
reimbursements in 1999. As of December 31, 2000 and 1999, no amount was due and
payable to the Blue Ridge Group, Inc. under this arrangement.
In March 1999, the Company purchased ancillary equipment to be used in
association with drilling rig #4 from Blue Ridge Group, Inc. at a price of
$415,000. In April 1999, the Company purchased drilling rig #2 with associated
drilling equipment from Blue Ridge Group, Inc. at a price of $750,000.
The Company has an affiliated broker dealer, Ridgemont Securities,
Inc., that raised the majority of the Company's funds during 1999 through
private placement offerings for oil and gas wells and the issuance of preferred
stock. The Company pays Ridgemont Securities various fees and commissions for
these services. The fees and expenses paid to Ridgemont Securities, Inc. by the
Company and the oil and gas partnerships during 2000 and 1999 are as follows:
2000 1999
---- ----
Commissions $299,580 $1,088,138
Due Diligence Fees - 43,493
Promotional Fees - 200,000
Reimbursed Expenses - 80,780
------------ -----------
Total $299,580 $1,412,411
The Company contracts with Blue Ridge Group, Inc. to manage and operate
the two drilling rigs it owns. Blue Ridge Group, Inc. also manages two other
rigs owned by other affiliates of Blue Ridge Group, Inc. Blue Ridge Group, Inc.
collects all drilling revenues and pays all expenses related to drilling
operations and accounts to the Company on a periodic basis from the net profits
from operations for the two rigs owned by the Company. The Company reported
revenues of $1,332,068 and $792,439 and costs of $1,102,936 and $709,308 from
the operation of the drilling rigs for the years ended December 31, 2000 and
1999, respectively.
During 1999, the Company made the following property acquisitions from
partnerships it had previously syndicated:
In 1999, the Company acquired a 100% working interest in the Keegan
Gibson #1 oil well in Smith County, Texas in exchange for issuing warrants to
purchase 335,725 shares of the Company's Common Stock at $3.00 per share. The
warrants are exercisable from March 27, 2000 through March 27, 2005. This
property acquisition was recorded at the estimated fair value of the working
interest acquired. Such amount was equal to the Company's investment in the
respective partnership plus related accounts receivable from the partnership. In
February 2001, the Company agreed to value the Common Stock warrants issued for
this property acquisition using the Black Scholes option valuation model. The
effect of this warrant valuation caused the Company to record an additional
value for these properties of $271,557 and then immediately write off this
additional value as an impairment loss because the fair value of the properties
acquired would not support the newly established carrying value for these
properties.
The Company acquired, in 1999, a 100% working interest in two gas wells
in Sherman County, Texas in exchange for warrants to purchase 521,208 shares of
the Company's Common Stock at $3.00 per share. The warrants expire in March
2005. The transaction was recorded at the estimated fair value of the working
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interest acquired. Such amount was equal to the Company's investment in the
respective partnership plus related accounts receivable from the partnership. In
February 2001, the Company agreed to value the Common Stock warrants issued for
this property acquisition using the Black Scholes option valuation model. The
effect of this warrant valuation caused the Company to record an additional
value for these properties of $421,601 and then immediately write off this
additional value as an impairment loss because the fair value of the properties
acquired would not support the newly established carrying value for these
properties.
During November 1999, the Company acquired a 30% working interest in
nine gas wells in Harlan County, Kentucky owned by two of its oil and gas
partnerships in exchange for the Company's 53.4% working interest in a gas well
in Wharton County, Texas, the Company's 12.5% working interest in five
development wells in Mingo and Wyoming Counties of West Virginia, and 968,300
warrants to purchase the Company's Common Stock at $3.00 per share. The warrants
expire in October 2002. The transaction was recorded at the estimated fair value
of the working interest acquired. Such amount was equal to the Company's
investment in the respective partnership plus related accounts receivable from
the partnership. In February 2001, the Company agreed to value the Common Stock
warrants issued for this property acquisition using the Black Scholes option
valuation model. The effect of this warrant valuation caused the Company to
record an additional value for these properties of $544,974 and then immediately
write off this additional value as an impairment loss because the fair value of
the properties acquired would not support the newly established carrying value
for these properties.
During 2000 and 1999, the Company had no significant customers or
suppliers, other than its major stockholder, Blue Ridge Group, Inc., the loss of
which could individually have a significant adverse effect on the Company's
operations.
Management believes that the contracts or transactions that the Company
entered into with Blue Ridge Group, Inc. were on terms that were no more
favorable to Blue Ridge Group, Inc. than those that could have been obtained
from unaffiliated parties.
PROPOSAL NO. 2 -- TO CONSIDER AND APPROVE THE 2001 STOCK OPTION PLAN
BACKGROUND
The Company's Board of Directors has approved, and recommends that
stockholders approve, the Blue Ridge Energy, Inc. 2001 Stock Option Plan (the
"Plan"). The purpose of the Plan is to promote the interests of the Company and
its stockholders by encouraging employees and directors to acquire a proprietary
interest in the Company. The Board of Directors believes that such investments
should facilitate the success and progress of the Company's business and enhance
the Company's efforts to attract and retain employees and directors. The
material terms of the Plan are summarized below:
DESCRIPTION OF THE PLAN
Approval; Shares Subject to Plan. The Plan was approved by the
Company's Board of Directors on April 3, 2001. The Plan permits the grant to
eligible participants of options to purchase shares of the Company's Common
Stock. The Plan authorizes the issuance of options for up to 1,000,000 shares of
the Company's Common Stock, plus 10% of any increase (other than any increase
due to shares of Common Stock issued pursuant to the Plan) in the number of
authorized and issued shares of Common Stock in excess of 6,070,294 shares.
Notwithstanding these limitations, the number of shares authorized for issuance
pursuant to the Plan is subject to adjustment in the event of a merger,
consolidation, reorganization, stock dividend, stock split or other change in
corporate structure or capitalization affecting the Common Stock. In addition,
the Plan limits the number of shares available for issuance pursuant to
incentive stock options to 800,000 shares. Shares subject to an option, but not
delivered under an option, will be available for future option grants during the
term of the Plan.
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Administration of the Plan. The Plan will be administered by a
committee appointed by the Board of Directors consisting of three or more
directors of the Company or the entire Board of Directors. So long as the
Company remains a public company, the members of the Committee must be "outside
directors" within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code") (or any successor provision thereto) or shall be
the entire Board or Directors. The Plan is currently administered by the full
Board of Directors.
Eligibility. Employees and directors are eligible to receive
options under the Plan. For purposes of the Plan, "employees" include full-time
employees of the Company or any of its majority-owned subsidiaries. Both
employee directors and nonemployee directors are eligible to participate in the
Plan.
Types and Terms of Options. The Committee may grant incentive
options, which are options meeting the requirements of Section 422 of the Code,
or non-qualified options, which are options that are not incentive options. Only
employees (including employee directors) are eligible to receive incentive
options. In the case of incentive options, options may not be granted to any 10%
holder of the Company's stock unless the incentive option is granted at 110% of
the fair market value of the Common Stock at the grant date. Also, the term of
any incentive option granted to a 10% holder of the Company's stock may not
exceed five years. If the aggregate value (determined at the time the option is
granted) with respect to which options are exercisable for the first time by an
optionee during any calendar year exceeds $100,000, such option will be treated
as a non-qualified option to the extent of the excess.
The Committee has the power, subject to the limitations of the
Plan, to prescribe the terms and conditions of options, including, without
limitation: whether the option will be an incentive option or non-qualified
option, the number of shares subject to the option, the option price (which may
not be less than 100% of the fair market value, as defined in the Plan, at the
time of grant of an incentive option), the term of the option (which may not
exceed 10 years), and the method and time when the option may be exercised in
whole or in part.
In determining the employees to whom options are to be
granted, the number of shares covered by each option and whether the options are
incentive options or non-qualified options, the Committee or the Board will take
into account the duties of the respective employees, their present and potential
contribution to the success of the Company, their anticipated number of years of
active service remaining and such other factors as it deems relevant to
accomplish the purposes of the Plan.
Upon a change in control of the Company (as defined in the
Plan), any then outstanding options will become fully vested and immediately
exercisable. Furthermore, if provided in the applicable option agreement, upon a
change in control the optionee will have the right to sell the option back to
the Company for an amount generally equal to the excess of the fair market value
of the Common Stock subject to the option over the option price.
If an employee optionee's employment terminates because of
discharge for cause (as defined in the Plan), the options held by the employee
optionee will terminate on the date of the optionee's discharge. If a non-
employee director ceases to serve as a director of the Company for any reason,
such optionee may exercise the option with respect to the number of shares of
Common Stock as to which the option was exercisable on the day immediately
preceding the optionee's termination as director, at any time within a period
ending on the earlier of (1) 90 days after the optionee's termination of service
as a director; or (2) the option's expiration date.
If an employee optionee's employment by the Company terminates
for any reason other than death, disability (as defined in the Plan) or
termination for cause, the option will terminate six months (three months in the
case of an incentive option) after the optionee's employment terminates (unless
the optionee dies
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during such period), or on the option's expiration date, if earlier, and the
option will be exercisable during that period only with respect to the number of
shares which the optionee was entitled to purchase on the day preceding
termination of employment. Notwithstanding the foregoing, the Committee or the
Board may, in specific cases and in its sole discretion, permit the exercise by
an optionee of all, or part of, the unexercised option within the foregoing time
period after the optionee's employment terminates.
In the event of the employee optionee's death or disability
while in the employ of the Company, or the optionee's death within six months
(three months in the case of an incentive option) after the termination of the
optionee's employment (other than by reason of discharge for cause), the option
will terminate upon the earlier to occur of (1) 12 months after the date of the
optionee's death or disability, or (2) the option's expiration date. The option
will be exercisable during the foregoing period with respect to the number of
shares as to which the option was exercisable on the day preceding the
optionee's death or disability, as the case may be.
Options granted under the Plan are not transferable by the
optionee otherwise than by bequest or the laws of descent and distribution.
Options are exercisable during the optionee's lifetime only by the optionee. Any
shares issued upon exercise of an option will be subject to any special
forfeiture conditions, rights of repurchase, rights of first refusal and other
transfer restrictions as the Board of Directors may determine. Any such
restrictions will be set forth in the applicable stock option agreement and will
apply in addition to restrictions to apply to holders of the Company's Common
Stock generally.
Amendment, Modification or Termination of the Plan. The Board
of Directors may at any time amend, modify or terminate the Plan; provided that
such actions may not be taken without stockholder approval if such approval is
required by any applicable law or the rules of any national securities exchange
or system on which the Common Stock is then listed or reported.
Effective Date of Plan. The Plan became effective upon
adoption by the Board of Directors. However, the Plan will be rescinded and all
options granted under the Plan will be null and void unless within 12 months
from the date of adoption of the Plan by the Board of Directors it has been
approved by the holders of a majority of the outstanding Common Stock present or
represented and entitled to vote on the Plan at a stockholders' meeting.
Termination of the Plan. The Plan will terminate on the
earliest to occur of: (1) the date when all Common Stock available under the
Plan has been acquired through the exercise of options granted under the Plan;
(2) 10 years after the date of adoption of the Plan by the Board of Directors;
or (3) such other date as the Board of Directors may determine.
ERISA. The Plan is not a qualified retirement plan. Therefore,
the Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA") or Section 401(a) of the Code.
Options Issued Under the Plan. On April 3, 2001, the Board of
Directors issued the following options, subject to stockholder approval. If
stockholder approval is not obtained within 12 months of the date of issuance,
these options will terminate and cease to be outstanding:
NEW PLAN BENEFITS
OPTIONS GRANTED SUBJECT TO STOCKHOLDER APPROVAL
NUMBER OF SHARES
NAME AND POSITION OF OPTIONEE COVERED BY OPTION TYPE OF OPTION
------------------------------- ------------------- --------------
Edward L. Stillie 100,000(1) Non-qualified
President and Chief Executive Officer
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Robert D. Burr 75,000(1) Non-qualified
Chairman of the Board
James T. Cook, Jr. 50,000(1) Non-qualified
Senior Vice President-Finance, Secretary and
Treasurer
Harry J. Peters 50,000(1) Non-qualified
Senior Vice President-Acquisitions
Gregory B. Shea 50,000(1) Non-qualified
Senior Vice President-Operations
Russell L. Vera 75,000(1) Non-qualified
Senior Vice President-Exploration and Development
Michael E. Van Dusen 100,000(2) Incentive option
Vice President-National Marketing Director
Total 500,000(3)
(1) These options vest in three equal annual installments commencing on April 3,
2001.
(2) This option vests in five equal annual installments commencing on January
15, 2002.
(3) All options granted by the Board of Directors on April 3, 2001 have an
exercise price of $1.70 per share. The Board of Directors determined that the
current fair market value per share of the Company's Common Stock was $1.70 on
April 3, 2001. This amount represented the last sales price per share of Common
Stock on April 3, 2001 on the OTC Bulletin Board. These options have a maximum
term of 10 years.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the Federal income tax consequences
to persons who receive options under the Plan. The discussion is based on
interpretations of the Code in effect as of June 30, 2001, and regulations
promulgated thereunder as of that date.
Non-Qualified Options. The granting of a non-qualified option
does not produce taxable income to the recipient or a tax deduction to the
Company. Taxable ordinary income will generally be recognized by the optionee at
the time of exercise in an amount equal to the excess of the fair market value
of the Common Stock purchased at the time of the exercise over the aggregate
exercise price. The Company will be entitled to a corresponding Federal income
tax deduction.
Upon a subsequent taxable disposition of the Common Stock
received upon exercise of the option, the optionee will generally recognize a
taxable capital gain or loss based upon the difference between the per share
market value at the time of exercise and the per share selling price. To the
extent an optionee pays all or part of the exercise price by tendering shares of
Common Stock (other than shares acquired pursuant to the exercise of any
incentive stock option ("ISO") where the holding period has not yet been met),
the tax consequences described above apply except that the number of shares
received upon such exercise which is equal to the number of shares surrendered
in payment of the exercise price will have the same basis and tax holding period
as the shares surrendered. Special rules may apply to an optionee who is subject
to Section 16(b) of the Securities Exchange Act of 1934 ("Exchange Act").
Incentive Stock Options. In the case of an ISO, an optionee
will not recognize any taxable income at the time of grant and the Company will
not be entitled to a Federal income tax deduction. No ordinary income will be
recognized by the holder of an ISO at the time of exercise. However, the excess
of the fair market value of the Common Stock at the time of exercise over the
aggregate exercise price will be an adjustment to alternative minimum taxable
income for purposes of the Federal "alternative minimum tax" at the date of
exercise.
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If the optionee holds the shares acquired upon exercise of the
ISO for the greater of two years after the date the option was granted or one
year after the acquisition of the Common Stock, the difference between the
aggregate exercise price and the amount realized upon disposition of the Common
Stock will constitute a long-term capital gain or loss, as the case may be, and
the Company will not be entitled to a Federal income tax deduction. If the
Common Stock is disposed of in a sale, exchange or other "disqualifying
disposition" within two years after the date of grant or within one year after
the date of exercise: (i) the optionee will realize taxable ordinary income in
an amount equal to the excess of the fair market value of the Common Stock at
the time of exercise or the sales price, whichever is less, over the aggregate
exercise price; (ii) the Company will be entitled to a deduction for such year
in the amount of the ordinary income so realized; and (iii) the optionee will
realize capital gain in an amount equal to the difference between (a) the amount
realized upon the sale of the Common Stock and (b) the exercise price plus the
amount of ordinary income, if any, realized upon the disposition. Under proposed
Treasury regulations, however, it would appear that where Common Stock which is
subject to a substantial risk of forfeiture (which could include stock held by a
person subject to Section 16(b) of the Exchange Act), is disposed of in a
disqualifying disposition, the relevant date for determining the amount of
ordinary income would be the date the restriction lapses, but in no event may
such amount be greater than the sales price. Because the regulations are only in
proposed form, the results remain unclear.
Excess Parachute Payment. Under certain circumstances, the
acceleration of the exercisability of options or the making of a cash payment in
connection with a change in control might be deemed to be an "excess parachute
payment" for purposes of the golden parachute tax provisions of sections 280G
and 4999 of the Code. To the extent it is considered an excess parachute
payment, the optionee may be subject to a 20% excise tax, and the Company may be
denied a tax deduction.
The affirmative vote of a majority of the shares of Common
Stock voting at the Annual Meeting is required to approve the Plan. THE BOARD
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE PLAN.
INDEPENDENT AUDITORS
Looney, Samson & Associates, P.L.L.C. ("LSA") is engaged as the
Company's independent public accountants to audit its financial statements. LSA
has audited the financial statements of the Company since fiscal 1996.
Stockholder ratification of the appointment of auditors is not required. It is
not anticipated that LSA will be represented at the Annual Meeting.
STOCKHOLDER PROPOSALS
Any proposal that a stockholder of the Company intends to present at
the 2002 Annual Meeting of Stockholders must be received by the Secretary of the
Company at the Company's principal executive offices at 632 Adams Street, Suite
710, Bowling Green, Kentucky 42101, by April 28, 2002 in order to be considered
by the Board of Directors for inclusion in the proxy solicitation materials for
the 2002 Annual Meeting.
ANNUAL REPORT
Please refer to the Company's 2000 Annual Report to Stockholders for
financial statements, other financial information, and management's discussion
and analysis of the financial condition and results of operations of the
Company. The 2000 Annual Report has previously been delivered to stockholders.
OTHER MATTERS
We know of no other business other than the matters discussed in this
proxy statement that will be presented for action before the Annual Meeting.
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BY ORDER OF THE BOARD OF DIRECTORS
BLUE RIDGE ENERGY, INC.
JAMES T. COOK, JR.
CORPORATE SECRETARY
Bowling Green, Kentucky
July 26, 2001
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BLUE RIDGE ENERGY, INC.
2001 STOCK OPTION PLAN
----------------------
1. PURPOSE OF PLAN. The purpose of this 2001 Stock Option Plan is to
promote the interests of Blue Ridge Energy, Inc. (the "Company") and its
shareholders, by encouraging Employees and Directors to acquire a proprietary
interest in the Company. Such investments should increase the personal interest
and the special effort of such persons in providing for the continued success
and progress of the business of the Company and should enhance the Company's
efforts to attract and retain competent Employees and Directors.
2. DEFINITIONS. The following terms when used herein shall have the
meanings set forth below, unless a different meaning is plainly required by the
context:
(a) BOARD. The Board of Directors of the Company.
(b) CAUSE. (i) The unauthorized use or disclosure of the
confidential information or trade secrets of the Company, which use or
disclosure causes material harm to the Company, (ii) conviction of, or a plea of
"guilty" or "no contest" to, a felony under the laws of the United States or any
state thereof, (iii) gross negligence or (iv) continued failure to perform
assigned duties after receiving written notification from the Board. The
foregoing, however, shall not be deemed an exclusive list of all acts or
omissions that the Company may consider as grounds for the discharge of an
Optionee.
(c) CHANGE OF CONTROL. (i) The acquisition by any person after the
date hereof of beneficial ownership of 50% or more of the voting power of the
Company's outstanding voting stock, (ii) a majority of the current members of
the Board ceasing to be members of the Board unless any replacement director was
elected by a vote of either a majority of the remaining directors, or a majority
of the shares entitled to vote on such replacement, or (iii) approval by the
shareholders of the Company of (a) a merger or consolidation of the Company with
another corporation if the shareholders of the Company immediately before such
vote will not, as a result of such merger or consolidation, own more than 50% of
the voting stock of the corporation resulting from such merger or consolidation,
or (b) a complete liquidation of the Company or sale of all, or substantially
all, of the assets of the Company.
(d) CODE. The Internal Revenue Code of 1986, as it may be amended
from time to time. Reference to any section of the Code shall include any
provision successor thereto.
(e) COMMITTEE. The Committee provided for in Section 7.
(f) COMMON STOCK. Shares of the Company's common stock, $.005 par
value per share.
(g) COMPANY. Blue Ridge Energy, Inc., a Kentucky corporation.
(h) DIRECTORS. Directors of the Company, including Employee
Directors and
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Non-Employee Directors.
(i) DISABILITY. Permanent and total disability within the meaning of
section 22(e)(3) of the Code.
(j) EMPLOYEE. Any full-time employee of the Company or any of its
majority- owned subsidiaries.
(k) EMPLOYEE DIRECTOR. A member of the Board who is an Employee.
(l) FAIR MARKET VALUE. The Fair Market Value of the Company's Common
Stock shall be the mean between the last sales price per share of Common Stock
on such date, or in case no such sale takes place on such date, the mean between
the closing bid and asked prices, in either case as reported in the OTC Bulletin
Board (or such other national securities exchange or Nasdaq as the Common Stock
shall be listed) or, if the Common Stock is not quoted by the OTC Bulletin Board
(or on a national securities exchange or Nasdaq), the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Common Stock as selected in good faith by the Committee. If the relevant
date is not a trading day, the determination shall be made as of the next
preceding trading day. As used herein, the term "trading day" means a day on
which the public trading of securities occurs and as reported in the OTC
Bulletin Board, or the Common Stock is not listed or admitted to trading on the
OTC Bulletin Board (or on a national securities exchange or Nasdaq), any
business day. Notwithstanding the foregoing if the Common Stock ceases to be
registered under Section 12 or Section 15 of the Securities and Exchange Act of
1934, as amended, the fair market value of a share of Common Stock on a given
date, shall be determined by the Committee.
(m) INCENTIVE OPTION. An option defined in section 422 of the Code.
(n) NON-EMPLOYEE DIRECTOR. A member of the Board who is not an
Employee.
(o) NON-QUALIFIED OPTION. An option which is not an Incentive
Option.
(p) OPTION. An Incentive Option or a Non-Qualified Option granted to
an Optionee pursuant to the Plan.
(q) OPTION AGREEMENT. A written agreement between the Company and an
Optionee evidencing the grant of an Option and containing terms and conditions
concerning the exercise of the Option.
(r) OPTION PRICE. The price to be paid for shares to be purchased
pursuant to the exercise of an Option.
(s) OPTIONEE. An Employee or Non-Employee Director who has been
granted an Option or the personal representative, heir or legatee of an Optionee
who has the right to exercise the Option upon the death of the Optionee.
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(t) PLAN. This 2001 Stock Option Plan, as it may be amended from
time to time.
(u) TEN PERCENT HOLDER. The holder of more than 10% of the issued
and outstanding stock of the Company. For the purpose hereof, an individual is
considered to own all of the Common Stock owned by his brothers, sisters,
spouse, ancestors and lineal descendants and his pro rata share of all Common
Stock owned by corporations, partnerships, estates and trusts in which he has an
interest.
3. ELIGIBILITY AND PARTICIPATION. Employees and Directors are eligible
to receive Options under the Plan. In determining the Employees (including
Employee Directors) to whom Options shall be granted, the number of shares to be
covered by each Option and whether the Options shall be Incentive Options or
Non-Qualified Options, the Committee shall take into account the duties of the
respective Employees, their present and potential contribution to the success of
the Company, their anticipated number of years of active service remaining and
such other factors as it deems relevant in connection with accomplishing the
purposes of the Plan. An individual who has been granted an Option may be
granted an additional Option or Options as the Committee shall so determine.
4. SHARES SUBJECT TO THE PLAN. Subject to the adjustments provided for
in Section 8 of this Plan, 1,000,000 authorized but unissued shares of Common
Stock shall be reserved for issuance pursuant to this Plan plus 10% of any
increase (other than any increase due to shares of Common Stock issued pursuant
to this Plan), in the number of authorized and issued shares of Common Stock in
excess of 6,070,294, provided that the number of Shares issued pursuant to
Incentive Options shall not exceed 800,000. Shares of Common Stock subject to,
but not delivered under, an Option terminating or expiring for any reason prior
to its exercise in full shall be deemed available for Options to be granted
thereafter during the term of the Plan.
5. TERMS AND CONDITIONS OF OPTIONS. All Options granted hereunder shall
be subject to the following terms and conditions.
(a) TO WHOM OPTIONS MAY BE GRANTED. Options shall be granted only to
Employees and Directors. Only Employees (including Employee Directors) are
eligible to receive Incentive Options. In the case of Incentive Options, Options
shall not be granted to any Ten Percent Holder unless such Incentive Option is
granted at 110% of the Fair Market Value of the Common Stock at the time of the
grant of the Incentive Option.
(b) NON-TRANSFERABILITY OF OPTION. The Option shall not be
transferable by the Optionee otherwise than by bequest or the laws of descent
and distribution, and shall be exercisable during the Optionee's lifetime only
by the Optionee.
(c) TERMINATION OF OPTIONS.
(i) If an Employee Optionee's employment by the Company shall
terminate for any reason other than death, Disability or termination for Cause,
the Option shall terminate six months (three months in the case of an Incentive
Option) after the Optionee's
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employment terminates (unless the Optionee dies during such period), or on the
Option's expiration date, if earlier, and shall be exercisable during such
period after termination of employment only with respect to the number of shares
which the Optionee was entitled to purchase on the day preceding the termination
of the Optionee's employment, except that the Committee may, in specific cases,
and in its sole discretion, permit the exercise by an Optionee of all, or a part
of, the unexercised Option within the period referred to above after the
Optionee's employment terminates.
(ii) If an Employee Optionee's employment shall terminate
because of discharge for Cause, the Option shall terminate on the date of the
Optionee's discharge.
(iii) In the event of an Employee Optionee's death or Disability
while in the employ of the Company, or the Optionee's death within six months
(three months in the case of an Incentive Option) after the termination of the
Optionee's employment (other than by reason of discharge for cause), the Option
shall terminate upon the earliest to occur of (i) 12 months after the date of
the Optionee's death or Disability or (ii) the Option's expiration date. The
Option shall be exercisable during such period after the Optionee's death or
Disability with respect to the number of shares as to which the Option shall
have been exercisable on the day preceding the Optionee's death or Disability,
as the case may be.
(iv) If a Non-Employee Director Optionee ceases to serve as a
director of the Company, for any reason, such Optionee may exercise the Option
regarding the number of shares of Common Stock as to which the Option shall have
been exercisable on the day immediately preceding the Optionee's termination as
director, at any time within a period ending on the earlier of (a) 90 days after
the termination of Optionee's termination as director or (b) the Option's
expiration date.
(d) LIMITATION ON INCENTIVE OPTIONS. If the aggregate value
(determined at the time the Option is granted) with respect to which Options are
exercisable for the first time by an Optionee during any calendar year under the
Plan or any other plan of the Company exceeds $100,000, then notwithstanding
anything contained herein, such Option shall be treated as a Non- Qualified
Option to the extent of the excess.
6. OTHER TERMS AND CONDITIONS OF OPTION AGREEMENTS. The Committee shall
have the power, subject to the limitations contained in the Plan, to prescribe
any terms and conditions regarding the grant or exercise of any Option granted
to Employees (including Employee Directors) under the Plan and in particular
shall prescribe the following terms and conditions which shall be contained in
the Option Agreement for all Options:
(a) TYPE OF OPTION. Whether the Option is an Incentive Option or a
Non- Qualified Option.
(b) NUMBER OF SHARES OF COMMON STOCK. The number of shares of Common
Stock to which it pertains.
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(c) OPTION PRICE. The Option Price, which shall not be less than
100% of the Fair Market Value of the Common Stock at the time of the grant of an
Incentive Option, except as otherwise provided in Section 5(a).
(d) THE TERM OF OPTION. The term of the Option, which shall not
exceed 10 years from the date on which the Option is granted, unless, in the
case of an Incentive Option, the Optionee is a Ten Percent Holder, in which case
the term shall not exceed five years.
(e) HOW EXERCISED. The method or time when the Option may be
exercised in whole or in part, including, but not limited to, whether it may be
exercised by delivery of previously owned shares of Common Stock.
(f) WITHHOLDING OF TAXES. For a Non-Qualified Option, the provisions
for the withholding of Federal, state and local income or other taxes which are
due in connection with the exercise of the Non-Qualified Option.
7. ADMINISTRATION. The Plan shall be administered by a Committee
appointed by the Board consisting of three or more directors of the Company or
the entire Board of the Company. So long as the Company remains a public
Company, the members of the Committee shall be "outside directors" within the
meaning of Section 162(m) of the Code (or any successor provision thereto) or
shall be the entire Board. In accordance with and subject to the provisions of
the Plan, the Committee shall have full power and authority to interpret the
provisions and supervise the administration of the Plan. All decisions,
determinations and selections made by the Committee pursuant to the provisions
of the Plan shall be final. Each Option granted shall be evidenced by an Option
Agreement containing such terms and conditions as may be approved by the
Committee and which shall not be inconsistent with the Plan.
8. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Notwithstanding the
limitations set forth in Section 4, in the event of a merger, consolidation,
reorganization, stock dividend, stock split or other change in corporate
structure or capitalization affecting the Common Stock, the Committee shall make
an appropriate adjustment in the maximum number of shares available under the
Plan or to any one individual and in the number, kind and Option Price of Common
Stock subject to Options granted under the Plan. Any such adjustment regarding
an Incentive Option shall be made so as not to constitute a modification,
extension or renewal of the Incentive Option within the meaning of section
424(h) of the Code.
9. TIME OF GRANTING OPTIONS. Nothing contained in the Plan or in any
resolution adopted or to be adopted by the Board or by the shareholders of the
Company, and no action taken by the Committee (other than the granting of a
specific Option), shall constitute the granting of an Option hereunder. The
granting of an Option pursuant to the Plan shall take place only on the date
such Option is approved by the Committee.
10. AMENDMENT AND DISCONTINUANCE. The Board may, at any time, amend,
modify or terminate the Plan; provided that such actions may not be taken
without the approval of the Company's shareholders if such approval is required
by any applicable law or the rules of any
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national securities exchange or system on which the Common Stock is then listed
or reported.
11. RESTRICTIONS ON TRANSFER OF SHARES. Any shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the Board
may determine. Such restrictions shall be set forth in the applicable Stock
Option Agreement and shall apply in addition to any restrictions that may apply
to holders of shares generally.
12. VESTING UPON CHANGE IN CONTROL. Upon a Change in Control, any then
outstanding Options held by Optionees shall become fully vested and immediately
exercisable. Furthermore, if provided in an Option Agreement, upon a Change in
Control, the Optionee shall have the right to sell the Option back to the
Company for an amount generally equal to the excess of the Fair Market Value of
the Common Stock subject to the Option over the Option Price.
13. EFFECTIVENESS AND TERMINATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective upon its
adoption by the Board. The Plan shall be rescinded and all Options granted
hereunder shall be null and void unless within 12 months from the date of the
adoption of the Plan by the Board it shall have been approved by the holders of
a majority of the outstanding Common Stock present or represented and entitled
to vote on the Plan at a shareholders' meeting.
(b) TERMINATION DATE. The Plan shall terminate on the earliest to
occur of (i) the date when all the Common Stock available under the Plan shall
have been acquired through the exercise of Options granted under the Plan, (ii)
10 years after the date of adoption of the Plan by the Board or (iii) such other
date as the Board may determine.
14. NO GRANTING OF EMPLOYMENT RIGHTS. Neither the Plan, nor any action
taken under the Plan, shall be construed as giving any Employee the right to
receive Options under the Plan nor shall an award of Options under the Plan be
construed as giving any Employee any right with respect to continuance of
employment by the Company. The Company expressly reserves the right to
terminate, with or without cause, any Employee's employment at any time, except
as may otherwise be provided by a written agreement between the Company and the
Employee.
15. GOVERNING LAW. The provisions of the Plan shall be construed,
administered and enforced according to the laws of the Commonwealth of Kentucky
and shall be construed in such a fashion that all Incentive Options shall
qualify as "incentive stock options" within the meaning of section 422 of the
Code.
DATED: ______________, 2001
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BLUE RIDGE ENERGY, INC.
By:
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Name: Edward L. Stillie
Title: President
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BLUE RIDGE ENERGY, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
Annual Meeting to be held on
August 7, 2001 at 10:00 a.m. CDT
For stockholders as of Control No.
6/30/01 ___________
The undersigned appoints Robert D. Burr as proxy to attend the Annual Meeting of
Stockholders of the Company set forth above and to vote as specified in this
proxy all shares of Common Stock of the company held of record by the
undersigned on June 30, 2001.
This proxy, when properly executed, will be voted in the manner specified herein
by the undersigned stockholder. If no directions are indicated, this proxy will
be voted for Proposals 1, 2 and 3.
PROPOSALS
1. ELECTION OF DIRECTORS
1. Robert D. Burr 4. Harry J. Peters
2. Edward L. Stillie 5. Gregory B. Shea
3. James T. Cook, Jr. 6. Russell L. Vera
2. 2001 STOCK OPTION PLAN
TO APPROVE THE 2001 STOCK OPTION PLAN.
3. IN HIS DISCRETION, THE PROXY IS AUTHORIZED TO VOTE ON SUCH OTHER BUSINESS AS
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
The Board of Directors recommends a vote for Proposals 1, 2 and 3.
BLUE RIDGE ENERGY, INC.
Annual Meeting to be held on
August 7, 2001 at 10:00 a.m. CDT
1. Directors
(Mark "X" for only one box)
[ ] For all Nominees
[ ] Withhold all Nominees
[ ] Withhold authority to vote for any
individual Nominee. Write
number(s) of Nominees below:
Use numbers only ____________________
2. 2001 Stock Option Plan
[ ] For [ ] Against [ ] Abstain
3. Authorization for proxy to vote other business
[ ] For [ ] Against [ ] Abstain
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Signature Date
Blue Ridge Energy, Inc.
632 Adams Street, Suite 710
Bowling Green, Kentucky 42101
Client Label