SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ____]
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|_| Preliminary Proxy Statement
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|X| Definitive Proxy Statement
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|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
PYR Energy Corporation
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(Name of Registrant as Specified in its Charter)
Not Applicable
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1. Title of each class of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
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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: Not applicable
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PYR ENERGY CORPORATION
1675 Broadway, Suite 2450
Denver, Colorado 80202
(303) 825-3748
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held June 18, 2001
The Annual Meeting Of Stockholders of PYR Energy Corporation will be held
on June 18, 2001 at 9:00 a.m. (local time) at Wells Fargo Bank, 1740 Broadway,
Main Floor - Forum Room, Denver, Colorado 80202, for the following purposes:
1. To elect a Board Of Directors consisting of four Directors.
2. To consider and vote upon a proposal recommended by the Board Of
Directors to amend our Certificate Of Incorporation to increase our
authorized common stock to 75,000,000 shares.
3. To consider and vote upon a proposal recommended by the Board Of
Directors to reincorporate the Company under the laws of the State of
Maryland.
4. To consider and vote upon a proposal recommended by the Board Of
Directors to amend our 2000 Stock Option Plan to increase from 500,000
to 1,500,000 the number of shares of common stock issuable pursuant to
options granted under our 2000 Stock Option Plan.
5. To consider and vote upon a proposal recommended by the Board Of
Directors to ratify the selection of Wheeler Wasoff, P.C. to serve as
our independent certified accountants.
6. To transact any other business that properly may come before the
annual meeting.
Only the stockholders of record as shown on our transfer books at the close
of business on May 7, 2001 are entitled to notice of, and to vote at, the annual
meeting.
All stockholders, regardless of whether they expect to attend the meeting
in person, are requested to complete, date, sign and return promptly the
enclosed form of proxy in the accompanying envelope (which requires no postage
if mailed in the United States). The person executing the proxy may revoke it by
filing with our Secretary an instrument of revocation or a duly executed proxy
bearing a later date, or by electing to vote in person at the annual meeting.
ALL STOCKHOLDERS ARE EXTENDED A CORDIAL INVITATION TO ATTEND THE ANNUAL
MEETING.
By the Board Of Directors
D. Scott Singdahlsen
Chief Executive Officer
Denver, Colorado
May 18, 2001
PROXY STATEMENT
PYR ENERGY CORPORATION
1675 Broadway, Suite 2450
Denver, Colorado 80202
(303) 825-3748
ANNUAL MEETING OF STOCKHOLDERS
to be held June 18, 2001
This proxy statement is provided in connection with the solicitation of
proxies by the Board Of Directors of PYR Energy Corporation, a Delaware
corporation (the "Company" or "we" or "us"), to be voted at the Annual Meeting
Of Stockholders to be held at 9:00 a.m. (local time) on June 18, 2001 at Wells
Fargo Bank, 1740 Broadway, Main Floor - Forum Room, Denver, Colorado 80202, or
at any adjournment or postponement of the annual meeting. We anticipate that
this proxy statement and the accompanying form of proxy will be first mailed or
given to stockholders on or about May 18, 2001.
The shares represented by all proxies that are properly executed and
submitted will be voted at the Annual Meeting in accordance with the
instructions indicated on the proxies. Unless otherwise directed, the shares
represented by proxies will be voted (1) for each of the four nominees for
director whose names are set forth on the proxy card, (2) in favor of the
amendment of our Certificate Of Incorporation to increase our authorized common
stock to 75,000,000 shares, (3) in favor of reincorporating the Company in
Maryland, (4) in favor of the amendment of our 2000 Stock Option Plan to
increase from 500,000 to 1,500,000 the number of shares of common stock issuable
pursuant to options granted under our 2000 Stock Option Plan, and (5) in favor
of ratification of Wheeler Wasoff, P.C. as our independent certified
accountants.
A stockholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of revocation to our Secretary, by
substituting a new proxy executed at a later date, or by requesting, in person
at the Annual Meeting, that the proxy be returned.
The solicitation of proxies is to be made principally by mail; however,
following the initial solicitation, further solicitations may be made by
telephone or oral communication with stockholders. Our officers, directors and
employees may solicit proxies, but these persons will not receive compensation
for that solicitation other than their regular compensation as employees.
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of the shares held of record by those persons. We may reimburse those persons
for reasonable out-of-pocket expenses incurred by them in so doing. We will pay
all expenses involved in preparing, assembling and mailing this proxy statement
and the enclosed material. A majority of the issued and outstanding shares of
common stock entitled to vote, represented either in person or by proxy,
constitutes a quorum at any meeting of the stockholders. If sufficient votes for
approval of the matters to be considered at the annual meeting have not been
received prior to the meeting date, we intend to postpone or adjourn the annual
meeting in order to solicit additional votes. The form of proxy we are
soliciting requests authority for the proxies, in their discretion, to vote the
stockholders' shares with respect to a postponement or adjournment of the Annual
Meeting. At any postponed or adjourned meeting, we will vote any proxies
received in the same manner described in this proxy statement with respect to
the original meeting.
RECENT DEVELOPMENTS CONCERNING THE COMPANY
During the fiscal year ended August 31, 2000, we announced a major natural
gas discovery at our East Lost Hills exploration project. This project dates
back to May of 1998, when we and other working interest owners commenced
drilling our first exploration well - the Bellevue #1-17. On November 23, 1998,
the Bellevue #1-17 prospect well blew out and ignited after having reached a
depth of approximately 17,600 feet out of targeted total depth of 19,000 feet. A
relief well, the Bellevue #1-17R, began drilling on December 18, 1998. On May
29, 1999 the relief well successfully killed, and the operator plugged and
abandoned, the original 1-17 well bore. The Bellevue #1-17R was then used to
successfully sidetrack a replacement well back into the target reservoir.
Concurrent with commencing completion operations on the 1-17R well, Berkley
Petroleum, Inc. (a wholly owned subsidiary of Berkley Petroleum Corporation of
Calgary, Alberta, Canada had taken over as operator. On March 19, 2001, Berkley
was acquired by Anadarko Petroleum Corporation and effective on that date,
Anadarko became operator of the East Lost Hills project.
In August 1999, we and other working interest owners commenced drilling the
ELH #1 well, approximately two miles northwest of the #1-17R well. On April 12,
2000, this well had drilled to a total depth of 19,724 feet. Production testing
commenced on May 28, 2000. On July 6, 2000, based on the results of the
production testing and other analysis, we announced a natural gas discovery at
the East Lost Hills Field. In February 2001, we reported that the ELH # 1 well
began flowing gas and liquid hydrocarbons. Production from the ELH # 1 well is
being sold at prices indexed to the California spot market. Other participants
at East Lost Hills and us are at various stages of drilling or testing three
additional wells in the field.
On July 11, 2000, the participants commenced drilling the Berkley ELH #2
well. This well targets the same structure encountered by the Bellevue 1-17,
1-17R and the ELH #1 wells and is located approximately 1.5 miles northwest of
the ELH #1. Currently, this well has been drilled and cased to a measured depth
of 18,011 feet. In March 2001, we announced the preliminary testing results of
the ELH #2 well. During the flow test portion of the production test, gas was
flowed at approximately 3 mmcf/day. Analysis of the production and pressure
build-up from the flow test is still in progress and final test results will be
released upon completion of the analysis of the data.
On June 19, 2000, the participants at East Lost Hills commenced drilling
the ELH #3 well. This well is located approximately one mile southwest of the
Bellevue 1-17R location and is designed to test a geologically separate
structure than the structure encountered by the Bellevue 1-17, 1-17R, ELH #1 and
#2 wells. This well has reached its total depth of 21,750 feet and logging
operations are underway.
On November 26, 2000, the participants commenced drilling the Berkley ELH
#4 well. This well is projected to drill to a total depth of 20,000 feet and
targets the same structure encountered by the Bellevue 1-17, 1-17R and the ELH
#1 and #2 wells. Currently, it is drilling at a measured depth below 17,000
feet.
Subsequent to August 31, 2000, we acquired an additional 1.544 percent
working interest at East Lost Hills. This interest was purchased from a
non-related private entity. As a result of this acquisition, our total working
interest in the approximately 30,000 gross and net acres at East Lost Hills
increased to 12.1193 percent.
During January 2000, we announced that the Berkley Cal Canal #1 well had
penetrated 1,230 feet of Temblor formation with 775 feet of net sand, and was
drilled to a total depth of 18,100 feet. During production testing,
non-commercial hydrocarbon flow rates were obtained from the initial perforated
10 foot zone in the lower McDonald. The participants had decided to defer
further completion or deepening of the existing well bore until information
regarding reservoir quality and performance is obtained from on-going drilling
efforts in the San Joaquin Basin.
2
In May 2000, we completed the sale of 22,000 units of common stock and
warrants pursuant to a private placement at a price of $32.50 per unit. Each
unit consisted of ten shares of common stock and one immediately exercisable
warrant to purchase one share of common stock at an exercise price of $4.25 per
share for a period of three years. Proceeds from the offering were $715,000,
before costs of the offering of $11,857.
In August 2000, we completed the sale of 540,000 units of common stock and
warrants pursuant to a private placement at a price of $17.50 per unit. Each
unit consisted of five shares of common stock and one immediately exercisable
warrant to purchase one share of common stock at an exercise price of $4.80 per
share for a period of three years. Proceeds from the offering were $9,450,000,
before costs of the offering of $567,436 (including warrants valued at
$110,606).
In March 2001, we completed the sale of a total of 1,450,000 shares of
common stock for $8 per share, or a total of $11,600,000 in a registered
offering. After the costs and expenses, we received net proceeds of
approximately $11,450,000.
Our offices are located at 1675 Broadway, Suite 2450, Denver, Colorado
80202. The telephone number is (303) 825-3748, telefax number is (303) 825-3768
and our web site is www.pyrenergy.com.
Financial Information
Financial Statements And Management's Discussion And Analysis Of Financial
Condition And Results Of Operations. Our financial statements for the year ended
August 31, 2000 are included in our Annual Report on Form 10-KSB for the year
ended August 31, 2000 and are incorporated into this proxy statement by
reference. Our unaudited financial statements for the six months ended February
28, 2001 are included in our Form 10-QSB for the quarter ended February 28, 2001
and are incorporated into this proxy statement by reference. Each of these
reports also includes a Management's Discussion And Analysis Of Financial
Condition And Results Of Operations for the respective periods covered by the
Reports. Copies of these reports are being sent to each stockholder with this
proxy statement.
1. ELECTION OF DIRECTORS
At the annual meeting, the stockholders will elect four directors to serve
as our Board Of Directors. Each director will be elected to hold office until
the next annual meeting of stockholders and thereafter until his successor is
elected and qualified. The affirmative vote of a majority of the shares
represented at the annual meeting is required to elect each director. Cumulative
voting is not permitted in the election of directors. Consequently, each
stockholder is entitled to one vote for each share of common stock held in his
or her name. In the absence of instructions to the contrary, the person named in
the accompanying proxy shall vote the shares represented by that proxy for the
persons named below as management's nominees for directors. Each of the nominees
currently is a director.
Each of the nominees has consented to be named in this proxy statement and
to serve on the Board if elected. It is not anticipated that any of the nominees
will become unable or unwilling to accept nomination or election, but, if that
should occur, the persons named in the proxy intend to vote for the election of
such other person as the Board Of Directors may recommend.
3
The following table sets forth, with respect to each nominee for director,
the nominee's age, his positions and offices with the Company, the expiration of
his term as a director, and the year in which he first became a director.
Individual background information concerning each of the nominees follows the
table. For additional information concerning the nominees, including stock
ownership and compensation, see "--Executive Compensation", "--Stock Ownership
Of Directors And Principal Stockholders", and "--Certain Transactions With
Management And Principal Stockholders".
Position With Expiration Of Term Initial Date
Name Age The Company As Director As Director
---- --- -------------- ----------- -----------
D. Scott Singdahlsen 42 Chief Executive Officer; 2001 Annual Meeting August 1997
President; and Chairman of
the Board
Keith F. Carney 44 Director 2001 Annual Meeting August 1997
S. L. Hutchison 68 Director 2001 Annual Meeting April 1999
Bryce W. Rhodes 47 Director 2001 Annual Meeting April 1999
D. Scott Singdahlsen has served as our President, Chief Executive Officer
and Chairman of the Board since August 1997. Mr. Singdahlsen co-founded PYR
Energy, LLC in 1996, and served as General Manager and Exploration Coordinator.
Mr. Singdahlsen was a principal and co-founder of Interactive Earth Sciences
Corporation, a 3-D seismic management and interpretation consulting firm in
Denver, where he served as vice president, president and lead seismic
interpretation specialist from 1992 to 1996. Prior to forming Interactive Earth
Sciences Corporation, Mr. Singdahlsen was employed as a Development Geologist
for Chevron USA in the Rocky Mountain region. At Chevron, Mr. Singdahlsen was
involved in 3-D seismic reservoir characterization projects and geostatistical
analysis. Mr. Singdahlsen started his career at UNOCAL as an Exploration
Geologist in Midland, Texas. Mr. Singdahlsen earned a B.A. in Geology from
Hamilton College and a M.S. in Structural Geology from Montana State University.
Keith F. Carney has served as a Director since August 1997. Since October
1997, Mr. Carney has been Executive Vice President of Cheniere Energy, Inc., a
Houston-based publicly traded oil and gas exploration company. From July 1997
until October 1997, Mr. Carney served as Chief Financial Officer of Cheniere
Energy. After earning his M.B.A. degree from the University of Denver in 1992,
Mr. Carney was employed as a Securities Analyst in the oil and gas
exploration/production sector by Smith Barney, Inc. Mr. Carney began his career
as an Exploration Geologist at Shell Oil after earning B.S. and M.S. degrees in
Geology from Lehigh University.
S. L. Hutchison has been a Director since April 1999, when he was nominated
and elected to the Board in connection with our private placement of convertible
promissory notes in October and November 1998. Since 1979, Mr. Hutchison has
served as Vice President and Chief Financial Officer of Victory Oil Company, an
oil and gas production company based in California, and other companies in the
Victory Group of companies. Also during that period, Mr. Hutchison has served as
Vice President and Chief Financial Officer and a Director of Crail Capital, a
real estate investment company that is owned by Victory Oil Company, and Victex,
Inc., a real estate and oil and gas company. Mr. Hutchison also serves as Chief
Financial Officer and a director of each of the Crail Johnson Foundation and the
Independent Oil Producers Agency, and is the Treasurer and a director of the Los
Angeles Maritime Institute. Mr. Hutchison received a Bachelor's degree in
accounting from the University of Washington.
4
Bryce W. Rhodes has been a Director since April 1999, when he was nominated
and elected to the Board in connection with our private placement of convertible
promissory notes in October and November 1998. Since 1996, Mr. Rhodes has served
as Vice President of Whittier Energy Company, an oil and gas investment company.
Mr. Rhodes also served as Investment Manager of Whittier Energy Company from
1990 until 1996. Mr. Rhodes received B.A. degrees in Geology and Biology from
the University of California, Santa Cruz, in 1976 and an MBA degree from
Stanford University.
Other Executive Officers
Andrew P. Calerich, 36, has served as our Chief Financial Officer since
August 1997, as Secretary since May 1998, and as Vice President since August
1999. From 1993 to 1997, Mr. Calerich was a business and financial consultant
primarily to public and private oil and gas producers in Denver. From 1990 to
1993, Mr. Calerich was employed as corporate Controller at a publicly traded oil
and gas company in Denver. Mr. Calerich began his professional career in public
accounting in the tax department at Arthur Andersen & Company. Mr. Calerich is a
Certified Public Accountant. He earned B.S. degrees in both Accounting and
Business Administration at Regis College.
Kenneth R. Berry, Jr., 48, has served as Vice President of Land since
August 1999 and as Land Manager since October 1997. Mr. Berry is responsible for
the management of all land issues including leasing and permitting. Mr. Berry
has 23 years of experience as an independent landman. Prior to joining the
Company, Mr. Berry served as the managing land consultant for Swift Energy
Company in the Rocky Mountain region. Mr. Berry began his career in the land
department with Tenneco Oil Company after earning a B.A. degree in Petroleum
Land Management at the University of Texas -- Austin.
Each of the officers serves at the pleasure of the Board Of Directors.
There are no family relationships among our officers and directors.
Committees And Meetings
The Board Of Directors met six times during the fiscal year ended August
31, 2000 and all directors were present at each of those meetings.
The Board Of Directors currently has a Compensation Committee, which met
once during the fiscal year ended August 31, 2000. All members of the
Compensation Committee participated in those meetings. The Compensation
Committee has the authority to establish policies concerning compensation and
employee benefits. The Compensation Committee reviews and makes recommendations
concerning the compensation policies and the implementation of those policies
and determines compensation and benefits for executive officers. The
Compensation Committee currently consists of Messrs. Carney (Chairman),
Hutchison and Rhodes. None of the members of the Compensation Committee is an
employee of the Company.
The Board of Directors currently has an Audit Committee consisting of
Messrs. Hutchison (Chairman), Carney and Rhodes. The Audit Committee did not
meet formally during the fiscal year ended August 31, 2000. The functions of the
Audit Committee and its activities during 2000 are described below under the
heading "Audit Committee Report". During the year ended December 31, 2000, the
Board examined the composition of the Audit Committee in light of the adoption
by the American Stock Exchange of new rules governing audit committees. Based
upon this examination, the Board confirmed that all members of the Audit
Committee are "independent" within the meaning of the Exchange's new rules.
5
Audit Committee Report
The following Report of the Audit Committee does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent the Company specifically incorporates this
Report by reference therein.
During the fiscal year ended August 31, 2000, the Audit Committee of the
Board of Directors developed a charter for the Committee, which was adopted by
the full Board on June 13, 2000 and amended on April 24, 2001. The complete text
of the new charter, which reflects standards set forth in new Securities and
Exchange Commission ("SEC") regulations and American Stock Exchange rules, is
reproduced in the appendix to this Proxy Statement.
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed and discussed with management the audited financial statements in the
Company's Annual Report on Form 10-KSB for the year ended August 31, 2000 and
the unaudited financial statements included in the Quarterly Reports on Form
10-QSB filed during the fiscal year ended August 31, 2001.
The Committee discussed with the independent auditors, who are responsible
for expressing an opinion on the conformity of audited financial statements with
generally accepted accounting principles, the auditors' judgments as to the
quality, not just the acceptability, of the Company's accounting principles and
such other matters as are required to be discussed by the auditors with the
Committee under Statement on Auditing Standard No. 61, as amended. In addition,
the Committee discussed with the independent auditors the auditors' independence
from management and the Company, including the matters in the written
disclosures and the letter required by the Independence Standards Board Standard
No. 1. The Committee considered whether the auditors' providing services on
behalf of the Company other than audit services is compatible with maintaining
the auditors' independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their respective audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of the auditors' examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The Committee did not meet during the fiscal year ended August 31, 2000 and has
thus far met twice during fiscal 2001.
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Annual Report on Form 10-KSB for
the year ended August 31, 2000 for filing with the SEC. The Committee also has
recommended to the Board the selection of the Company's independent auditors.
The Audit Committee
Keith F. Carney
S.L. Hutchison
Bryce W. Rhodes
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires our directors, executive officers and beneficial owners of more than
10% of our common stock to file with the SEC initial reports of ownership and
6
reports of changes in ownership of our common stock and other equity securities.
We believe that during the year ended December 31, 2000, our officers, directors
and beneficial owners of more than 10% of our common stock complied with all
Section 16(a) filing requirements, except that S. Scott Singdahlsen was late
filing a Form 5, Annual Statement Of Beneficial Ownership Of Securities,
following the fiscal year ended August 31, 2000 reporting a gift of shares. In
making these statements concerning compliance with Section 16(a), we have relied
upon the written representations of our directors and officers and our review of
the monthly statements of changes filed with us by our officers and directors.
Executive Compensation
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the last three successive completed fiscal years ended August 31,
2000 by D. Scott Singdahlsen, the Chief Executive Officer, President and
Chairman Of The Board. No executive officer, other than the Chief Executive
Officer and the Chairman Of The Board, received total salary and bonus exceeding
$100,000 during any of the last three fiscal years.
Summary Compensation Table
--------------------------
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------------------- ---------------------------------
Restricted
Other Annual Stock LTIP All other
Name and Fiscal Salary Bonus Compensation Awards Options Payouts Compensation
Principal Position Year ($)(1) ($)(2) ($)(3) ($) (#) ($)(4) ($)(5)
- ----------------------------------------------------------------------------------------------------------------------------------
D. Scott Singdahlsen 2000 $110,000 $-0- -0- -0- -0- -0- -0-
Chief Executive Officer,
President and Chairman 1999 $ 77,917 -0- -0- -0- -0- -0- -0-
Of the Board
1997 $ 75,000 -0- -0- -0- -0- -0- -0-
- ---------------------
(1) The dollar value of base salary (cash and non-cash) received during the
year indicated.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
(3) During the period covered by the Summary Compensation Table, we did not pay
any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
(4) We do not have in effect any plan that is intended to serve as incentive
for performance to occur over a period longer than one fiscal year except
for our 1997 and 2000 Stock Option Plans.
(5) All other compensation received that we could not properly report in any
other column of the Summary Compensation Table including annual Company
contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the named executive officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, the Company.
7
Option Grants Table
The following table provides certain summary information concerning
individual grants of stock options made during the fiscal year ended August 31,
2000 to the following named executive officers.
Option Grants For Fiscal Year Ended August 31, 2000
---------------------------------------------------
- --------------------------------------------------------------------------------
Number of
Securities % of Total
Underlying Options Granted Exercise
Options to Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date
- --------------------------------------------------------------------------------
D. Scott Singdahlsen 100,000 31% $4.40 5/14/05
- --------------------------------------------------------------------------------
Aggregated Option Exercises And Fiscal Year-End Option Value Table
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended August 31, 2000 by the named
executive officers and the value of unexercised stock options held by the named
executive officers as of August 31, 2000.
Aggregated Option Exercises
For Fiscal Year Ended August 31, 2000
And Year-End Option Values (1)
- ----------------------- -------------- ---------------------- ---------------------------- ----------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-
Options at Fiscal Year- Money Options at
End (#) (4) Fiscal Year-End ($) (5)
- ----------------------- -------------- --------------------- ---------------------------- ----------------------------
Shares
Acquired on
Name Exercise (2) Value Realized ($)(3) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- -------------- --------------------- ----------- ------------- ----------- -------------
D. Scott Singdahlsen 0 0 0 100,000 0 $47,500
- ----------------------- -------------- --------------------- ----------- ------------- ---------- -------------
(1) No stock appreciation rights are held by any of the named executive
officers.
(2) The number of shares received upon exercise of options during the year
ended August 31, 2000.
(3) With respect to options exercised during the year ended August 31, 2000,
the dollar value of the difference between the option exercise price and
the market value of the option shares purchased on the date of the exercise
of the options.
(4) The total number of unexercised options held as of August 31, 2000,
separated between those options that were exercisable and those options
that were not exercisable on that date.
(5) For all unexercised options held as of August 31, 2000, the aggregate
dollar value of the excess of the market value of the stock underlying
those options over the exercise price of those unexercised options. These
values are shown separately for those options that were exercisable, and
those options that were not yet exercisable, on August 31, 2000. As
required, the price used to calculate these figures was the closing sale
price of the common stock at year's end, which was $4.875 per share on
August 31, 2000.
8
1997 Stock Option Plan
In August 1997, our 1997 Stock Option Plan (the "1997 Plan") was adopted by
the Board Of Directors and subsequently approved by the stockholders. Pursuant
to the 1997 Plan, we may grant options to purchase an aggregate of 1,000,000
shares of common stock to key employees, directors, and other persons who have
contributed or are contributing our success. The options granted pursuant to the
1997 Plan may be either incentive options qualifying for beneficial tax
treatment for the recipient or nonqualified options. The 1997 Plan may be
administered by the Board Of Directors or by an option committee. Administration
of the 1997 Plan includes determination of the terms of options granted under
the 1997 Plan. At August 31, 1999, options to purchase 821,000 shares were
outstanding under the 1997 Plan. During fiscal year ended August 31, 2000,
options to purchase 179,000 additional shares were granted and options to
purchase 27,5000 shares were exercised so that, as of August 31, 2000, options
to purchase 972,5000 shares were outstanding and there are no remaining shares
that may be granted under the 1997 Plan.
2000 Stock Option Plan
In March 1999, our 2000 Stock Option Plan (the "2000 Plan") was adopted by
the Board Of Directors and subsequently approved by the stockholders. Pursuant
to the 2000 Plan, we may grant options to purchase an aggregate of 500,000
shares of our common stock to key employees, directors, and other persons who
have contributed or are contributing to our success. The options granted
pursuant to the 2000 Plan may be either incentive options qualifying for
beneficial tax treatment for the recipient or non-qualified options. The 2000
Plan may be administered by the Board Of Directors or by an option committee.
Administration of the 2000 Plan includes determination of the terms of options
granted under the 2000 Plan. During the fiscal year ended August 31, 2000,
options to purchase 200,000 shares were granted so that, as of August 31, 2000,
options to purchase 300,000 shares may be granted under the 2000 Plan.
Subsequent to the fiscal year ended August 31, 2000, options to purchase an
additional 300,000 shares have been granted so that there currently are no
remaining shares to be granted.
Compensation Of Outside Directors
Currently, outside directors are compensated for serving as a director by
vesting options to purchase 2,500 shares of our common stock for every complete
fiscal quarter served as a director. Directors also are reimbursed for expenses
incurred in attending meetings and for other expenses incurred on our behalf.
Employment Contracts And Termination of Employment And Change-In-Control
Arrangements
We do not have any written employment contracts with any of our officers or
other employees. We have no compensatory plan or arrangement that results or
will result from the resignation, retirement, or any other termination of an
executive officer's employment or from a change-in-control or a change in an
executive officer's responsibilities following a change-in-control, except that
both the 1997 Plan and the 2000 Plan provide for vesting of all outstanding
options in the event of the occurrence of a change-in-control.
Stock Ownership Of Directors And Principal Stockholders
As of May 4, 2001, there were 23,641,357 shares of common stock
outstanding. The following table sets forth certain information as of that date
with respect to the beneficial ownership of common stock by each director and
nominee for director, by all executive officers and directors as a group, and by
each other person known by us to be the beneficial owner of more than five
percent of our common stock:
9
Name and Address of Number of Shares Percentage of
Beneficial Owner Beneficially Owned (1) Shares Outstanding
---------------- ---------------------- ------------------
D. Scott Singdahlsen 1,900,000 (2) 8.0%
1675 Broadway, Suite 1150
Denver, Colorado 80202
Keith F. Carney 124,289 (3) *
915 Bay Oaks Road
Houston, Texas 77008
S.L. Hutchison 3,224,100 (4) 13.7%
c/o Victory Oil Company
222 West Sixth Street, Suite 1010
San Pedro, California 90731
Bryce W. Rhodes 264,039 (5) 1.1%
c/o Whittier Energy Company
462 Stevens Avenue, Suite 109
Solana Beach, California 92075
All Executive Officers and
Directors as a group (six persons) 6,070,293 (3)(4)(5)(6)(7) 25.7%
Victory Oil Company 3,118,976 (8) 13.2%
222 West Sixth Street, Suite 1010
San Pedro, California 90731
- ------------------------
(*) Less than one percent.
(1) "Beneficial ownership" is defined in the regulations promulgated by the
U.S. Securities and Exchange Commission as having or sharing, directly or
indirectly (i) voting power, which includes the power to vote or to direct
the voting, or (ii) investment power, which includes the power to dispose
or to direct the disposition of shares of the common stock of an issuer.
Unless otherwise indicated, the beneficial owner has sole voting and
investment power.
(2) The shares shown for Mr. Singdahlsen include 200,000 shares owned by Mr.
Singdahlsen's two minor children.
(3) Includes options to purchase 15,000 shares at $4.125 per share until
December 20, 2002 that currently are exercisable or that will become
exercisable within the next 60 days.
(4) Includes options to purchase 15,000 shares at $4.125 per share until
December 20, 2002 that currently are exercisable or that will become
exercisable within the next 60 days. Also includes the shares shown as
beneficially owned by Victory Oil Company as described in note (8) below.
Mr. Hutchison is the Vice President and Chief Financial Officer of Victory
Oil Company. Mr. Hutchison disclaims beneficial ownership of the shares
beneficially owned by Victory Oil Company.
(5) Includes 13,000 shares of common stock owned by Mr. Rhodes and 64,414
shares of common stock owned by Adventure Seekers Travel, Inc. Adventure
Seekers is owned by Mr. Rhodes' wife and Mr. Rhodes is the President of
Adventure Seekers. Also includes 171,625 shares that are held by Whittier
Energy Company. Mr. Rhodes is a Vice President of Whittier Energy Company.
Mr. Rhodes disclaims beneficial ownership of the shares beneficially owned
by Whittier Energy Company. Also includes options to purchase 15,000 shares
at $4.125 per share until December 20, 2002 that currently are exercisable
or that will become exercisable within the next 60 days.
10
(6) Includes 125,000 shares of common stock and options to purchase 80,000
shares of common stock that currently are exercisable or that will become
exercisable within the next 60 days that are held by Andrew P. Calerich,
Vice-President, Chief Financial Officer and Secretary of the Company, and
32,600 shares held by Mr. Calerich's wife's individual retirement account.
(7) Includes the following securities held directly or indirectly by Kenneth R.
Berry, Jr., who is Vice President of Land: an aggregate of 70,265 shares
owned by various entities, IRAs, and trusts with which Mr. Berry, or his
spouse or minor daughter, is associated; and options to purchase 230,000
shares of common stock that currently are exercisable or that will become
exercisable within the next 60 days.
(8) Includes 100,000 shares owned by Crail Fund, a partnership that is owned by
the shareholders of Victory Oil Company. See "Certain Transactions With
Management And Principal Stockholders".
Certain Transactions With Management And Principal Stockholders
1998 Private Placement Of Notes
- -------------------------------
In November 1998, we completed the sale of convertible promissory notes in
the total amount of $2,500,000 in a private placement transaction pursuant to
exemptions from federal and state registration requirements. Victory Oil Company
purchased $1.0 million of notes, and trusts for whom the Whittier Trust Company
and Whittier Trust Company of Nevada, Inc. serve as trustee, purchased $500,000
of notes. In addition, a company owned by Bryce Rhodes' wife purchased $40,000
of these notes. The remaining notes were sold to other investors.
These notes were automatically converted into shares of Series A Preferred
Stock at the rate of one share for each $100 principal amount of notes upon
approval by the stockholders of the Series A Preferred Stock on April 16, 1999.
As a result, no notes are currently outstanding.
Each share of Series A Preferred Stock issued had a face value of $100 per
share. The Series A Preferred Stock was convertible, in whole or in part, into
common stock at the rate of one share of common stock for each $.60 of face
value of Series Preferred Stock (or 166.67 shares of common stock for each $100
face amount share of Series A Preferred Stock). All these shares of Preferred
Stock were converted into shares of common stock.
We had the right to require that one-third of the outstanding Series A
Preferred Stock be redeemed or converted at any time after October 26, 1999,
provided that the market value of our common stock was at least $2.40 per share
based on a 45-day weighted average trading price. At October 26, 1999, we had
exceeded the $2.40 per share requirement and subsequently gave notice of
redemption to the holders of one-third of the Series A Preferred Stock.
We also had the right to require all of the outstanding Series A Preferred
Stock be redeemed or converted beginning at any time after October 26, 2000,
provided that the market value of our common stock was at least $4.80 per share
based upon a 45-day weighted average trading price. At October 26, 2000, we had
exceeded the $4.80 per share trading requirement. In November 2000, we informed
the holders of the Series A Preferred Stock that the outstanding shares would be
redeemed at 5:00 p.m. on December 8, 2000 if they were not converted into common
stock prior to that time. As a result, no shares of Series A Preferred Stock are
currently outstanding.
11
In connection with the sale of the convertible promissory notes, we agreed
to add, and our stockholders subsequently approved the election of, S.L.
Hutchison and Bryce W. Rhodes to the Board of Directors. Mr. Hutchison is the
Chief Financial Officer of Victory Oil Company and Mr. Rhodes is a beneficial
owner of less than five percent of the Whittier Trust Company and the Whittier
Trust Company of Nevada, Inc., and a beneficiary of trusts administered by those
companies that own our securities. Mr. Rhodes has no investment authority over
those trusts.
As a condition to the sale of these notes, D. Scott Singdahlsen, a director
and officer of the Company entered into a voting agreement with the purchasers
of the notes. Pursuant to this voting agreement, Mr. Singdahlsen agreed that he
will vote all the shares of common stock owned by him in favor of the election
of two nominees of the investors to serve on the Board Of Directors and for the
re-election of those nominees or other nominees at any time that the aggregate
percentage ownership of common equity owned by the investors is 20 percent or
more of the outstanding common stock. At the annual meeting of stockholders held
on March 13, 2000, all of Mr. Singdahlsen's shares were voted in favor of the
two nominees. Mr. Singdahlsen is required to vote for only one nominee at any
time after the aggregate percentage ownership of common equity owned by the
investors is less than 20 percent and greater than or equal to 10 percent of the
outstanding common stock. The obligation of Mr. Singdahlsen to vote for any
nominees of the investors terminates at any time after the percentage ownership
of common equity owned by the investors is less than 10 percent of the
outstanding common stock. Mr. Singdahlsen is not required to vote for the
designated board members at any time that the holders of the Series A Preferred
have the right voting separately as a class to elect those designated board
members.
May 1999 Private Placement Of Units
- -----------------------------------
In May 1999, we completed a private placement of $7,000,000 of units at $16
per unit, with each unit consisting of 10 shares of common stock and a warrant
to purchase one share of common stock at an exercise price of $2.50 per share
until May 14, 2004. The private placement was made pursuant to exemptions from
federal and state registration requirements. Mr. Hutchison purchased 2,500 units
for $40,000 and Mr. Carney purchased 2,400 units for $38,400. Messrs. Hutchison
and Carney are directors of the Company. An additional 93,750 units for
$1,500,000 and 7,875 units for $126,000 were purchased by Victory Oil Company
and Whittier Energy Company, respectively. Bryce W. Rhodes, a director of the
Company, is a Vice President of Whittier Energy.
May 2000 Private Placement Of Units
- -----------------------------------
In May 2000, we completed a private placement of $715,000 of units at
$32.50 per unit, with each unit consisting of 10 shares of common stock and a
warrant to purchase one share of common stock at an exercise price of $4.25 per
share until May 19, 2003. The private placement was made pursuant to exemptions
from federal and state registration requirements. A total of 2,000 units for
$65,000 were purchased by Whittier Energy Company.
Except as described above, during the fiscal year ended August 31, 2000,
there were no transactions between the Company and its directors, executive
officers or known holders of greater than five percent of the common stock in
which the amount involved exceeded $60,000 and in which any of the foregoing
persons had or will have a material interest.
2. PROPOSAL TO AMEND OUR CERTIFICATE OF
INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The Board Of Directors has unanimously approved, and recommends to the
stockholders that the stockholders approve, amending our certificate of
incorporation to authorize the issuance of up to 75,000,000 shares of common
stock. Our certificate of incorporation currently authorizes the issuance of up
to 50,000,000 shares of common stock.
12
If no action is taken to increase the authorized common stock, based on the
number of shares currently outstanding, we would be able to issue 24,615,554
additional shares of common stock after excluding shares reserved for the
issuance of options and warrants to purchase common stock. If the proposal to
increase authorized capital is approved by stockholders, we will have 49,615,554
unissued and unreserved shares of common stock available for issuance in the
future.
The Board believes that the additional shares of common stock resulting
from the increase in authorized capital should be available for issuance from
time to time as may be required for various purposes, including the issuance of
common stock in connection with financing or acquisition transactions and the
issuance or reservation of common stock for employee stock options. We do not
presently have any intention or commitment to issue shares of the newly
authorized shares of common stock.
We anticipate that in the future we will consider a number of possible
financing and acquisition transactions that may involve the issuance of
additional equity, debt or convertible securities. If the proposed increase in
authorized capital is approved, the Board would be able to authorize the
issuance of shares for these purposes without the necessity, and related costs
and delays, of either calling a special stockholders' meeting or of waiting for
the regularly scheduled annual meeting of stockholders in order to increase the
authorized capital. If in a particular instance stockholder approval were
required by law or otherwise deemed advisable by the Board, then the matter
would be referred to the stockholders for their approval regardless of whether a
sufficient number of shares previously had been authorized. Neither Delaware law
nor Maryland law, if we reincorporate in Maryland as proposed below, have
similar provisions, and the stockholders of the Company are not entitled to
preemptive rights with respect to the issuance of any authorized but unissued
shares.
The proposed change in capital is not intended to have any anti-takeover
effect and is not part of any series of anti-takeover measures contained in any
debt instruments, our certificate of incorporation or bylaws in effect on the
date of this proxy statement or the articles of incorporation or bylaws we will
adopt if we reincorporate in Maryland. However, stockholders should note that
the availability of additional authorized and unissued shares of common stock
could make any attempt to gain control of the Company or the Board more
difficult or time consuming and that the availability of additional authorized
and unissued shares might make it more difficult to remove current management.
Although the Board currently has no intention of doing so, shares of common
stock could be issued by the Board to dilute the percentage of common stock
owned by a significant stockholder and increase the cost of, or the number of,
voting shares necessary to acquire control of the Board or to meet the voting
requirements imposed by Delaware (or Maryland law if we reincorporate there)
with respect to a merger or other business combination involving the Company. We
are not aware of any proposed attempt to take over the Company or of any attempt
to acquire a large block of our Delaware Common Stock. We have no present
intention to use the increased authorized common stock for anti-takeover
purposes.
If the proposal to increase authorized common stock is approved by the
stockholders, we will amend our certificate or articles of incorporation in
order to effect the increase in authorized common stock.
13
Required Vote; Board Recommendation
The affirmative vote of a majority of the outstanding shares of common
stock, whether represented in person or by proxy, is required at the annual
meeting in order to approve amendment of the certificate of incorporation to
increase authorized common stock. The Board Of Directors unanimously recommends
that the stockholders vote in favor of the proposal to increase authorized
common stock.
3. PROPOSAL TO APPROVE REINCORPORATION IN MARYLAND
The Board of Directors recommends that the stockholders approve a proposal
for the Company to change its state of incorporation to Maryland from Delaware.
We refer to this proposal as the Reincorporation Proposal. The following
discussion summarizes certain aspects and consequences of the Reincorporation
Proposal, which are related primarily to the differences between the Maryland
Business Corporation Act (the "Maryland Code") and the Delaware General
Corporation Law (the "Delaware Code"), as well as the respective provisions of
the articles/certificate of incorporation and bylaws of PYR Energy Corporation
("PYR Maryland") and the Company. This summary is not intended to be complete.
It is qualified in its entirety by the Agreement And Plan Of Merger (the "Merger
Agreement") between the Company and PYR Maryland, the Articles Of Incorporation
of PYR Maryland (the "Maryland Articles"), and the Bylaws of PYR Maryland (the
"Maryland Bylaws). Copies of these documents will be made available to
stockholders upon request.
Introduction
General
If it is approved by our stockholders, the Reincorporation Proposal will be
accomplished by the merger (the "Merger") of the Company with and into our
wholly-owned subsidiary, PYR Maryland. As a result of the Merger, our legal
domicile will be changed from Delaware to Maryland. We anticipate that, except
for reduction in the annual franchise tax fees paid to Delaware as described
below, the Merger will not cause any change in the business or financial
condition of the Company, and that, except for the differences in the Maryland
Code from the Delaware Code described below, the Merger will not cause any
change in our management.
Upon the terms and subject to the conditions of the Merger Agreement, at
the Effective Time (as defined in the Merger Agreement) of the Merger, each
outstanding share of our $.001 par value common stock (the "Delaware Common
Stock") will be converted into one share of common stock, $.001 par value, of
PYR Maryland (the "Maryland Common Stock"). In addition, at the Effective Time,
each outstanding option or warrant to purchase shares of Delaware Common Stock
will continue outstanding as a right to purchase shares of Maryland Common Stock
upon the same terms and conditions as immediately prior to the Effective Time.
Following the Effective Time, each outstanding certificate representing shares
of Delaware Common Stock will continue to represent the same number of shares of
Maryland Common Stock, and delivery of certificates for shares of Delaware
Common Stock will constitute "good delivery" for transactions in the shares of
Maryland Common Stock. IT WILL NOT BE NECESSARY FOR STOCKHOLDERS OF THE COMPANY
TO EXCHANGE THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF PYR
MARYLAND.
Our common stock (symbol: PYR) became listed on the American Stock Exchange
on December 8, 1999. At the Effective Time, that symbol will, without
interruption, represent the Maryland Common Stock.
14
Also at the Effective Time, we will be governed by the Maryland Code, by
the Maryland Articles and by the Maryland Bylaws, which will result in certain
changes in the rights of stockholders and other matters related to us. The most
significant changes, which include changes in the availability of appraisal
rights and a significant decrease in the annual fees payable by us to the state
of incorporation, are discussed in this proxy statement under "--Certain
Differences Between The Charter Documents Of PYR Energy Corporation And Those Of
PYR Maryland; Analysis Of The Delaware Code And The Maryland Code". For
additional details and other information relating to these and other changes in
the rights of stockholders, you should review the Maryland Articles and the
Maryland Bylaws. In addition, you should review copies of our Delaware
Certificate Of Incorporation (the "Delaware Articles") and our current Bylaws
(the "Delaware Bylaws"). Each of the Maryland Articles, the Maryland Bylaws, the
Delaware Articles and the Delaware Bylaws may be inspected at our principal
business offices, and we will send copies of each of those documents to any
stockholder who requests them.
Regardless of whether the Reincorporation Proposal is approved, we will
continue to be responsible for all our existing contracts, plans, arrangements
and obligations.
Effective Time
We anticipate that the Merger will become effective within one business day
after stockholder approval. However, the Merger Agreement provides that the
Merger may be abandoned prior to the Effective Time, either before or after
stockholder approval, if circumstances arise which, in the opinion of the Board,
make the Merger inadvisable. Even if the Merger is abandoned, we intend to
proceed with the amendment of our Delaware Articles to increase our authorized
common stock as described in this proxy statement if approved by our
stockholders. In addition, the Merger Agreement may be amended prior to the
Effective Time, either before or after stockholder approval thereof, subject to
applicable law.
Principal Reasons For And Effects Of Changing The State Of Incorporation
The Board Of Directors recommends that the Company become a Maryland
corporation subject to the statutes of Maryland rather than Delaware primarily
because this will eliminate our annual Delaware franchise tax expenses. The
State of Delaware imposes franchise taxes on Delaware corporations based on
alternative formulas involving either (1) the corporation's aggregate number of
shares of authorized stock, or (2) the corporation's capital structure as
compared to its assets. Delaware corporations may elect to be treated under the
formula alternative which results in the lesser amount of franchise tax imposed
on the corporation. We have always elected to be considered under the formula
which results in the lower franchise tax burden.
For the fiscal years ended August 31, 2000 and 1999, our Delaware franchise
taxes were $10,600 and $4,200, respectively. If our assets increase, our annual
franchise taxes will increase. Unlike Delaware, the State of Maryland does not
impose a franchise tax on corporations incorporated under its laws. If we are
reincorporated in Maryland, the only amount payable annually to the State of
Maryland as a result of being incorporated under its laws would be $100 to be
paid in conjunction with Maryland's annual reporting requirements.
Although there are several differences between the Delaware Code and the
Maryland Code, the Board Of Directors does not believe that these differences
will have a significant impact on our operations. See "--Certain Differences
Between The Charter Documents Of PYR Energy Corporation And Those Of PYR
Maryland; Analysis Of The Delaware Code And The Maryland Code".
15
The Board Of Directors currently is not aware of any specific effort to
accumulate our securities, other than for investment, or to obtain control of
the Company by merger, tender offer, solicitation in opposition to the Board Of
Directors, or otherwise.
The Board of Directors has unanimously concluded that the potential
benefits of the Reincorporation Proposal outweigh any possible disadvantages.
Accordingly, the Board Of Directors unanimously recommends that the stockholders
vote for the Reincorporation Proposal.
Certain Differences Between The Charter Documents Of PYR Energy Corporation And
Those Of PYR Maryland; Analysis Of The Delaware Code And The Maryland Code
The following is a summary of certain differences between provisions
affecting holders of shares of the Company's common stock under the Delaware
Code, the Delaware Articles and the Delaware Bylaws and those affecting holders
of shares of PYR Maryland under the Maryland Code, the Maryland Articles and the
Maryland Bylaws. The summary does not replace those full documents and to the
extent the summary conflicts with the terms of an actual document, the terms of
the actual document will prevail. We will send copies of the Maryland Articles,
Maryland Bylaws, Delaware Articles and Delaware Bylaws to any stockholder who
requests them.
With respect to certain differences between the rights held by stockholders
under the Delaware Code and those that they would have under the Maryland Code,
the Maryland Articles and Maryland Bylaws have been structured so that the
Maryland charter documents provide for essentially the same rights and
obligations as our Delaware charter documents, and our management does not have
any present intention of amending or otherwise altering the Maryland Articles or
Maryland Bylaws. However, economic and/or business conditions and considerations
may arise which may, in the opinion of our present or future directors, make
amendment of the Maryland charter documents in our best interests. Therefore,
there can be no assurance that the Maryland charter documents will not be
amended, including changes to provisions that directly affect stockholders.
Stockholders also should refer to the Delaware Code and the Maryland Code with
respect to the matters discussed in this proxy statement.
Stockholder Meetings
Both the Delaware Bylaws and the Maryland Bylaws provide that an annual
meeting of stockholders will be held on a date and at a time and place
determined by the Board. Both the Delaware Bylaws and the Maryland Bylaws
provide that a majority of our outstanding shares represented in person or by
proxy constitute a quorum at stockholder meetings.
Under the Delaware Code, special meetings of stockholders may be called by
the Board or by such other person or persons as may be authorized by the
certificate of incorporation or bylaws. Under the Delaware Bylaws, the President
or the Board Of Directors may call a special meeting of stockholders.
Under the Maryland Code, special meetings may be called by the Board Of
Directors, the President, the holders of shares entitled to cast not less than
25 percent of the votes at the special meeting or such other persons as the
articles of incorporation or the bylaws provide. The Maryland Bylaws provide
that special meetings may be called by the President, the Board Of Directors or
the holders of shares entitled to cast not less than 10 percent of the votes at
such special meeting.
Both the Delaware Code and the Maryland Code provide that special meetings
of stockholders require a minimum of 10 days' notice.
16
Stockholder Vote For Certain Matters
Both the Delaware Code and the Maryland Code require an affirmative vote of
the stockholders of each of the constituent corporations in order to approve a
merger (other than a parent-subsidiary merger as described in the next
paragraph) or the sale, lease or exchange of all or substantially all of a
corporation's assets. Under the Delaware Code, these transactions must be
approved by the holders of a majority of the shares entitled to vote unless
otherwise provided in a corporation's certificate of incorporation. The Delaware
Articles require a majority vote in these circumstances. Under the Maryland
Code, a two-thirds vote is required unless a corporation's articles of
incorporation provide for a lesser (but not less than a majority) or greater
vote. The Maryland Articles provide that a majority vote is sufficient in these
circumstances.
Both the Delaware Code and the Maryland Code permit a corporation to
effect, without stockholder approval, a merger with or into a subsidiary if 90
percent or more of the subsidiary is owned by the corporation.
Stockholder Action By Written Consent
Pursuant to the Delaware Code, we can take action with respect to a matter
if written consents are executed by those stockholders owning that number of
shares that would be required to take the same action at a meeting of
stockholders at which all stockholders were present. Under the Maryland Code,
stockholder action may be taken without a meeting only if all stockholders
entitled to vote on the matter consent in writing to the action proposed to be
taken.
Nominations Made By Stockholders For The Election Of Directors
The Delaware Bylaws do not contain specific provisions regarding
nominations made by stockholders for the election of directors.
The Maryland Bylaws provide that written notice of proposed nominations
made by stockholders for the election of directors must be received by us not
less than 53 days nor more than 90 days prior to the meeting (or, if fewer than
60 days' notice of the meeting is given or made to stockholders, not later than
the seventh day following the day on which the notice of the date of the meeting
was mailed to stockholders). The notice must contain certain information about
the proposed nominee, including name, age, business address, principal
occupation or employment for the five years preceding the date of the notice,
the number of shares of our stock beneficially owned by the nominee, and any
arrangement, affiliation, association, agreement or other relationship of the
nominee with any stockholder.
Cumulative Voting
Both the Delaware Code and the Maryland Code permit a corporation to
specify in its certificate/articles of incorporation whether cumulative voting
exists. Neither the Delaware Articles nor the Maryland Articles allow cumulative
voting in elections of directors or otherwise.
Removal Of Directors
In the case of a corporation whose board is classified, both the Delaware
Code and the Maryland Code provide that directors may be removed only for cause
unless the charter documents provide otherwise. The Delaware charter documents
provide that directors may be removed, with or without cause, by the holders of
a majority of shares then entitled to vote at a meeting of stockholders. The
Maryland charter documents do not modify the code provisions concerning this
matter. Therefore, directors may be removed only for cause.
17
If a corporation's board is not classified and the charter documents do not
provide otherwise, both the Delaware Code and the Maryland Code provide that
directors may be removed, with or without cause, by the holders of a majority of
the shares then entitled to vote at an election of directors.
Under both the Delaware Code and the Maryland Code, if cumulative voting is
allowed and less than the entire board of directors is to be removed, no
director may be removed without cause if the votes cast against such director's
removal would be sufficient to elect such director if then cumulatively voted at
an election of the entire board of directors, or, if there is more than one
class of directors, at an election of the class of directors of which such
director is a part.
Elimination Or Limitation Of Certain Personal Liability Of Directors And
Officers
The Delaware and Maryland charter documents contain provisions concerning
personal liability of directors. These provisions are worded differently but
have substantially the same effect. The only notable difference is that the
Maryland Code provides for limitation of officers' personal liability to the
same extent as for directors, and the Maryland Articles also provide for this
protection. The Delaware Code does not permit limitation of officers' personal
liability.
The Delaware Articles eliminate and limit the personal liability of each of
our directors to the full extent permitted by the Delaware Code, including
without limitation as permitted by the provisions of Section 102(b)(7) of the
Delaware Code and any successor provision, as amended. Thus, our directors are
not liable for certain money damages as a director. However, pursuant to Section
102(b)(7), liability of directors is not eliminated or limited (1) for any
breach of a director's duty of loyalty to the corporation or its stockholders,
(2) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (3) under Section 174 of the Delaware
Code (dealing with willful or negligent violation of certain statutory
provisions concerning dividends and stock purchases or redemptions), and (4) for
any transaction from which the director derived an improper personal benefit.
The Maryland Articles also contain provisions which eliminate and limit the
personal liability of directors to the full extent permitted by the Maryland
Code. Pursuant to the Maryland Code, the Maryland Articles also limit the
personal liability of officers to the same extent as that afforded directors.
Similar to the Delaware Code, however, the Maryland Code does not permit
limitation of personal liability of directors or officers (1) for the amount of
any improper benefit they actually receive, or (2) to the extent that a judgment
or final adjudication adverse to the director or officer in a proceeding based
on the finding in that proceeding that the person's action, or failure to act,
was the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
Indemnification Of Directors And Officers
The Delaware Code and the Maryland Code each specify certain circumstances
when a corporation must, and other circumstances when it may, indemnify its
officers, directors, employees and agents against legal expenses and
liabilities. Generally, under both codes, the person being indemnified must have
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation and, in a criminal proceeding,
must have had no reasonable cause to believe his conduct was unlawful. A
director may be reimbursed in advance of a final disposition of a proceeding if
he undertakes to repay any such advances if it is determined he did not meet the
required standards of conduct. Both codes permit corporations to purchase
insurance on behalf of directors, officers, employees and agents for liability
asserted against them in their capacity as such regardless of whether the
corporation would have the power to indemnify them. Under both codes, a
18
corporation may expand the rights to indemnification by a provision in its
bylaws, by an agreement, by resolution of stockholders or directors not involved
in the proceeding, or otherwise.
The Maryland Bylaws provide that: (1) we are required to indemnify our
directors and officers to the fullest extent permitted by law, including those
circumstances in which indemnification would otherwise be discretionary; (2) we
are required to advance expenses to our officers and directors as incurred,
including expenses relating to obtaining a determination that such directors and
officers are entitled to indemnification, provided that they undertake to repay
the amount advanced if it is ultimately determined that they are not entitled to
indemnification; (3) we are authorized to enter into indemnification agreements
with our directors and officers; and (4) we may not retroactively amend the
indemnification provisions in the Bylaws in a way which is adverse to our
directors or officers. This indemnification is more restrictive than under the
Delaware Articles and Bylaws because under the Delaware charter documents,
pursuant to the Delaware Code, we may indemnify directors or officers who are
ultimately found to be liable to the Company. However, under the Maryland
charter documents, as required by the Maryland Code, we may not indemnify a
director or officer made party to a proceeding by reason of service as a
director if it is established that (a) the act or omission of the director was
material to the matter giving rise to the proceeding and was either committed in
bad faith or was the result of active and deliberate dishonesty, (b) the
director actually received an improper personal benefit in money, property or
services, or (c) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. Also, the
Maryland Code provides that a Maryland corporation may not indemnify a director
or officer if the proceeding was one by or on behalf of the corporation and in
the proceeding the director or officer is adjudged to be liable to the
corporation.
Although indemnification under the Maryland Code is not allowed to the same
extent as under the Delaware Code, the Board believes that the Maryland
indemnification provisions are reasonable and adequate, and that we will be able
to continue to attract and retain qualified directors and officers. None of our
directors or officers has indicated that approval of the Reincorporation
Proposal would cause him or her to consider resigning from his position with the
Company.
Dividends
The Delaware Code permits the payment of dividends out of surplus or, if
there is no surplus, out of net profits for the current or preceding fiscal
year, provided that an amount equal to the par value represented by all shares
of the corporation's common and preferred stock remains in the stated capital
account.
The Maryland Code provides that a corporation may pay dividends to its
stockholders from time to time as authorized by the board of directors. However,
no dividend or other distribution may be made if, after giving effect to the
distribution (1) the corporation would not be able to pay its debts as they
became due in the usual course of business, or (2) the corporation's total
assets would be less than the sum of the corporation's total liabilities plus
amounts payable to stockholders having preferential rights to assets in the
event of dissolution of the corporation.
Neither the Maryland charter documents nor the Delaware charter documents
modify the respective code provisions concerning the payment of dividends.
Amendments To Charter Documents
Pursuant to the Delaware Code, the Delaware Articles may be amended by a
majority vote of the outstanding shares of voting stock, except with respect to
the provisions governing the election, classification and removal of members of
19
the Board, in which case the Delaware Articles requires a 66 2/3 percent
stockholder vote for amendment. The Delaware Articles gives the Board the power
to amend, adopt or repeal the Delaware Bylaws. The Delaware Bylaws also provide
that the Delaware Bylaws may be altered, amended or repealed, or new Bylaws may
be adopted, by a majority vote of the outstanding shares, without necessity of
the concurrence of the Board.
As permitted by the Maryland Code, the Maryland Articles provide that the
stockholder vote required to approve charter amendments has been reduced from
two-thirds to a majority vote. It also is provided in the Maryland Articles and
Maryland Bylaws that the Maryland Bylaws may be amended or repealed, and new
Bylaws adopted, by the Board. The Maryland Bylaws also provide that the Maryland
Bylaws may be altered, amended or repealed or new Bylaws may be adopted by a
majority vote of the outstanding shares, without necessity of the concurrence of
the Board.
Inspection Of Books And Records
Under the Delaware Code, any stockholder may submit a written demand to
inspect and copy the corporation's stock ledger, a list of its stockholders and
its other books and records. The written demand must state a purpose for the
inspection which is reasonably related to the demanding stockholder's interest
as a stockholder.
Under the Maryland Code, any stockholder may inspect and copy, during usual
business hours, the corporation's bylaws, minutes of the proceedings of
stockholders, annual statements of affairs and any voting trust agreements on
file at the corporation's principal office. Additionally, any person who has
been a holder of record for a minimum of six months or who owns at least five
percent of the corporation's outstanding shares has a right to (1) inspect the
corporation's books of account and stock ledger, (2) present to any officer or
resident agent of the corporation a written request for a statement of its
affairs, and (3) in the case of any corporation which does not maintain the
original or a duplicate stock ledger at the corporation's offices in Maryland,
present to any officer or resident agent of the corporation a written request
for a list of its stockholders.
Appraisal Rights
Under the Delaware Code and the Maryland Code, stockholders, in certain
circumstances, have the right to dissent from certain corporate reorganizations
and mergers, provided that statutory procedures are followed. The
Reincorporation Proposal does not trigger any appraisal rights. See
"--Dissenting Stockholders' Rights Of Appraisal".
In cases where appraisal rights are available, both the Delaware Code and
the Maryland Code provide that a stockholder exercising his right to dissent may
demand payment in cash for his shares equal to their fair value, excluding any
appreciation or depreciation in anticipation of the transaction (although under
the Maryland Code such appreciation or depreciation may be included in
determining fair value if its exclusion would be inequitable). Under the
Delaware Code, fair value is determined by the Court of Chancery. Under the
Maryland Code, fair value is determined by agreement with the corporation or, if
an agreement cannot be reached, by an appropriate court upon the petition of the
surviving corporation or the dissenting stockholder.
The Maryland Code provides that stockholders may exercise their right to
dissent from the sale, lease, exchange or other disposition of all or
substantially all of a corporation's assets unless the proceeds from the
transaction are distributed to stockholders. The Delaware Code does not provide
appraisal rights to stockholders in transactions involving the sale, lease,
exchange or other disposition of all or substantially all of a corporation's
assets.
20
Under the Delaware Code, there are no appraisal rights for shares which, at
the record date for the meeting at which a merger or consolidation is to be
approved, are listed on a national securities exchange or are held of record by
more than 2,000 stockholders, unless stockholders receive anything other than:
(1) shares of stock of the corporation surviving or resulting from such merger
or consolidation; (2) shares of stock of any other corporation which at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or held of record by more than 2,000 stockholders;
(3) cash in lieu of fractional shares of the corporations described in the
foregoing clauses (1) and (2); or (4) any combination of (1), (2) and (3).
Under the Maryland Code, there are no appraisal rights if: (1) the stock is
listed on a national securities exchange or is designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. (a) with respect to the merger of a subsidiary
corporation, 90 percent or more of which is owned by the acquiring corporation,
on the date notice is given to or waived by the dissenting stockholder, or (b)
with respect to any other transaction, on the record date for determining
stockholders entitled to vote on the transaction objected to; (2), the stock
received is that of the successor in the merger, unless the merger alters the
contract rights of the stock as expressly set forth in the charter and the
charter does not reserve the right to do so, or the stock is to be changed or
converted in whole or in part in the merger into something other than either
stock in the successor, cash, scrip or other rights or interests arising out of
provisions for the treatment of fractional shares of stock in the successor; or
(3) the stock is that of an open-end investment company registered under the
Investment Company Act of 1940, as amended, and the value placed on the stock in
the transaction is its net asset value.
Increase In Authorized Common Stock
Our certificate of incorporation currently authorizes the issuance of
50,000,000 shares of Delaware Common Stock. If the stockholders approve Proposal
2 to increase our authorized common stock to 75,000,000 shares, the Maryland
Articles will also authorize the issuance of 75,000,000 shares of Maryland
Common Stock.
Certain Anti-Takeover Effects
The Delaware Bylaws currently contain provisions which may be viewed as
having anti-takeover effects. Our stockholders do not have cumulative voting
rights in the election of directors. We currently have authorized but unissued
shares of our common stock that could also be issued in such a way as to have
anti-takeover effects.
The Maryland Articles and Maryland Bylaws also may be deemed to have
anti-takeover effects because the Maryland Articles (1) also do not allow for
cumulative voting by stockholders, (2) provide for additional shares of
authorized common stock, and (3) provide for a 66 2/3 percent stockholder vote
to amend certain provisions of the Maryland Articles and Maryland Bylaws. In
addition, the requirement under the Maryland Code that actions by written
consent of stockholders must be signed by all stockholders would make it more
difficult to approve matters without a meeting of stockholders, including the
election of directors. This would have an anti-takeover effect.
The Board currently has no intention of using the increase in authorized
common stock for anti-takeover purposes or of proposing any other measures in
the future which may be deemed to have anti-takeover effects.
21
Dissenting Stockholders' Rights Of Appraisal
Pursuant to Section 253 of the Delaware Code, appraisal rights are not
available regarding mergers of two corporations if one of them owns at least 90
percent of the other's outstanding shares of each class of stock. Because we own
100 percent of all outstanding shares of PYR Maryland, no appraisal rights are
available in connection with the Merger, the Merger Agreement or the
Reincorporation Proposal.
Required Vote; Board Recommendation
The affirmative vote of a majority of the outstanding shares of common
stock is required to approve reincorporation of the Company in Maryland,
including the provisions to increase authorized common stock. The Board of
Directors unanimously recommends that the stockholders vote in favor of the
Reincorporation Proposal.
4. PROPOSAL TO AMEND 2000 STOCK OPTION PLAN
The Board Of Directors has adopted, subject to stockholder approval, an
amendment to the 2000 Plan to increase from 500,000 to 1,500,000 the number of
shares of common stock issuable pursuant to options granted under the 2000 Plan.
Other than this increase in the number of shares subject to the 2000 Plan, there
are no additional amendments to the 2000 Plan. The options granted pursuant to
the 2000 Plan may be either incentive options or non-qualified options. The 2000
Plan is intended to provide incentives to key employees and other persons who
have or are contributing to our success by offering them options to purchase
shares of common stock. The effect of the increase in the number of shares
issuable upon the exercise of options granted under the 2000 Plan is to allow us
to grant more options from time to time and thereby augment our program of
providing incentives to employees. The terms of the 2000 Plan concerning
incentive options and non-qualified options are substantially the same except
that only employees of the Company or its subsidiaries are eligible for
incentive options and employees and other persons are eligible for non-qualified
options. The number of options authorized is a maximum aggregate so that the
number of incentive options granted reduces the number of non-qualified options
that may be granted. There currently are approximately seven employees eligible
to receive incentive options and an unspecified number of persons eligible to
receive non-qualified options. Grants of options under the 2000 Plan prior to
its amendment are disclosed in this proxy statement under the heading "Executive
Compensation -- Option Grants Table".
The portion of the 2000 Plan concerning incentive options and non-qualified
options is administered by the option committee, which may consist of either (a)
the entire Board Of Directors, or (b) a committee, appointed by the Board Of
Directors, of two or more non-employee directors. If the option committee
consists of less than the entire Board, each member of the committee is required
to be a "non-employee director" as defined in SEC regulations. To the extent
necessary for any option granted under the 2000 Plan to be considered as
performance based compensation that is not subject to limitations on
deductibility under the Internal Revenue Code of 1986, as amended (the "Code"),
shall be an "outside director" as defined in the Code and related regulations. A
"non-employee director" is a director who (1) is not currently an officer or
employee of the Company or any of its subsidiaries; (2) does not receive
compensation from the Company in excess of $60,000 for services rendered other
than as a director; and (3) is not involved in any transaction that is required
to be disclosed in our Form 10-KSB and proxy reports as a related party
transaction. An "outside director" means, generally, a director who (1) is not a
current employee of the Company, (2) is not a former employee of the Company who
receives compensation for prior services during the taxable year in question,
(3) has not been an officer of the Company, and (4) does not receive
compensation from the Company, either directly or indirectly, in any capacity
22
other than as a director. The Board of Directors has determined that the
compensation committee will act as the option committee at all times that the
members of the compensation committee meet these criteria. The option committee
has discretion to select the persons to whom incentive options and non-qualified
options will be granted, the number of shares to be granted, the term of these
options and the exercise price of these options. However, no option may be
exercisable more than 10 years after the granting of the option, and no option
may be granted under the 2000 Plan after December 19, 2009.
The 2000 Plan provides that the exercise price of incentive options granted
cannot be less than the fair market value of the underlying common stock on the
date the incentive options are granted. No incentive option may be granted to an
employee who, at the time the incentive option would be granted, owns more than
ten percent of our outstanding stock unless the exercise price of the incentive
option granted to the employee is at least 110 percent of the fair market value
of the stock subject to the incentive option, and the incentive option is not
exercisable more than five years from the date of grant. In addition, the
aggregate fair market value (determined as of the date an option is granted) of
the common stock underlying incentive options granted to a single employee which
become exercisable in any single calendar year may not exceed the maximum
permitted by the Code for incentive stock options. This amount currently is
$100,000.
All options granted under the 2000 Plan will become fully exercisable upon
the occurrence of a change in control or certain mergers or other
reorganizations or asset sales described in the 2000 Plan.
Options granted pursuant to the 2000 Plan will not be transferable during
the optionee's lifetime except in limited circumstances set forth in the 2000
Plan. Subject to the other terms of the 2000 Plan, the option committee has
discretion to provide vesting requirements and specific expiration provisions
with respect to the incentive options and non-qualified options granted.
Although we may in the future file a registration statement covering the
issuance of the options and underlying shares of common stock issuable pursuant
to the 2000 Plan, we currently plan to use the exemption from registration set
forth in Section 4(2) of the Securities Act of 1933 (the "Securities Act") and
related rules and regulations due to the limited number, and of our relationship
with the persons currently anticipated to participate in the 2000 Plan. The
common stock acquired through the exercise of the options may be reoffered or
resold only pursuant to an effective registration statement or pursuant to Rule
144 under the Securities Act or another exemption from the registration
requirements of the Securities Act.
If a change, such as a stock split, is made in our capitalization which
results in an exchange or other adjustment of each share of common stock for or
into a greater or lesser number of shares, appropriate adjustment shall be made
in the exercise price and in the number of shares subject to each outstanding
option. In the event of a stock dividend, each optionee shall be entitled to
receive, upon exercise of the option, the equivalent of any stock dividend that
the optionee would have received had he or she been the holder of record of the
shares purchased upon exercise. The option committee also may make provisions
for adjusting the number of shares subject to outstanding options if we have one
or more reorganizations, recapitalizations, rights offerings, or other increases
or reductions of shares of outstanding common stock.
The Board Of Directors may at any time terminate the 2000 Plan or make such
amendments or modifications to the 2000 Plan that the Board Of Directors deems
advisable, except that no amendments may impair previously outstanding options
and amendments that materially modify eligibility requirements for receiving
options, that materially increase the benefits accruing to persons eligible to
receive options, or that materially increase the number of shares under the 2000
Plan must be approved by our stockholders.
23
The incentive options issuable under the 2000 Plan are structured to
qualify for favorable tax treatment provided for "incentive stock options" by
Section 422 of the Code. All references to the tax treatment of the incentive
options are under the Code as currently in effect. Pursuant to Section 422 of
the Code, optionees will not be subject to federal income tax at the time of the
grant or at the time of exercise of an incentive option. In addition, provided
that the stock underlying the incentive option is not sold less than two years
after the grant of the incentive option and is not sold less than one year after
the exercise of the incentive option, then the difference between the exercise
price and the sales price will be treated as long-term capital gain or loss. An
optionee also may be subject to the alternative minimum tax upon exercise of his
incentive options. We will not be entitled to receive any income tax deductions
with respect to the granting or exercise of incentive options or the sale of the
common stock underlying the incentive options.
Non-qualified options will not qualify for the special tax benefits given
to incentive options under Section 422 of the Code. An optionee does not
recognize any taxable income at the time the optionee is granted a non-qualified
option. However, upon exercise of these options, the optionee recognizes
ordinary income for federal income tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. The
ordinary income recognized by the optionee will be treated as wages and will be
subject to income tax withholding. Upon an optionee's sale of shares acquired
pursuant to the exercise of a non-qualified option, any difference between the
sale price and the fair market value of the shares on the date when the option
was exercised will be treated as long-term or short-term capital gain or loss.
Upon an optionee's exercise of a non-qualified option, we will be entitled to a
tax deduction in the amount recognized as ordinary income to the optionee
provided that the compensation amount is reasonable and we satisfy the
applicable reporting requirements required under U.S. Treasury regulations.
As of May 4, 2001, there were options to purchase 500,000 shares of common
stock outstanding under the 2000 Plan. There are no additional options to
purchase shares that could be granted under the 2000 Plan.
Required Vote; Board Recommendation
The approval of holders of shares representing a majority of the votes
represented at the annual meeting will be necessary to amend the 2000 Plan. The
Board Of Directors unanimously recommends a vote "FOR" the proposal to amend the
2000 Plan.
5. PROPOSAL TO RATIFY THE SELECTION OF WHEELER WASOFF, P.C.
AS CERTIFIED INDEPENDENT ACCOUNTANTS
The Board Of Directors recommends that the stockholders vote in favor of
ratifying the selection of the certified public accounting firm of Wheeler
Wasoff, P.C. of Denver, Colorado as the auditors who will audit financial
statements, prepare tax returns, and perform other accounting and consulting
services we request for the fiscal year ended August 31, 2001 or until the Board
Of Directors, in its discretion, replaces them. Wheeler Wasoff, P.C. has audited
our financial statements since the fiscal year ended August 31, 1997.
Independent Public Accountants
Audit Fees. The Company paid Wheeler Wasoff, P.C. a total of $20,500 for
professional services rendered for the audit of the Company's financial
statements for the fiscal year ended August 31, 2000 and for their review of the
24
financial statements included in the Company's Quarterly Reports on Form 10-QSB
during the fiscal year ended August 31, 2000.
Financial Information Systems Design And Implementation Fees. Wheeler
Wasoff, P.C. did not perform services during the fiscal year ended August 31,
2000 relating to financial information systems and implementation.
All Other Fees. The Company paid Wheeler Wasoff, P.C. a total of $1,500 for
all other services performed for the Company during the fiscal year ended August
31, 2000.
Required Vote; Board Recommendation
An affirmative vote of the majority of shares represented at the annual
meeting is necessary to ratify the selection of auditors. There is no legal
requirement for submitting this proposal to the stockholders; however, the Board
Of Directors believes that it is of sufficient importance to seek ratification.
Whether the proposal is approved or defeated, the Board may reconsider its
selection of Wheeler Wasoff, P.C. It is expected that one or more
representatives of Wheeler Wasoff, P.C. will be present at the annual meeting
and will be given an opportunity to make a statement if they desire to do so and
to respond to appropriate questions from stockholders.
The Board Of Directors unanimously recommends that the stockholders vote
for approval of Wheeler Wasoff, P.C. as the Company's certified independent
accountants.
OTHER BUSINESS
The Board Of Directors is not aware of any other matters that are to be
presented at the annual meeting, and it has not been advised that any other
person will present any other matters for consideration at the meeting.
Nevertheless, if other matters should properly come before the annual meeting,
the stockholders present, or the persons, if any, authorized by a valid proxy to
vote on their behalf, shall vote on such matters in accordance with their
judgment.
VOTING PROCEDURES
Votes at the annual meeting are counted by an inspector of election
appointed by the Chairman of the meeting. If a quorum is present, an affirmative
vote of a majority of the votes entitled to be cast by those present in person
or by proxy is required for the approval of items submitted to stockholders for
their consideration, unless a different number of votes is required by Delaware
law or our certificate of incorporation. Under Delaware law, the proposal to
amend our certificate of incorporation to increase the number of shares of
authorized common stock requires the approval of a majority of all the
outstanding shares. Abstentions by those present at the annual meeting are
tabulated separately from affirmative and negative votes and do not constitute
affirmative votes. If a stockholder returns his proxy card and withholds
authority to vote for any or all of the nominees, the votes represented by the
proxy card will be deemed to be present at the meeting for purposes of
determining the presence of a quorum but will not be counted as affirmative
votes. Shares in the names of brokers that are not voted are treated as not
present.
As a condition to the sale of convertible promissory notes in the total
amount of $2,500,000 that we sold in November 1998 pursuant to exemptions from
federal and state registration requirements, D. Scott Singdahlsen, a director
and officer of the Company, entered into a voting agreement with the purchasers
of these notes. Pursuant to this voting agreement, Mr. Singdahlsen is required
to vote all the shares of our common stock owned by him in favor of the election
25
of two nominees of these investors to serve on the Board of Directors of the
Company and for the re-election of those nominees or other nominees at any time
that the aggregate percentage ownership of our common equity owned by these
investors is 20 percent or more of the outstanding common stock. At the annual
meeting of stockholders held on March 13, 2000, all of Mr. Singdahlsen's shares
were voted in favor of the two nominees. Mr. Singdahlsen is required to vote for
only one nominee at any time after the aggregate percentage ownership of our
common equity is owned by these investors is less than 20 percent and greater
than or equal to 10 percent of the outstanding common stock. Although these
investors have nominated two directors for re-election, because then ownership
of our common equity is less than 20 percent and greater than 10 percent of the
outstanding common stock, Mr. Singdahlsen is only required to vote in favor of
the re-election of one of these nominees at the upcoming annual meeting. The
obligation of Mr. Singdahlsen to vote for any nominees of the investors
terminates at any time after the percentage ownership of our common equity owned
by the investors is less than 10 percent of the outstanding common stock.
RESOLUTIONS PROPOSED BY INDIVIDUAL STOCKHOLDERS;
DISCRETIONARY AUTHORITY TO VOTE PROXIES
In order to be considered for inclusion in the proxy statement and form of
proxy relating to our next annual meeting of stockholders following the end of
our 2001 fiscal year, proposals by individual stockholders must be received by
us no later than September 24, 2001.
In addition, the proxy solicited by the Board of Directors for the next
annual meeting of stockholders following the end of our 2001 fiscal year will
confer discretionary authority on any stockholder proposal presented at that
meeting unless we are provided with notice of that proposal no later than
December 10, 2001.
AVAILABILITY OF REPORTS ON FORM 10-KSB
Upon written request, we will provide, without charge, a copy of our annual
report on Form 10-KSB for the fiscal year ended August 31, 2000 to any
stockholders of record, or to any stockholder who owns common stock listed in
the name of a bank or broker as nominee, at the close of business on May 7,
2001. Any request for a copy of our annual report on Form 10-KSB should be
mailed to the Secretary, PYR Energy Corporation, 1675 Broadway, Suite 2450,
Denver, Colorado 80202, (303) 825-3748.
INCORPORATION BY REFERENCE
We incorporate by reference into this proxy statement the following
information included in reports filed with the Securities And Exchange
Commission:
1. Items 6 (Management's Discussion And Analysis Of Financial Condition
And Results Of Operations) and 7 (Financial Statements) included in
our Annual Report on Form 10-KSB for the year ended August 31, 2000;
and
2. Items 1 (Financial Statements) and 2 (Management's Discussion And
Analysis Of Financial Condition And Results Of Operations) included in
our Quarterly Report on Form 10-QSB for the quarter ended February 28,
2001.
A copy of these reports is being mailed to each stockholder with this proxy
statement.
FORWARD-LOOKING STATEMENTS
This proxy statement includes "forward-looking" statements within the
meaning of Section 21E of the Exchange Act. All statements other than statements
of historical facts included in this proxy statement, including without
26
limitation statements under "Recent Developments Concerning The Company"
regarding our financial position, business strategy, and plans and objectives of
management for future operations and capital expenditures, are forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements and the assumptions upon which the forward-looking
statements are based are reasonable, we can give no assurance that such
expectations and assumptions will prove to have been correct. Additional
statements concerning important factors that could cause actual results to
differ materially from our expectations ("Cautionary Statements") are disclosed
below in the "Forward-Looking Statements--Cautionary Statements" section of our
Annual Report on Form 10-KSB for the fiscal year ended August 31, 2000. All
written and oral forward-looking statements attributable to us or persons acting
on our behalf subsequent to the date of this proxy statement are expressly
qualified in their entirety by the Cautionary Statements.
This Notice and Proxy statement are sent by order of the Board Of
Directors.
Dated: May 18, 2001 D. Scott Singdahlsen
Chief Executive Officer
* * * * *
27
Exhibit A
---------
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
PYR ENERGY CORPORATION
AS AMENDED AS OF APRIL 24, 2001
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors of PYR Energy
Corporation (the "Company") to assist the Board in fulfilling its oversight
responsibilities. The Audit Committee's primary duties and responsibilities
are as follows:
A. Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
B. Monitor the independence and performance of the Company's independent
auditors and the performance of the Company's accounting department.
C. Provide an avenue of communication among the independent auditors,
management, the Company's accounting department, and the Board of
Directors.
D. Recommend to the Board of Directors the independent auditors to be
engaged by the Company.
E. Discuss the scope of the independent auditors' examination.
F. Review the financial statements and the independent auditors' report.
G. Review areas of potential significant financial risk to the Company.
H. Monitor compliance with legal and regulatory requirements.
I. Solicit recommendations from the independent auditors regarding internal
controls and other matters.
J. Establish guidelines for the Board of Directors to review related party
transactions for potential conflicts of interest.
K. Make recommendations to the Board of Directors.
L. Perform other related tasks as requested by the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as to anyone in the organization. The
Audit Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it deems
necessary in the performance of its duties.
A-1
II. Audit Committee Composition and Meetings
A. Audit Committee members shall meet the requirements of the American
Stock Exchange and/or any other exchange on which the Company's stock is
traded. The Audit Committee shall be comprised of three or more directors
as determined by the Board, each of whom shall be independent nonexecutive
directors, free from any relationship that would interfere with the
exercise of his or her independent judgment. All members of the Committee
shall have a basic understanding of finance and accounting and be able to
read and understand fundamental financial statements, and at least one
member of the Committee shall have accounting or related financial
management expertise.
B. Audit Committee members shall be appointed by the Board. If an
Audit Committee Chair is not designated or present, the members of the
Committee may designate a Chair by majority vote of the Committee
membership.
C. The Committee shall meet (either in person or telephonically) at
least four times annually, or more frequently as circumstances dictate. The
Audit Committee Chair shall prepare and/or approve an agenda in advance of
each meeting. The Committee should meet privately in executive session at
least annually with management, the Chief Financial Officer, the
independent auditors, and as a committee to discuss any matters that the
Committee or each of these groups believe should be discussed. In addition,
the Committee, or at least its Chair, should communicate with management
and the independent auditors quarterly to review the Company's financial
statements and significant findings based upon the auditors limited review
procedures.
III. Audit Committee Responsibilities and Duties
Review Procedures
-----------------
A. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with Securities
And Exchange Commission ("SEC") regulations.
B. Review the Company's annual audited financial statements prior to
filing or distribution. The review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
C. In consultation with the management, the independent auditors, and
the Chief Financial Officer, consider the integrity of the Company's
financial reporting processes and controls. Discuss significant financial
risk exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors and the Company's accounting department together with
management's responses.
D. Review with management the Company's quarterly financial results
prior to the release of earnings and/or the Company's quarterly financial
statements prior to filing or distribution. The Chair of the Committee may
represent the entire Audit Committee for purposes of this review.
A-2
Independent Auditors
- --------------------
A. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee and the
Board of Directors shall be responsible for the selection, evaluation,
and replacement of the independent auditors. The Audit Committee shall
review the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
B. Approve the fees and other significant compensation to be paid to the
independent auditors.
C. Review and discuss with the independent auditors all significant
relationships that the auditors and their affiliates have with the
Company and its affiliates in order to determine the auditors'
independence. The Audit Committee shall: (i) request, receive and
review on a periodic basis, a formal written statement from the
independent auditors delineating all relationships between the
independent auditors and the Company, (ii) discuss with the
independent auditors any disclosed relationships or services that may
impact the objectivity and independence of the independent auditors
and (iii) recommend that the Board take appropriate action in response
to the independent auditors' report to satisfy itself of the
independent auditors' independence.
D. Review the independent auditors' audit plan, including discussing
scope, staffing, locations, reliance upon management, and internal
audit and general audit approach.
E. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS
61.
F. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
Accounting Department and Legal Compliance
- ------------------------------------------
A. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the Company's accounting department,
as needed.
B. Review the appointment and performance of the Chief Financial Officer,
and review financial and accounting personnel succession planning with
the Company.
C. Review significant reports prepared by the Company's accounting
department together with management's response and follow-up to these
reports.
D. On at least an annual basis, review with the Company's counsel any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
A-3
Other Audit Committee Responsibilities
- --------------------------------------
A. Annually prepare a report to shareholders as required by the SEC. The
report should be included in the Company's annual proxy statement.
B. Perform any other activities consistent with this Charter, the
Company's bylaws, and governing law, as the Committee or the Board
deems necessary or appropriate.
C. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
D. Periodically perform self-assessment of Audit Committee performance.
E. While the Audit Committee has the responsibilities and powers set
forth in this Charter, it is not the duty of the Audit Committee to
plan or conduct audits or to determine that the Company's financial
statements are complete and accurate and are in accordance with
generally accepted accounting principles. This is the responsibility
of management and the independent auditors. Nor is it the duty of the
Audit Committee to conduct investigations, to resolve disagreements,
if any, among management, the independent auditors or the accounting
department or to assure compliance with laws and regulations.
* * * * *
A-4
PROXY PROXY
PYR ENERGY CORPORATION
For the Annual Meeting Of Stockholders
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints D. Scott Singdahlsen and Andrew P.
Calerich, or either of them, as proxies with full power of substitution to vote
all the shares of the undersigned with all of the powers which the undersigned
would possess if personally present at the Annual Meeting of Stockholders of PYR
Energy Corporation (the "Corporation") to be held at 9:00 a.m. (local time) on
June 18, 2001, at Wells Fargo Bank, Main Floor - Forum Room, 1740 Broadway,
Denver, Colorado 80202, or any adjournments thereof, on the following matters:
[X] Please mark votes as in this example.
1. ELECTION OF DIRECTORS
Nominees: Keith F. Carney, S. L. Hutchison, Bryce W. Rhodes
and D. Scott Singdahlsen.
FOR ALL NOMINEES [ ]
WITHHELD FROM ALL NOMINEES [ ]
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE [ ]
2. Proposal to amend the Corporation's Certificate Of Incorporation to
increase authorized common stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to reincorporate the Corporation under the laws of the State
of Maryland.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to amend the Corporation's 2000 Stock Option Plan to increased
common stock issuable pursuant to options granted under the Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to ratify the selection of Wheeler Wasoff, P.C. as the
Corporation's certified independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
- --------------------------------------------------------------------------------
6. In their discretion, the proxies are authorized to vote upon an
adjournment or postponement of the meeting.
[ ] YES [ ] NO [ ] ABSTAIN
7. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
Unless contrary instructions are given, the shares represented by this
proxy will be voted in favor of Items 1, 2, 3, 4, 5 and 6. This proxy is
solicited on behalf of the Board of Directors of PYR Energy Corporation.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE VOTE, DATE, SIGN AND RETURN THIS
PROXY IN THE ACCOMPANYING ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
Dated:
--------------------------------------------
Signature:
----------------------------------------
Signature:
----------------------------------------
Signature if held jointly
(Please sign exactly as shown on your stock
certificate and on the envelope in which this
proxy was mailed. When signing as partner,
corporate officer, attorney, executor,
administrator, trustee, guardian, etc., give full
title as such and sign your own name as well.
If stock is held jointly, each joint owner should
sign.)