SCHEDULE 14A INFORMATION
PROXY STATEMENT
PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1 )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Daleco Resources Corporation
120 North Church Street
West Chester, Pennsylvania, 19087
Telephone No.: 610-429-125
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(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
C. Warren Trainor, Esq.
Ehmann, Van Denbergh & Trainor, P.C.
Two Penn Center Plaza, Suite 220, Philadelphia, Pennsylvania
19102
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4) Date Filed:
February 16, 2006
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DALECO RESOURCES CORPORATION
120 NORTH CHURCH STREET
WEST CHESTER, PA 19380
---------------------------------------------
NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS
---------------------------------------------
The Annual Meeting of Stockholders of Daleco Resources Corporation will be
held at the Harvard Club, 27 West 44th Street, New York, New York, on Thursday,
March 16, 2006, at 2:00 p.m., local time.
At the meeting, Stockholders will be asked to:
1. Elect six directors;
2. Ratify the selection of Vasquez & Company, LLP, as the Company's
independent public accountants for 2006;
3. Approve the increase in the authorized shares of Common Stock from
50,000,000 shares to 100,000,000 shares;
4. Ratify the granting of 300,000 shares of Common Stock as
compensation to each of the members of a Special Committee of the
Board of Directors;
5. Consider any other business properly brought before the meeting.
The close of business, January 25, 2006, was the record date for
determining Stockholders entitled to vote at the Annual Meeting. For a period of
10 days prior to the Annual Meeting, a list of those Stockholders will be
available for inspection at the offices of the Company, 120 North Church Street,
West Chester, Pennsylvania, and 10350 Santa Monica Boulevard, Suite 290, Los
Angeles, California. Such list also will be available at the Annual Meeting.
Your vote is important. Please vote as soon as possible.
By Order of the Board of Directors,
Jody Spencer
Secretary
DALECO RESOURCES CORPORATION
120 NORTH CHURCH STREET
WEST CHESTER, PENNSYLVANIA 19380
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 16, 2006
This PROXY STATEMENT is furnished to the holders of Common Stock
("Stockholder" or "Stockholders") of Daleco Resources Corporation (the
"Company") in connection with the solicitation of the accompanying proxy by the
Board of Directors of the Company to be voted at the Annual Meeting of
Stockholders (the "Annual Meeting") and any adjournment thereof. The Annual
Meeting will be held on March 16, 2006, at the Harvard Club, 27 West 44th
Street, New York, NY, at 2:00 p.m. local time.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to Stockholders is February ____, 2006.
STOCKHOLDER PROPOSALS
---------------------
Stockholders desiring to present proposals, to include nominees to the
Board of Directors, for consideration at the Company's next annual meeting of
Stockholders must have their proposal received by the Company no later than
September 30, 2006, to be considered for inclusion in the Company's Proxy
Statement meeting. Should any proposal be submitted after September 30, 2006, it
may be omitted by the Company from the proxy statement relating to that meeting.
No Stockholder of the Company has submitted to the Company either a nominee for
the Board of Directors of the Company or any other matter to be considered by
the Stockholders at the Annual Meeting through the date of this Proxy Statement.
Stockholder proposals must be submitted in writing to the attention of the
Company's Secretary at the following address: Daleco Resources Corporation,
Attention: Corporate Secretary, 120 North Church Street, West Chester,
Pennsylvania 19380.
VOTING
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GENERAL
- -------
The record date for determining the Stockholders entitled to vote at the
Annual Meeting was January 25, 2006 ("Record Date"). On the Record Date, there
were 40,988,498 shares of Common Stock issued, outstanding and entitled to vote
("Outstanding Shares"). The Outstanding Shares were held by 1,785 Stockholders.
The holders of the Company's Series B Preferred Stock are not entitled to vote
at the Annual Meeting.
QUORUM AND VOTE REQUIRED
- ------------------------
The presence, in person or by proxy, of A MAJORITY of the Outstanding
Shares is necessary to constitute a quorum at the Annual Meeting. The
affirmative vote of a majority of the Outstanding Shares represented in person
or by proxy at the Annual Meeting is required to pass any matter put to a vote
at the Annual Meeting.
When voting by proxy, Stockholders should specify their election as to
each matter to be voted upon. If no specific instructions are given with regard
to the matter to be voted upon, the shares represented by a signed proxy card
will be voted "FOR" that matter.
Any Stockholder delivering a proxy has the power to revoke same at any
time before it is voted by giving written notice to the Secretary of the
Company, by executing and delivering to the Secretary of the Company a proxy
card bearing a later date, or by voting in person at the Annual Meeting.
With regard to the election of directors, votes may be cast in favor of or
withheld from any or all nominees. Votes that are withheld and abstentions will
be excluded entirely from the vote and will have no effect other than for
purposes of determining the presence of a quorum.
BROKER NON-VOTES.
Brokers who hold Outstanding Shares in street name for clients have the
authority under the rules of the various stock exchanges to vote on certain
issues when they have not received instructions from beneficial owners. The
Company believes that brokers who do not receive instructions are entitled to
vote those shares with respect to the election of directors but not with respect
to the remaining proposals. Outstanding Shares not voted by brokers under such
circumstances are referred to as "broker non-votes." Broker non-votes will not
be counted as votes cast on a proposal other than the election of directors.
HOUSEHOLDING
Unless it has received contrary instructions, the Company will perpetually
send a single copy of the annual report, proxy statement and notice of annual or
special meeting to any household at which two or more Stockholders reside if the
Company believes the Stockholders are members of the same family. Each
Stockholder in the household will continue to receive a separate proxy card.
This process, known as "householding," reduces the volume of duplicate
information received at your household and helps to reduce the Company's
expenses.
If you would like to receive your own set of the Company's annual
disclosures documents this year or in future years, follow the instructions
described below. Similarly, if you share an address with another Stockholder and
together both of you would like to receive only a single set of the Company's
annual disclosure documents, follow these instructions:
If your shares are registered in your own name, please contact our
transfer agent and inform them of your request to revoke or institute
householding by calling them (610) 649-7300, or writing to them at StockTrans,
44 West Lancaster Avenue, Ardmore, Pennsylvania 19003. Within 30 days of your
revocation, the Company will send individual documents. If a bank or other
nominee holds your shares, please contract your bank, broker or other nominee
directly.
PROXY
Execution of the accompanying proxy will not affect a Stockholder's right
to attend the meeting and vote in person. Any Stockholder giving a proxy has the
right to revoke it by giving written notice of revocation to the Secretary of
the Company, by delivering a subsequently executed proxy card bearing a later
date or by voting in person at the Annual Meeting prior to the proxy's being
voted.
PROXY SOLICITATION
In addition to soliciting proxies through the mail, the Company's
directors, officers and employees may solicit proxies in person, by telephone or
the Internet. Brokerage firms, nominees, custodians, and fiduciaries may also be
requested to forward proxy materials to the beneficial owners of Outstanding
Shares held of record by them. All expenses incurred in connection with the
Annual Meeting will be borne by the Company.
-2-
PRINCIPAL HOLDERS OF VOTING SECURITIES
--------------------------------------
The following table sets forth information, as of January 25, 2006,
regarding the ownership of the Company's Common Stock by each person known to
the Company to be the beneficial owner of more than five percent (5%) of the
Company's Common Stock, as set forth on such person's filings with the
Securities and Exchange Commission ("SEC") and the records of the Company.
===============================================================================
AMOUNT OF
BENEFICIAL PERCENT
CLASS OF OWNERSHIP OF CLASS
STOCK PRINCIPAL SHAREHOLDER (SHARES) (%) (2)
- -------------------------------------------------------------------------------
Common Terra Silex Holdings, LLC 3,863,097(1) 9.26%
===============================================================================
(1) The 3,863,097 shares owned by Terra Silex Holdings, LLC, consist of:
(a) 50,200 shares held by Mr. Alfonso Knoll;
(b) 1,264,547 shares owned by Terra Silex Holdings, LLC;
(c) 1,498,350 shares owned by two members of Terra Silex Holdings, LLC;
(d) a warrant for 250,000 shares at $1.25 per share which expires on
December 31, 2006;
(e) warrants for 250,000 shares at $1.00 per share expiring on September
21, 2006 ("Participation Warrants");
(f) warrants for 250,000 shares at $2.00 per share expiring on September
21, 2007 ("Contingent Warrants"). The Contingent Warrants are
exercisable only if the holder has timely exercised the
Participation Warrants; and
(g) 300,000 shares of Common Stock awarded to Mr. Knoll as compensation
for serving on a Special Committee of the Board of Directors to
identify and recruit new management and independent directors for
the Company. Issuance of these 300,000 shares is subject to
Stockholder ratification.
(2) Applicable percentage ownership is based on 40,988,498 shares of Common
Stock outstanding as of January 25, 2006, plus all securities exercisable
or convertible into shares of Common Stock within 60 days of January 25,
2006, consisting of: (i) options and warrants for 11,392,305; and (ii)
shares to be issued upon the exchange by the holders of 185,000 shares of
Series B Preferred Stock at the minimum conversion price of $1.25 per
share or 1,480,000 shares; or 53,860,803 shares of common stock on a fully
diluted basis.
-3-
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
----------------------------------------------
The following table sets forth information as of January 25, 2006,
regarding the Security Ownership of Members of the Board of Directors and
Management of the Company.
===============================================================================================================================
AMOUNT OF PERCENT PERCENTAGE OF COMMON
CLASS OF NAME, AGE AND POSITION BENEFICIAL OF STOCK CLASS STOCK EQUIVALENT(%)(13)
STOCK WITH THE COMPANY OWNERSHIP (%)(12)
(SHARES)
- -------------------------------------------------------------------------------------------------------------------------------
Common Dov Amir (81) (1)
Chairman of the Board of Directors 2,114,696 3.94% 5.10%
- -------------------------------------------------------------------------------------------------------------------------------
Common Gary J. Novinskie (55) (2)
President and Chief Financial Officer 1,622,474 3.02% 3.91%
- -------------------------------------------------------------------------------------------------------------------------------
Common Stephan V. Benediktson (72) (3) 1,400,000 2.61% 3.40%
Director and Chief Executive Officer
- -------------------------------------------------------------------------------------------------------------------------------
Common Nathan K. Trynin (75) (4) 1,200,000 2.24% 2.91%
Vice Chairman of the Board of Directors
- -------------------------------------------------------------------------------------------------------------------------------
Common Alfonso Knoll (30)(5) 3,863,097 7.20% 9.26%
Director
- -------------------------------------------------------------------------------------------------------------------------------
Common Lord Gilbert [John](77) (6) 550,000 1.02% 1.34%
Director
- -------------------------------------------------------------------------------------------------------------------------------
Common William Pipkin (52) (7) 200,000 0.37% 0.49%
Director
- --------------------------------------------------------------------------------------------------------------------------
Common Beau Kelly (25) (8) 0.00% 0.00%
Director
- -------------------------------------------------------------------------------------------------------------------------------
Common Stephen Roche (52) (9) 260,000 0.48% 0.63%
Director
- -------------------------------------------------------------------------------------------------------------------------------
Charles T. Maxwell (74) (10) 200,000 0.37% 0.48%
Common Director
- -------------------------------------------------------------------------------------------------------------------------------
Common All Directors and Officers of the 11,693,506 21.79% 26.74%
Company as a Group(11)
===============================================================================================================================
(1) The 2,114,696 stock ownership of Mr. Amir consists of:
(a) 328,121 shares held by the Amir Family Trust;
(b) 1,286,575 shares held by Mr. Amir; and
(c) options for 500,000 shares at an exercise price of $.526 per share
expiring on October 1, 2007.
(2) The stock ownership of Mr. Novinskie includes: ownership of 1,050,522
shares owned by him directly and 71,942 shares held by his wife and
children. Mr. Novinskie received an option for 500,000 shares at an
exercise price of $.526 per share expiring on October 1, 2007. Mr.
Novinskie disclaims beneficial ownership of the 71,942 shares owned by his
wife and children. While Mr. Novinskie disclaims beneficial interest in
the shares owned by his wife and children, these shares have been included
in Mr. Novinskie's stock ownership for disclosure purposes only.
(3) The stock ownership of Mr. Benediktson consists of 1,200,000 shares owned
by him directly, warrants for 100,000 shares at $1.00 per share expiring
on September 21, 2006 ("Participation Warrants"), and warrants for 100,000
shares at $2.00 per share expiring on September 21, 2007 ("Contingent
Warrants"). The Contingent Warrants are exercisable only if the holder has
timely exercised the Participation Warrants.
(4) The stock ownership of Mr. Trynin consists of 400,000 shares owned by him
directly and warrants for 100,000 shares at $1.00 per share expiring on
September 21, 2006 ("Participation Warrants"), and warrants for 100,000
shares at $2.00 per share expiring on September 21, 2007 ("Contingent
Warrants"). The Contingent Warrants are exercisable only if the holder has
timely exercised the Participation Warrant. The above figures include
400,000 shares owned by his children's trust and 200,000 shares owned by
Mr. Trynin's wife. Mr. Trynin disclaims beneficial ownership of the shares
held in trust and by his wife. The shares held by Mr. Trynin's wife and
children's trusts are included for disclosure purposes only.
-4-
(5) The 3,863,097 shares owned by Terra Silex Holdings, LLC consist of:
(a) 50,200 shares held by Mr. Alfonso Knoll;
(b) 1,264,547 shares owned by Terra Silex Holdings, LLC;
(c) 1,498,350 shares owned by two other members of Terra Silex Holdings,
LLC;
(d) a warrant for 250,000 shares at $1.25 per share which expires on
December 31, 2006;
(e) warrants for 250,000 shares at $1.00 per share expiring on September
21, 2006 ("Participation Warrants");
(f) warrants for 250,000 shares at $2.00 per share expiring on September
21, 2007 ("Contingent Warrants"). The Contingent Warrants are
exercisable only if the holder has timely exercised the
Participation Warrants; and
(g) 300,000 shares of Common Stock awarded to Mr. Knoll as compensation
for serving on a Special Committee of the Board of Directors to
identify and recruit new management and independent directors for
the Company. Issuance of these 300,000 shares is subject to
Shareholder ratification.
(6) The common stock attributable to Lord Gilbert [John] consists of 50,000
shares owned by Lord Gilbert, an option to acquire 200,000 shares at an
exercise price of $.85 per share issued under the Company's Non-Qualified
Independent Director Stock Option Plan and 300,000 shares of Common Stock
awarded to Lord Gilbert as compensation for serving on a Special Committee
of the Board of Directors to identify and recruit new management and
independent directors for the Company. Issuance of these shares is subject
to the Stockholder ratification.
(7) The Common Stock attributable to Mr. Pipkin consists of an option for
200,000 shares of Common Stock at an exercise price of $.43 per share.
The option was granted under the Company's Non-Qualified Independent
Director Stock Option Plan. Mr. Pipkin will partially vest in these
shares after one year of service on the Board.
(8) Mr. Kelly does not own any Common Stock of the Company.
(9) The Common Stock attributable to Mr. Roche consists of 260,000 shares of
Common Stock which are personally owned by him.
(10) The Common Stock attributable to Mr. Maxwell consists of an option for
200,000 shares of Common Stock at an exercise price of $.48 per share. The
option was granted under the Company's Non-Qualified Independent Director
Stock Option Plan. Mr. Maxwell will partially vest in these shares after
one year of service on the Board.
(11) This group consists of 11 persons, nine directors and two officers of the
Company who are not directors, Ms. Jody Spencer, Secretary of the Company,
who owns 283,239 shares of stock and Mr. Novinskie whose ownership is set
forth above.
(12) Applicable percentage of ownership is based on 40,988,498 shares of common
stock outstanding as of January 25, 2006, together with securities
exercisable or convertible into shares of common stock within 60 days of
January 25, 2006, by that director, and assuming that no other director or
officer exercised his/her options and warrants. Beneficial ownership is
determined in accordance with the rules of the SEC and generally includes
voting or investment power with respect to securities. Securities
currently exercisable or convertible into shares of Common Stock within 60
days of January 25, 2006, are deemed to be beneficially owned by the
person holding such securities for the purpose of computing the percentage
of ownership of such person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
-5-
(13) Applicable percentage ownership is based on 40,988,498 shares of Common
Stock outstanding as of January 25, 2006, plus all securities exercisable
or convertible into shares of Common Stock within 60 days of January 25,
2006, consisting of: (i) options and warrants for 11,392,305; and (ii)
shares to be issued upon the exchange by the holders of 185,000 shares of
Series B Preferred Stock at the minimum conversion price of $1.25 per
share or 1,480,000 shares; or 53,660,803 shares of common stock on a fully
diluted basis.
COMMITTEES OF THE BOARD OF DIRECTORS
- ------------------------------------
Audit Committee: The following persons are currently serving as the Audit
Committee:
Lord Gilbert
Nathan K. Trynin
Steven P. Roche
The Audit Committee previously consisted of Lord Gilbert, H. Paul Pryor
and Robert E. Martin.
The Audit Committee met one time during Fiscal 2005. It also met on
December 16, 2005 (Fiscal 2006), with the Company's accountants to discuss the
Company's restatement of its treatment of the transaction with Ostara
Corporation for the sale of the Company's I-Square and I-Top Technology as
reported on the Company's June 30, 2005, and March 31,2005, quarterly reports on
Form 10-QSB. On January 13, 2006, the Audit Committee met with the Company's
accountants to review the Company's financial statements for the fiscal year
ended September 30, 2005, and to discuss the efficacy of the Company's
Accounting Disclosure and Controls. Each of the members of the Audit committee
is qualified, based on his education and experience, to serve on the Audit
Committee.
The Board of Directors adopted an Audit Committee Charter, a copy of which
is attached as Exhibit 3.7 to the Company's Annual Report on Form 10-KSB. and
attached hereto at Appendix 1
The Audit Committee recommended to the Board of Directors that Vasquez &
Company, LLP, be retained for Fiscal 2006 as the Company's Independent
Registered Public Accountants, reviewing and approving audit plans, reviewing
the Company's quarterly filings on Form 10-QSB, reviewing and approving the
Company's annual report on Form 10-KSB, and advising the Board and Audit
Committee concerning the work of the Company's independent accountants. It is
anticipated that Messrs: Lord Gilbert and Trynin will be re-appointed to the
Audit Committee at the Annual Meeting of the Board of Directors immediately
following the Annual Meeting of Stockholders if they are reelected as Directors
by the Stockholders. A new independent director elected by the Stockholders will
also be appointed to the Audit Committee at the Annual Meeting of the Board of
Directors immediately following the Annual Meeting of Stockholders so that the
Audit Committee consists of not less than three qualified individuals.
-6-
Compensation Committee: The following persons are currently serving as the
Compensation Committee:
Steven P. Roche
William Pipkin
Nathan K. Trynin
There were no meetings of the Compensation Committee in Fiscal 2005. The
Board of Directors handled all compensation matters. The Compensation
Committee's responsibilities include the recommendation to the Board of
Directors on the salaries and other compensation appropriate for the officers of
the Company. It is anticipated that new members of the Compensation Committee
will be appointed at the Annual Meeting of the Board of Directors immediately
following the Annual Meeting of Stockholders.
Executive Committee: The following persons are currently serving as the
Executive Committee:
Dov Amir
Stephan V. Benediktson
Nathan K. Trynin
The Executive Committee met on two occasions in Fiscal 2005.
MEETINGS OF THE BOARD OF DIRECTORS
- ----------------------------------
During the Company's fiscal year ended September 30, 2005, there were
12 meetings of the Board of Directors.
Section 16(a) Compliance
- ------------------------
Based solely upon a review of Forms 3 and 4 during the fiscal year ending
September 30, 2005, and the representations of each of the members of the Board
of Directors and officers of the Company, Mr. Benediktson and Mr. Trynin were
tardy in filing their initial Form 3's. There were no late filings of any
member's Form 4. Mr. Knoll has never filed a Form 3, 4 or 5, rather relying on
Terra Silex's Form 13 D filings. The Company received no Form 5's filed by any
party.
THE CURRENT EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS:
========================================================================================================
NAME AND AGE OFFICE HELD
- --------------------------------------------------------------------------------------------------------
Dov Amir (81) Chairman of the Board of Directors (1)
- --------------------------------------------------------------------------------------------------------
Stephan V. Benediktson (72) Chief Executive Officer and Director (1)
- --------------------------------------------------------------------------------------------------------
Nathan K. Trynin (75) Vice Chairman of the Board of Directors (1)
- --------------------------------------------------------------------------------------------------------
Gary J. Novinskie (55) President, Chief Operating Officer and Chief Financial Officer(1)
- --------------------------------------------------------------------------------------------------------
Jody Spencer (60) Secretary (1)
========================================================================================================
(1) See "SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT" and "Election of
Directors--Business Experience" for positions held, experience and stock
ownership.
-7-
ELECTION OF DIRECTORS
---------------------
The current Board of Directors consists of nine directors who were elected
or appointed to serve for a period of one (1) year or until their successors are
elected and qualified. The directors elected at the Annual Meeting and who
qualify to serve will serve until their successors can be elected at the Annual
Meeting to be held in 2007. The Board of Directors is authorized a total of nine
directors, but management is nominating only six persons for election to the
Board of Directors.
Under the terms of the Clean Age Minerals, Inc. Acquisition Agreement, the
former stockholders of Clean Age Minerals, Inc. ("CAMI"), have the right to
nominate two directors.
Under the provisions of the Terra Silex SPA, Terra Silex is entitled to
nominate one person to stand for election as a director of the Company. Neither
CAMI nor Terra Silex has nominated any one to stand for election.
Messrs. Knoll, Kelly and Roche have advised the Company that they would
not be standing for re-election.
REQUIRED VOTE
- -------------
The shares represented by the enclosed proxy will be voted at the meeting
as directed. If no choice is specified in the proxy, the shares represented by
the enclosed proxy will be voted "FOR" the election of the nominees listed
below. All six of the nominees are presently members of the Board of Directors.
If any nominee becomes unavailable for any reason or if another vacancy should
occur before the election (which events are not anticipated), the shares
represented by the enclosed proxy may be voted by the holders of such proxy in
their sole discretion. The Board of Directors recommends that the Stockholders
vote "FOR" the nominees.
SECURITY OWNERSHIP OF MANAGEMENT'S NOMINEES
-------------------------------------------
========================================================================================================================
AMOUNT OF PERCENT PERCENTAGE OF COMMON
CLASS OF NAME, AGE AND POSITION BENEFICIAL OF STOCK CLASS STOCK EQUIVALENT(%)(8)
STOCK WITH THE COMPANY OWNERSHIP (%)(9)
(SHARES)
- ------------------------------------------------------------------------------------------------------------------------
Common Dov Amir (81) (1)
Chairman of the Board of Directors 2,114,696 3.94% 5.10%
- ------------------------------------------------------------------------------------------------------------------------
Common Stephen V. Benediktson (72) (2) 1,400,000 2.61% 3.40%
Chief Executive Officer and Director
- ------------------------------------------------------------------------------------------------------------------------
Common Nathan K. Trynin (75) (3) 1,200,000 2.24% 2.91%
Vice Chairman of the Board of Directors
- ------------------------------------------------------------------------------------------------------------------------
Common William Pipkin (52) (4) 200,000 0.37% 0.49%
Director
- ------------------------------------------------------------------------------------------------------------------------
Common Lord Gilbert [John](77) (5) 550,000 1.02% 1.34%
Director
- ------------------------------------------------------------------------------------------------------------------------
Common Charles T. Maxwell (74)(6) 200,000 0.37% 0.49%
- ------------------------------------------------------------------------------------------------------------------------
Common All Nominees of the 5,664,696 10.55% 13.73%
Company as a Group(7)
========================================================================================================================
(1) See footnote number 1 to "Security Ownership of Directors and Management."
(2) See footnote number 3 to "Security Ownership of Directors and Management."
(3) See footnote number 4 to "Security Ownership of Directors and Management."
-8-
(4) See footnote number 7 to "Security Ownership of Directors and Management."
(5) See footnote number 6 to "Security Ownership of Directors and Management."
(6) See footnote number 10 to "Security Ownership of Directors and
Management."
(7) This group consists of six nominees to serve as directors of the Company.
(8) Applicable percentage of ownership is based on 40,988,498 shares of common
stock outstanding as of January 25, 2006, together with securities
exercisable or convertible into shares of common stock within 60 days of
January 25, 2006 for each stockholder. Beneficial ownership is determined
in accordance with the rules of the SEC and generally includes voting or
investment power with respect to securities. Securities currently
exercisable or convertible into shares of Common Stock within 60 days of
January 25, 2006, are deemed to be beneficially owned by the person
holding such securities for the purpose of computing the percentage of
ownership of such person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other person.
(9) Applicable percentage ownership is based on 40,988,498 shares of common
stock outstanding as of January 25, 2006, plus all securities exercisable
or convertible into shares of common stock within 60 days of January 25,
2006, consisting of: (i) options and warrants for 11,392,305 shares; and
(ii) shares to be issued upon the exchange by the holder of 185,000 shares
of Series B Preferred Stock at the minimum conversion price of $1.25 per
share, or 1,480,000 shares; or 53,660,803 shares of common stock on a
fully diluted basis.
NOMINEES
- --------
Set forth below is certain information about each of the persons nominated
by Management to be Directors of the Company including the name, age, principal
occupation, business experience and length of service as a Director of the
Company:
BUSINESS EXPERIENCE
- -------------------
Dov Amir (81)
Mr. Amir is the Chairman of the Board of Directors of the Company. Mr.
Amir has been an officer and director of the Company since 1977, having
previously held the position of President and Director. Prior to joining the
Company, Mr. Amir was involved in the development of natural resources and
economic development projects in the United States, Africa, South America and
Europe both in the capacity of a corporate executive and as a consultant. Mr.
Amir holds a B.S. degree in Petroleum Engineering, Cum Laude, and M.S. degree in
Petroleum Engineering and Economics from the University of Southern California
as well as postgraduate courses in management and finance at USC and UCLA.
Stephan V. Benediktson (72)
Mr. Benediktson has extensive technical and managerial experience within
the natural resource industry. He is a graduate of the University of Alberta
where he received a degree in Engineering. During his 43 year career, he has
held various positions with affiliates of Exxon in Canada, the United States,
Australia, Indonesia and Saudi Arabia. Mr. Benediktson was involved in the
Government of Canada's development plans and regulatory controls for the
exploration of Canada's Beaufort Sea frontier energy plays. He held the position
of Vice President of the Amerada Hess Corporation in which he managed the firm's
activities in the United Arab Emirates and was later the Director General of
Bridas in Argentina. Mr. Benediktson has either founded or co-founded several
independent oil companies including Benson Petroleum Ltd., PetroSantander Inc.
and Kroes Energy Inc. and has been instrumental in their management and
corporate development. He was a charter director of the Society of Petroleum
Engineers (SPE) in the United Arab Emirates and in Ottawa, Canada, and has
served as the Honorary Consul of Iceland in Alberta.
-9-
Nathan K. Trynin (75)
Mr. Trynin is a graduate of Harvard College and the Harvard Law School. He
is a former Assistant United States Attorney for the Eastern District of New
York, an officer in the Judge Advocate General's Department, United States Air
Force, and has been in private practice in New York. In 1962 he joined Amerada
Hess Corporation where he rose to the position of Senior Vice President,
International Exploration and Production after holding positions as Executive
Assistant to the Chairman of the Board and Vice President and General Counsel.
Since his retirement from Amerada Hess in 1986, Mr. Trynin has served on several
Boards of Directors of for-profit and non-profit organizations including Merit
Oil Company, Benson Petroleum, Ltd., and the Meadville Corporation. He is
presently a permanent member of the Board of Overseers of Judson Realty, Inc.,
and a member of the Board of Trustees of the Shelter Island Association.
William Pipkin (52)
Mr. Pipkin has a broad technology background with expertise in
commercializing technology. Mr. Pipkin is a 1992 graduate of The Wharton School,
University of Pennsylvania, earning a Masters in Business Administration in
Finance and Entrepreneurship, Awarded Director's List. He received a Bachelors
of Science, Analytical Chemistry, American Chemical Society certified, from
Brigham Young University in 1978. In 1978 he did course work in alternating and
direct current theory, design and construction of power supplies and
semiconductor theory and application. Mr. Pipkin worked for Hewlett-Packard for
21 years commercializing new technology before joining the "start-up" world. His
experience is international in scope, having worked in the United States and
Asia as well as having consulted in the United States, Japan, China, Europe and
for the United Nations. Mr. Pipkin has been involved in all operations aspects
including sales, applications, support, research and development, manufacturing
and marketing. Mr. Pipkin was one of the founders of 16/6, Inc. which was
acquired by the Company in 1991. He previously served as the Chief Investment
Officer and a member of the Board of Directors of Ostara Corporation resigning
in April 2005.
Lord Gilbert [John] (79)
Lord Gilbert was appointed as a director in November 2003. Lord Gilbert
served as U.K. Minister of State for Defense Procurement from 1997-99, and is a
member of the House of Lords and the Privy Council. He first entered Parliament
in 1970 and served as Financial Secretary to the Treasury (1974-75), Minister
for Transport (1975-76), and Minister of State for Defense (1976-79). During the
Conservative government, he was Senior Opposition member of the Select
Committees on Defense and Trade and Industry and the Committee on Intelligence &
Security. A Chartered Accountant, Lord Gilbert was educated at St. John's
College, Oxford, and New York University where he earned a Ph.D. in
International Economics. His early career included work with Price Waterhouse
and Canadian Business Services, Toronto, and as Assistant Vice President,
Business Development at the Bank of America International in New York. He is a
Fellow of the Royal Geographic Society and a member of the Trilateral
Commission, and he has served several companies on both sides of the Atlantic as
an advisor and board member.
Charles T. Maxwell (74)
Mr. Maxwell was educated at Princeton as an undergraduate and Oxford as a
graduate. Mr. Maxwell entered the oil industry in 1957 and worked for Mobile Oil
Company for 11 years in the United States, Europe, the Middle-east and Africa.
His background has been in four traditional sectors of the industry - producing,
refining, transportation, and marketing. In 1968, Mr. Maxwell joined a
well-known Wall Street Firm as an oil analyst. In polls taken by Institutional
Investor magazine, Mr. Maxwell has been ranked by the US financial institutions
as the No. 1 oil analyst for the years 1972, 1974, 1977 and 1981-1986. In
addition, for the last 22 years he has been an active member of an Oxford based
organization comprised of OPEC and other industry executives from 30 countries
who meet twice a year to discuss trends within the energy industry. Mr. Maxwell
is currently affiliated with Weeden & Co., LLP, Greenwich, Connecticut.
-10-
INCREASE IN AUTHORIZED NUMBER OF SHARES
---------------------------------------
The Board of Directors has recommended the increase in the authorized
number of shares of Common Stock from 50,000,000 shares to 100,000,000 shares.
REQUIRED VOTE
- -------------
The shares represented by the enclosed proxy will be voted at the meeting
as directed. If no choice is specified in the proxy, the shares represented by
the enclosed proxy will be voted "FOR" the increase in all authorized shares of
common stock.
The Board of Directors recommends that the Stockholders vote "FOR" the
increase in the authorized number of shares.
DISCUSSION
- ----------
The Company's Articles of Incorporation currently authorize 50,000,000
shares of Common Stock and 20,000,000 shares of Preferred Stock. As of the
Record Date, there were 40,988,498 shares issued and outstanding. There are also
outstanding options and warrants for 11,392,305 and 185,000 shares of Series B
Preferred stock convertible into 1,480,000 shares of Common Stock at a price of
$1.25 per share.
The success of the Company's private placement in September, 2005 (See
Footnote 11, Common Stock, to the Company's Financial Statements for Fiscal Year
2005), in which 6,500,000 shares of Common Stock were sold demonstrates the
viability of the Company raising needed capital through the equity market.
Historically, the Company has also demonstrated the benefit of acquiring
assets, such as Clean Age Minerals, Inc., through the issuance of equity.
Management believes that it is essential for the Company to be able to
continue to raise necessary operating capital for the development of its oil and
gas assets, placing its industrial minerals into production and acquiring new
assets through the sale or exchange of the Company's stock. The increase in the
authorized number of shares of Common Stock from 50,000,000 to 100,000,000
shares will provide the Company with the ability to meet all its obligations
under the existing outstanding options and warrants, conversion of the Series B
Preferred Stock, permits the Company to raise additional capital in the equity
markets and acquire new assets to enhance the value of the Company. Failure of
the Stockholders to approve the increase in the authorized shares of Common
Stock may have a detrimental effect on the Company's ability to obtain the
necessary capital for the monetization of its industrial minerals, its ability
to acquire additional assets, primarily interests in existing producing oil and
gas properties, and to obtain necessary working capital. Should the Company not
have available sufficient equity with which to raise capital or to acquire
assets, it would be forced to do so through incurring debt. Management has
diligently sought to reduce all debt of the Company, either by exchanging
existing debt for equity and/or satisfaction of its obligations. The approval of
the increase in the authorized Common Stock would assist management in this
endeavor. The intent and purpose of the Company's proposal is to provide the
Company the flexibility to act or react immediately if the opportunity or need
arises. The Company has no current plans, proposals or arrangements, written or
otherwise, to engage in any business or investment opportunity utilizing the
increase in the authorized shares of Common Stock, other than the issuance of
shares upon the exercise of existing options and warrants. Rather the Company
desires to be in the position to be able take advantage of such business or
investment opportunity when and if such an opportunity becomes available.
-11-
Management recommends that the Stockholders vote FOR the resolution to
increase the authorized shares of Common Stock from 50,000,000 to 100,000,000.
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS
-----------------------------------------
The Audit Committee of the Board of Directors has selected the accounting
firm of Vasquez & Company, LLP, to be the Company's Independent Registered
Public Accountant to audit the books and records of the Company and its
subsidiaries for the 2006 fiscal year. This firm replaced the Company's previous
auditor, Jay Shapiro, who resigned as the Company's Auditor on September 9, 2004
due to the expense of complying with the certification process required under
the Sarbanes Oxley Act of 2002 and the Public Company Accounting Oversight Board
("PCAOB"). Mr. Shapiro had audited the books and records of the Company
commencing in fiscal 1998 through 2003. Vasquez & Company, LLP, has been then
the Company's auditors since that time and has prepared the audits for its 2003,
2004 and 2005 fiscal years. Other than providing audit services, there is no
material relationship between Vasquez & Company, LLP, and the Company. Vasquez &
Company, LLP, is certified by the PCAOB as required under the Sarbanes Oxley Act
of 2002 and is considered well qualified.
In Fiscal Years 2004 and 2005, the Company paid Vasquez & Company, the
following compensation.
=========================================================================================================
Financial Information System All Other Fees (1) Total
Year Audit Fee Design and Implementation Fees
- ---------------------------------------------------------------------------------------------------------
2004 $51,000 0 $0 $51,000
- ---------------------------------------------------------------------------------------------------------
2005 $45,000 0 $24,086 $69,086
=========================================================================================================
(1)The Company paid Vasquez & Company the following fees in addition to
its fee for the Annual Audit of the Company: (i) $21,000 for its review of the
Company's quarterly reports on Form 10-QSB; and (ii) $3,086 in expense
reimbursement.
The Audit Committee recommends that the Stockholders ratify the selection
of Vasquez & Company to be the Company's Registered Independent Accountant for
the Company's fiscal year ending September 30, 2006. The Board of Directors
believes that the terms of the retention letter with Vasquez & Company, LLP, is
consistent with maintaining Vasquez & Company, LLP's independence. The Board of
Directors further believes the retention of Vasquez & Company, LLP, is in full
compliance with the provisions of the Sarbanes Oxley Act of 2002 relating to
auditor independence.
REQUIRED VOTE
- -------------
The Board of Directors recommends a vote "FOR" the proposal to ratify the
selection of Vasquez & Company, LLP, as the Company's Independent Accountant.
The shares represented by the enclosed proxy will be voted at the meeting
as directed. If no choice is specified in the proxy, the shares represented by
the enclosed proxy will be voted "FOR" the retention of Vasquez & Company, LLP.
A majority of the shares voting at the meeting is required for the retention of
Vasquez & Company, LLP.
-12-
A representative of Vasquez & Company, LLP, the Company's Registered
Independent Accountant for Fiscal Years 2003, 2004 and 2005, is not expected to
be present at the Annual Meeting.
RATIFICATION OF STOCK AWARD TO
SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS
-------------------------------------------
On April 29, 2005, the Board of Directors appointed Lord Gilbert, Mr. H.
Paul Pryor and Mr. Alfonso Knoll as a Special Committee of the Board of
Directors ("Special Committee") to identify and recruit additional persons to
act as officers and independent directors of the Company. As consideration for
their services, the Board voted to grant each member of the Special Committee
300,000 shares of Common Stock ("Award"). Since the Company's announced policy
has been not to compensate its directors, other than for reimbursement of costs
associated with a director's performance of his duties, the Company believes
that the award of these Shares requires Stockholders approval. The Company is
seeking Stockholder approval of these Awards. Mr. Pryor resigned as a Director
on May 17, 2005. The Special Committee consisting of Mr. Knoll and Lord Gilbert
continued in existence though August 2005 when Mr. Benediktson and Mr. Trynin
agreed to join the Company. The Board believes that the members of the Special
Committee are entitled to the Award for their additional services and efforts on
behalf of the Company and the Stockholders.
REQUIRED VOTE
- -------------
The shares represented by the enclosed proxy will be voted at the meeting
as directed. If no choice is specified in the proxy, the shares represented by
the enclosed proxy will be voted "FOR" the ratification of the Award. A majority
of the shares voting at the meeting is required for the ratification of the
Award.
The Board of Directors recommends a vote "FOR" the proposal to ratify the
Award.
CODE OF ETHICS
--------------
On December 9, 2005, the Board of Directors passed a Code of Ethics for
the Company. A copy of the Company's Code of Ethics was filed as Exhibit 14.1 to
the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission on January 13 2006. A copy of the Code of Ethics is attached
hereto as Schedule 2.
The Company will, at no charge to its Stockholders, provide additional
copies of the Code of Ethics to any one whom so requests. Any request should be
sent to the Company's Secretary at the following address:
Daleco Resources Corporation
Attention: Corporate Secretary
120 North Church Street
West Chester, PA 19380
SARBANES OXLEY COMPLIANCE
-------------------------
The Sarbanes Oxley Act of 2002 ("SOX") was enacted in large measure in
response to the Enron scandal and to insure corporate compliance with basic
rules of ethical conduct and fair and proper reporting of corporate financial
matters.
-13-
While the enactment made and changes promulgated by the Securities and
Exchange Commission ("SEC") in furtherance of the SOX achieve the goals and
intent of the SOX, unfortunately the one-size-fits-all philosophy of the SOX
often does not properly deal with all corporations subject to the SOX.
We believe that the Company is one of those corporations. As noted in the
Company's annual report, as filed with the SEC, as of January 13, 2006, the
Company only had eight employees, six of whom are employed by Daleco Resources
Corporation. One employee, Mr. Martin, is employed by Clean Age Minerals, Inc.
and is located in Albuquerque, New Mexico, and one employee, Mr. John Ryan, is
employed by Sustainable Forest Industries, Inc. with its office on Long Island,
New York. Of the six employed by Daleco Resources Corporation, four are located
at its corporate headquarters in West Chester, Pennsylvania, two located in Los
Angeles, California.
Two employees at the Company's principal office in West Chester,
Pennsylvania, Mr. Novinskie, President and Chief Financial Officer, and Mr.
Payne, the controller, keep all financial records for the Company and its
subsidiaries. All financial matters, accounting principals and compliance issues
are reviewed with the Company's Board of Directors and discussed by either the
Board of Directors or Audit Committee with the Company's independent accountants
and outside counsel.
Additionally, the Company's Audit Committee is composed of directors with
substantial business experience (See "Business Experience" above.). Lord
Gilbert's qualifications enable him to qualify as an "audit committee financial
expert." Messrs. Roche's and Trynin's business experience also gives them
substantial insight and familiarity with financial matters. Any non-audit uses
of the Company's independent accountant would require pre-approval by the Audit
Committee and would have to be in compliance with the standards for an
accountant's independence established by SOX and the PCAOB.
The Company is open to Stockholder's recommendations/nominations to the
Board of Directors. Currently, four separate groups within the Company may
select directors. Under the Merger Agreement with Clean Age Minerals, the former
Clean Age stockholders have the right to nominate two directors. The Clean Age
stockholders have not nominated anyone to stand for election at this Annual
Meeting. Terra Silex is entitled to nominate one person to serve as a director
of the Company. Terra Silex has not nominated anyone to stand for election at
this Annual Meeting. The third group is the Company's Stockholders with the
fourth group being the existing directors.
By reason of the existing methods of selecting nominees for the Board of
Directors, the Company believes it is in full compliance with the SOX.
Stockholders are free to, and do, communicate directly with both the
officers and directors of the Company. No constraint is placed on any
Stockholder's communication. However, often the Stockholders will be requested
to speak with the President and/or Chief Executive Officer of the Company for
specific information. All requests for information are usually discussed with
counsel prior to release or the requesting party is referred to the Company's
published and/or filed reports.
Since the Company does not yet have a website, parties cannot be referred
to a website for information. However, any information that would otherwise be
posted on a company website is available directly from the Company.
-14-
EXECUTIVE COMPENSATION
----------------------
For the period ending September 30, 2005, the Company had eight full-time
employees. The following table sets forth the compensation paid its three
highest paid officers and highest paid employee for the past four years.
SUMMARY COMPENSATION TABLE
===========================
Long Term Compensations
- ----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Other Restricted Securities All
Principal Position ($) ($) Annual Stock Underlying LTIP other
Compensation Award(s) Options/SARs Payouts Compensation
($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Dov Amir 2002 100,000(1) 0 0 1,000,000
Chairman of the
Board of Directors
- ----------------------------------------------------------------------------------------------------------------------------------
Dov Amir 2003 100,000(1) 0 0 0 0
Chairman of the
Board of Directors
- ----------------------------------------------------------------------------------------------------------------------------------
Dov Amir 2004 100,000(1) 0 0 0 0
Chairman of the
Board of Directors
- ----------------------------------------------------------------------------------------------------------------------------------
Dov Amir 2005 100,000(1) 0 0 0 0
Chairman of the
Board of Directors
- ----------------------------------------------------------------------------------------------------------------------------------
Gary J. Novinskie 2002 100,000(1) 25,000 25,000 500,000
President, COO,
CFO
- ----------------------------------------------------------------------------------------------------------------------------------
Gary J. Novinskie 2003 100,000(1) 0 0 0 0
President, COO,
CFO
- ----------------------------------------------------------------------------------------------------------------------------------
Gary J. Novinskie 2004 100,000(1) 0 0 0 0
President, COO,
CFO
- ----------------------------------------------------------------------------------------------------------------------------------
Gary J. Novinskie 2005 100,000(1) 0 0 0 0
President, COO,
CFO
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------
(1) During fiscal years 2002, 2003, 2004 and 2005, Messrs. Martin, Amir and
Novinskie received only a portion of their salaries with the remainder
accrued as indicated in the Company's audited financial statements for the
periods ending September 30, 2002, September 30, 2003, September 30, 2004,
and September 30, 2005. (See Footnote 8 to the Company's audited financial
statements.)
-15-
Long Term Compensations
- ----------------------------------------------------------------------------------------------------------------------------------
Awards Payouts
- ----------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- ----------------------------------------------------------------------------------------------------------------------------------
Name and Year Salary Bonus Other Restricted Securities All
Principal Position ($) ($) Annual Stock Underlying LTIP other
Compensation Award(s) Options/SARs Payouts Compensation
($) ($) (#) ($) ($)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Martin, 2002 50,000 0 0 50,000 100,000
President of Clean
Age Minerals, Inc. (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Martin, 2003 100,000(1) 0 0 0 0
President of Clean
Age Minerals, Inc. (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Martin, 2004 100,000(1) 0 0 0 0
President of Clean
Age Minerals, Inc.. (3)
- ----------------------------------------------------------------------------------------------------------------------------------
Robert E. Martin, 2005 58,334(1) 0 0 0 0
President of Clean
Age Minerals, Inc. (2)
- ----------------------------------------------------------------------------------------------------------------------------------
Edward Payne 2002 52, 000 0 0 0 0
Controller
- ----------------------------------------------------------------------------------------------------------------------------------
Edward Payne 2003 52, 000 0 0 0 0
Controller
- ----------------------------------------------------------------------------------------------------------------------------------
Edward Payne 2004 52, 000 0 0 0 0
Controller
- ----------------------------------------------------------------------------------------------------------------------------------
Edward Payne 2005 52, 000 0 0 0 0
Controller
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------
(1) During fiscal years 2002, 2003, 2004 and 2005, Messrs. Martin, Amir and
Novinskie received only a portion of their salaries with the remainder
accrued as indicated in the Company's audited financial statements for the
periods ending September 30, 2002, September 30, 2003, September 30,
2004,and September 30, 2005. (See Footnote 8 to the Company's audited
financial statements.)
(2) Mr. Martin is the President of Daleco's wholly owned subsidiaries, Clean
Age Minerals, Inc. and C.A. Properties, Inc. Mr. Martin is not an officer
of Daleco. Mr. Martin resigned as a director of the Company in April 2005.
-16-
The following table contains information regarding options granted during
the year ended September 30, 2005, to Daleco's named executive officers.
TABLE OF TOTAL OPTION/WARRANTS/SAR/GRANTS
HELD BY MANAGEMENT AT FISCAL YEAR END 2005(1)
---------------------------------------------
============================================================================================================================
Name No. of Securities Underlying % Total Options/Warrants Exercise or Base Price Expiration Date
Options/Warrants Granted (#) Held by Management (%) ($ per Share)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Dov Amir 545,455(2) 4.86% $0.526 to $.55 Nov. 2005 and
Oct 2007
- ----------------------------------------------------------------------------------------------------------------------------
Gary Novinskie 500,000(3) 4.46% $0.526 Oct 2007
- ----------------------------------------------------------------------------------------------------------------------------
Robert E. Martin 1,000,000(4) 8.91% $1.08 Oct 2007
============================================================================================================================
- -------------------------
(1) Daleco has not issued any Stock Appreciation Rights.
(2) Pursuant to the terms of his Key Man Agreement, Mr. Amir received an
option to purchase 500,000 shares at a price of $0.526 per share expiring
three years after the option became fully vested. The option expires on
October 1, 2007. Mr. Amir received 45,455 warrants with an exercise price
of $.55 per share in consideration for a loan of $25,000 to the Company in
July 1998. Mr. Amir exercised these warrants in October 2005.
(3) Pursuant to the terms of his Key Man Agreement, Mr. Novinskie received an
option to purchase 500,000 shares at $0.526 per share expiring three years
after the option became fully vested. The option expires on October 1,
2007.
(4) Mr. Martin's option consists of an option for 1,000,000 shares at $1.08
awarded under his Key Man Agreement with Daleco. His option expires three
years after it becomes fully vested. The option expires on October 1,
2007.
The following table contains information regarding options exercised in
the year ended September 30, 2005, and the number of shares of common stock
underlying options held as of September 30, 2005, by Daleco's named executive
officers.
AGGREGATED OPTIONS/WARRANTS/SAR EXERCISES
IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTIONS/WARRANTS/SAR VALUES(1)
===========================================================================================================================
Value of Unexercised
Number of Securities Underlying In-the-Money
Shares Acquired Value Unexercised Options/Warrants/SARs at Options/Warrants/SARs
on Exercise (2) Realized FY-End at FY-End (4)
- ---------------------------------------------------------------------------------------------------------------------------
(#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------------
Dov Amir 1,000,000 -- 545,455(3) -- $0 --
- ---------------------------------------------------------------------------------------------------------------------------
Gary Novinskie 1,000,000 -- 500,000 -- $0 --
- ---------------------------------------------------------------------------------------------------------------------------
Robert Martin -- -- 1,000,000 -- $0 --
===========================================================================================================================
(1) Daleco has granted no stock appreciation rights.
(2) In May 2005, Mr. Amir, and in September 2005, Mr. Novinskie, exercised
options for 1,000,000 shares at $.25 per share. These options were awarded
on September 17, 2000, and were due to expire on September 17, 2005.
(3) In October 2005, Mr. Amir exercised warrants for 45,455 shares received in
July 1998 as consideration for a loan of $25,000 to the Company.
(4) The values of the unexercised in-the-money options were calculated by
determining the difference between the fair market value of the common
stock ($.497 per share) underlying the options and the exercise price of
the options as of September 30, 2005 or $0.00. There were no options in
the money.
-17-
ISSUER'S STOCK PURCHASES
IN FOURTH QUARTER OF FISCAL 2005(1)
-----------------------------------
===============================================================================
Purchase Purchases
Month Common Stock Preferred Stock(1) Price
- -------------------------------------------------------------------------------
July 2005 0 0 -----
- -------------------------------------------------------------------------------
August 2005 0 8,000(2) $643,819.32
- -------------------------------------------------------------------------------
September 2005 0 0 -----
===============================================================================
- ---------------------------------
(1) The Company has not made any purchases of its stock either on the open
market or through a repurchase program.
(2) On or about August 10, 2005, the Company settled its lawsuit with the
holders of the Company's Class A Preferred Stock (stated value $50 per
share). (See footnote 14(a) to the Company's Audited Financial Statements
contained in the Company's Annual Report on Form 10-KSB.) This payment
satisfied the outstanding principal, interest and fees due to the holders
of the Class A Preferred Stock. The Class A Preferred Stock was cancelled
on the books of the Company.
COMPENSATION OF DIRECTORS
-------------------------
The Board of Directors does not pay fees to Directors, but does reimburse
Directors for actual costs of travel and lodging incurred in connection with the
Director's attendance at a meeting of the Board. At the Meeting of the Board of
Directors on April 29, 2005, the Board of Directors appointed three "outside"
directors to a Special Committee to identify and recruit new management and
independent directors for the Company. These directors were Messrs. Knoll,
Gilbert and Pryor. As consideration for their services, each member of the
Special Committee was awarded 300,000 shares of Common Stock. Since the
Company's announced policy has been not to compensate its directors, other than
for reimbursement of costs associated with a director's performance of his
duties, the Company believes that the awarding of these shares requires
Stockholders' approval. The Company is seeking Stockholder approval of these
awards.
ANTI-TAKEOVER
-------------
The Board of Directors has not adopted any anti-takeover amendments, but
reserves the right to do so. There are presently issued and outstanding 185,000
shares of Series B Preferred Stock, par value $0.01, with a stated value of
$10.00 per share and 40,988,498 shares of Common Stock, leaving 19,815,000
shares of preferred stock authorized but unissued, and 9,011,502 shares of
Common Stock, par value $.01, available as an anti-takeover device, without
giving effect to: (i) the exercise of all outstanding options and warrants held
by management totaling 2,800,000 shares and warrants for 900,000 shares Common
Stock (See "Principal Holders of Voting Securities" and "Security Ownership of
Management"), and (ii) a maximum of 1,480,330 shares of Common Stock into which
the remaining 185,000 shares Series B Preferred Shares may be converted. (For a
list of all outstanding warrants and options see Footnote 11 to the Company's
Audited Financial Statements for the fiscal year ending September 30, 2005.
There are a total of 11,392,305 options and warrants, including those held by
management, outstanding as of September 30, 2005.) While these are all potential
mechanisms which might be considered by the Board of Directors to frustrate a
hostile takeover of the Company, the Board of Directors has not considered such
actions, and none has been put into effect.
-18-
At the Company's Annual Meeting in 2005, the Stockholders approved the
Company's Nonqualified Independent Director Stock Option Plan ("Plan") for award
of incentive options to outside directors of the Company. The options granted by
this Plan would vest upon certain conditions, one of which would be the merger
with or acquisition of the Company with another entity. While the vesting
provisions may be deemed by some to be an anti-takeover device, the Plan has not
been proposed or viewed by Management in that context. Options for 200,000
shares with an exercise price of $.85 were awarded to Mr. Pryor and 200,000
shares to Lord Gilbert with an exercise price of $.85. Mr. Pryor resigned as a
director of the Company on May 17, 2005, and was vested in 150,000 shares at the
time of his resignation. Lord Gilbert will be fully vested in his options in
March 2007. Messrs. Roche, Pipkin and Kelly were each awarded options for
200,000 shares under the Plan at an exercise price of $.43 per share. As a
result of Messrs. Roche's and Kelly's election not to stand for reelection,
their options will terminate in their entirety. Mr. Pipkin, if re-elected as a
director for an additional year, will become vested in 100,000 of the 200,000
shares after one year of service on the Board.
OTHER MATTERS
-------------
The Board of Directors knows of no other matter to be brought before the
Annual Meeting of Stockholders. Should any other matter be properly raised at
the meeting, it is the intention of each of the persons named in the proxy to
vote in accordance with his judgment as to each such matter raised.
INCORPORATION BY REFERENCE
--------------------------
The Company incorporates herein by reference the audited financial
statements of the Company as set forth in the Annual Report distributed to each
shareholder with this Proxy Statement.
EXPENSES OF SOLICITATION
------------------------
The expenses associated with the preparation, assembling, printing and
mailing of the Notice of Annual Meeting, Proxy Statement and Proxy will be borne
by the Company.
Dated: February __, 2006 By Order of the Board of Directors
/s/ Stephan V. Benediktson
------------------------------------
Stephan V. Benediktson
Chief Executive Officer
-19-
SECHEDULE 1
AUDIT COMMITTEE CHARTER
Daleco Resources Corporation
AUDIT COMMITTEE CHARTER (EFFECTIVE DECEMBER 9, 2005)
DALECO RESOURCES CORPORATION
I. PURPOSE
The Audit Committee will assist the Board of Directors of the Company in
fulfilling its responsibilities with respect to matters involving the
accounting, financial reporting and internal control functions of the Company
and its subsidiaries. This will include assisting the Board in overseeing (a)
the integrity of the Company's financial statements; (b) the Company's
compliance with legal and regulatory requirements; (c) the independent auditor's
qualifications and independence; and (d) the performance of the Company's
independent auditor. The Audit Committee also will assist the Board of Directors
in the preparation of any report that Securities and Exchange Commission ("SEC")
rules require to be included in the Company's annual proxy statement.
The Committee's responsibilities under this Charter do not relieve the Company's
management of its responsibilities for (a) preparing the Company's financial
statements so that they comply with generally accepted accounting principles
("GAAP") and fairly present the Company's financial condition, results of
operations and cash flows; (b) issuing financial reports that comply with the
requirements of the SEC; and (c) establishing and maintaining adequate internal
control structures and procedures for financial reporting.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as determined
by the Board, each of whom shall meet the independence and experience
requirements of applicable Nasdaq Marketplace Rules, the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
SEC. Each member of the Audit Committee shall, in the judgment of the Board, be
financially literate or must become financially literate within a reasonable
period of time after appointment to the Audit Committee. At least one member of
the Audit Committee must have accounting or related financial management
expertise, as determined by the Board, and, unless otherwise determined by the
Board of Directors, at least one member shall be "an audit committee financial
expert" as defined by the SEC. Audit committee members shall not simultaneously
serve on the audit committees of other public companies. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant.
-20-
The members of the Committee shall be appointed by the Board annually and shall
serve until their successors are duly elected and qualified. Unless a Chair is
elected by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership. The Board will have the power at
any time to change the size and membership of the Committee, to remove Committee
members and to fill vacancies on the Committee, provided that any new member
satisfy the requirements of this Charter and any other applicable requirements.
III. MEETINGS
The Committee shall meet at least quarterly, or more frequently as circumstances
dictate. The Committee will meet following the end of each fiscal quarter prior
to the filing of the Company's quarterly or annual report with the SEC to review
the financial results of the Company for the preceding fiscal quarter or the
preceding fiscal year, as the case may be. During each quarterly meeting, or at
such other times as the Committee may determine, the Committee shall meet
separately with management and the independent auditor to discuss any matters
that the Committee or any of these groups believe should be discussed privately
and to review the Company's periodic reports consistent with Section IV below.
The Audit Committee may request any officer or employee of the Company or the
Company's outside counsel or independent auditor to attend a meeting of the
Committee with or without the presence of management or to meet with any members
of, or consultants to, the Committee.
The Committee will record and maintain minutes of its meetings. The Chairman of
the Committee or a Committee member designated by the Chairman will make a
report to the Board of the Committee's meetings, actions taken at meetings or by
consent, and recommendations made since the most recent Board meeting, unless
the Committee has previously circulated an interim report addressing the matter
or matters.
Committee meetings may be held in person or by telephone.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
A. DOCUMENTS/REPORTS REVIEW
1. Review, reassess the adequacy of and update this Charter periodically, at
least annually, as conditions dictate and recommend any proposed changes to the
Board for approval.
2. Review and discuss with management and the independent auditor the Company's
annual audited financial statements and related disclosures, including the
Company's disclosures under "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and recommend to the Board that the
audited financial statements be included in the Company's annual report on Form
10-KSB.
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3. Review and discuss with management and the independent auditor the Company's
quarterly financial statements and related disclosures prior to the filing of
its Form 10-QSB, including the results of the independent auditor's review of
the quarterly financial statements.
4. In connection with each quarterly and annual report of the Company, review
(a) management's disclosure to the Committee under Section 302 of the
Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley"); and (b) the contents of the Chief
Executive Officer and Chief Financial Officer certifications to be furnished or
filed with the SEC under Sections 302 and 906 of Sarbanes-Oxley.
5. Review and discuss with management the Company's earnings press releases,
including the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and rating
agencies. The Chair of the Committee may represent the entire Committee for
purposes of this review.
6. Assist the Board in the preparation of all financial reports required to be
included in the Company's annual proxy materials.
7. Review and discuss quarterly reports with the independent auditors and
management on:
a) All critical accounting policies and practices to be used.
b) All alternative treatments of financial information within GAAP that
have been discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by the
independent auditor.
c) Other material written communications between the independent auditor
and management, such as any management letter or schedule of unadjusted
differences.
8. Discuss with management and the independent auditor the effect of regulatory
and accounting initiatives as well as off-balance sheet structures on the
Company's financial statements.
B. INDEPENDENT AUDITOR
9. Be directly responsible for the appointment (subject to shareholder
ratification, if applicable), retention, termination, compensation and oversight
of the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Audit Committee.
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10. Approve all audit and permissible non-audit services to be provided by the
independent auditor, establish a policy for the Committee's pre-approval of
audit and non-audit services to be provided by the independent auditor and
annually review and pre-approve the audit and non-audit services that are to be
covered by the pre-approval policy.
11. Obtain and review a report from the independent auditor at least annually
regarding (a) the independent auditor's internal quality-control procedures; (b)
any material issues raised by the most recent internal quality-control review,
or peer review, of the firm, or by any inquiry or investigation by governmental
or professional authorities within the preceding five years respecting one or
more independent audits carried out by the firm; (c) any steps taken to deal
with any such issues; and (d) all relationships between the independent auditor
and the Company. Evaluate the qualifications, performance and independence of
the independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of permitted non-audit services is
compatible with maintaining the auditor's independence, taking into account the
opinions of management. The Audit Committee shall present its conclusions with
respect to the independent auditor to the Board.
12. Discuss, as needed, with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management.
13. Review and reassess, at least annually, the qualifications, performance and
independence of the independent auditor, including a review and evaluation of
the lead partner of the independent auditor team.
14. Prior to engaging the independent auditor to perform an audit of the
Company's financial statements, (a) obtain from the independent auditor a formal
written statement delineating all relationships between the accountants and the
Company, consistent with Independence Standards Board Standard No. 1 or such
other standard as may be promulgated by the Public Company Accounting Oversight
Board; (b) actively engage in a dialogue with the independent auditor with
respect to any disclosed relationships or services that may impact the auditor's
objectivity and independence; and (c) recommend that the Board take appropriate
action in response to the independent auditor's report to satisfy the Board of
independence.
15. Oversee the rotation of the audit partners as required by law. Consider
whether, in order to assure continuing auditor independence, it is appropriate
to adopt a policy of rotating the independent auditing firm on a regular basis.
16. Establish hiring policies for employees or former employees of the
independent auditor who participated in any capacity in the audit of the
Company.
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17. Discuss with the national office of the independent auditor issues on which
they were consulted by the Company's audit team and matters of audit quality and
consistency.
18. Confirm with the independent auditor that it is aware of no violations of
Rule 13b2-2 under the Exchange Act relating to improper influence on the conduct
of audits, or any illegal act that would require the independent auditor to
inform management of the Company and the Audit Committee as required by Section
10A(b) of unusual transactions.
19. Meet with the independent auditor prior to the audit to discuss the proposed
scope, planning and staffing of the audit. Review the fees and other significant
compensation to be paid to the independent auditor.
C. FINANCIAL REPORTING PROCESS AND DISCLOSURE MATTERS
20. In consultation with management and the independent auditor, review the
integrity of the Company's financial reporting processes, both internal and
external.
21. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of the
Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls and any special steps adopted
in light of material control deficiencies.
22. Review, on a quarterly basis, the significant accounting principles,
policies and practices followed by the Company in accounting for and reporting
its financial results of operations in accordance with GAAP.
D. PROCESS IMPROVEMENT
23. Establish regular and separate systems of reporting to the Audit Committee
by each of management and the independent auditor regarding any significant
judgments made in management's preparation of the financial statements and the
view of each as to appropriateness of such judgments.
24. Review with the independent auditor and management the extent to which
changes or improvements in financial or accounting practices, as approved by the
Audit Committee, have been implemented.
E. OTHER
25. Review and advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations relevant to
the scope of the Audit Committee's responsibilities.
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26. Review with the Company's internal and outside counsel legal matters that
may have a material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.
27. Discuss with management and the independent auditor the Company's major
financial risk exposures and the steps management has taken to monitor and
control such exposures, including the Company's risk assessment and risk
management policies.
28. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters; and (b) the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
29. Respond as it determines to be appropriate (after consulting with legal
counsel selected by the Committee) to any report of evidence of a material
violation of the securities laws that the Committee receives from the Company's
chief legal officer, if any, or from any attorney appearing and practicing
before the SEC in the representation of the Company.
30. Conduct a review and evaluation, at least annually, of the performance of
the Audit Committee and its members, including a review of the compliance of the
Committee with this Charter.
31. Undertake such additional actions within the scope of its primary functions
as the Board or Audit Committee shall determine.
V. ADDITIONAL RESOURCES
The Committee will have the right to use reasonable amounts of time of the
Company's accounting personnel and the independent auditor, other internal staff
and legal counsel and also will have the right to hire independent accounting
experts, lawyers and other consultants and advisors to assist and advise the
Committee in connection with its responsibilities. The Company will provide for
appropriate funding, as determined by the Audit Committee, for payment of
compensation to the independent auditor and any experts, lawyers, consultants or
advisors employed by the Audit Committee.
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SCHEDULE 2
CODE OF ETHICS
Daleco Resources Corporation Code of Business Conduct and Ethics
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Adopted December 9, 2005
INTRODUCTION
This Code of Business Conduct and Ethics (the "Code") of Daleco Resources
Corporation (the "Company") provides guidance on how to maintain the Company's
commitment to being honest and ethical in all of its business dealings. The Code
has been adopted by the Company's Board of Directors and may be amended by the
Board of Directors from time to time as required or if required by law. This
Code does not cover every issue that may arise, but it covers a wide range of
business practices and procedures and sets out basic principles to guide all
employees (as defined below) of the Company. Some sections and topics may be
more relevant to certain functions or departments than to others. However, since
one person's misconduct can damage the Company's reputation and compromise the
public's trust, every employee should become familiar with and adhere to the
entire Code. For the purposes of this Code, and unless the context otherwise
requires, "employees" includes the employees, officers, directors, agents and
representatives (including consultants, advisors and independent contractors) of
the Company and its subsidiaries and other affiliates.
If a law conflicts with a policy in this Code, an employee must comply with the
law; however, if a local custom or policy conflicts with this Code, the employee
must comply with the Code. If an employee has any questions about these
conflicts, he/she should consult with the Company's counsel on how to handle the
situation.
Every year, the Company requires each employee to read and understand the Code
and agree to abide by it. It is also each employee's responsibility to report
any activity that he/she believe is contrary to the Code.
All of the Company's employees must conduct themselves in accordance with the
Code and seek to avoid even the appearance of improper behavior. Even
well-intentioned actions that violate the law or the Company's standards of
conduct may result in appropriate disciplinary action, including termination. If
an employee is in a situation which he/she believes may violate or lead to a
violation of this Code, the employee must follow the guidelines described below
under the heading "Reporting of Illegal or Unethical Behavior. "
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COMPLIANCE WITH LAWS, RULES AND REGULATIONS
GENERAL
Obeying the law, both in letter and in spirit, is the foundation on which the
Company's ethical standards are built. All employees must respect and obey all
local, state and federal laws and the laws of any countries in which the Company
does business. Employees are expected to know and adhere to the laws applicable
to the scope of their employment or service and thus should seek advice from
supervisors, managers or other appropriate personnel if they have questions
about such laws. The Chief Financial Officer or other compliance officer
designated by the Board of Directors (the "Compliance Officer") should be
consulted for further guidance when dealing with governments of countries or
territories outside of the U.S.
INSIDER TRADING LAWS
Employees may not use inside information about the Company or other companies
and must be equally careful not to make such information available to others who
might profit from it. Company policy, stock exchange regulations and federal and
state laws establish strict guidelines for the use of material non-public
information by employees. Material information includes any information that an
investor might consider important in deciding whether to buy, sell or hold
securities. Examples of some types of material information include, by way of
example and not limitation, financial results; financial forecasts; possible
mergers, acquisitions, divestitures or joint ventures; matters discussed at
meetings of the Board of Directors and information concerning significant
discoveries, major litigation developments and major changes in business
direction.
Information is considered to be non-public unless it has been adequately
disclosed to the public. Examples of effective disclosure include public filings
with the Securities and Exchange Commission, issuance of Company press releases
and, in certain circumstances, Company meetings with members of the press and
the public. Not only must the information be publicly disclosed, but there also
must be adequate time for the market as a whole to become aware of the
information.
The trading of stock or other securities of the Company in the market by an
employee, based upon material, non-public information, or by others who have
acquired material, non-public information from the employee, is against the law
and Company policy. Trading in the stock of other companies (such as suppliers
or customers) based upon material, non-public information is also prohibited. In
addition to raising ethical considerations, such actions may result in
liability, including civil or criminal penalties, and could prove embarrassing
and harmful to the individual and the Company.
All employees must exercise caution not to disclose inside information to
outsiders, either intentionally or inadvertently, under any circumstances,
whether at meetings held as part of the business day or at informal after-hours
discussions. Only authorized officials of the Company are permitted to respond
to inquiries for Company information from the media, the financial community,
investors and others, and employees must promptly refer all such inquiries to
the specified officials or to their supervisors.
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If there is a question as to whether certain information is material or has been
adequately disclosed to the public and the market, the employee must contact the
Compliance Officer. Employees must also abstain from trading stock or other
securities of the Company (or any other company with which the Company is in
negotiations or transacting business) and disclosing such information to people
outside the Company until it is clear that information is not material or has
been appropriately disclosed. No trading in the securities of the Company should
take place sooner than 48 hours after public disclosure of such information.
BRIBERY, KICKBACKS AND OTHER IMPROPER PAYMENTS
Both the Company and federal law prohibit bribery of public officials in the
conduct of the Company's business in the U. S. and abroad. All employees are
required to comply strictly with the U.S. Foreign Corrupt Practices Act (the
"FCPA"). The FCPA prohibits the bribery of foreign government officials
(including officials of designated public international organizations) ,
political party candidates or officials or political parties. Bribery can take
many forms, including the payment of money or anything else of value (such as
"in-kind" items or services). The FCPA also requires that the Company's books,
records and accounts be kept in reasonable detail to reflect accurately and
fairly all transactions.
Bribes, kickbacks or otherwise giving of anything else of value, in an attempt
to influence the action or inaction of a public official, will not be tolerated
and is strictly prohibited. This prohibition extends to payments to consultants,
agents or any other intermediary when the payor knows or has reason to believe
that some part of the payment or "fee" will be used to bribe or otherwise
influence a public official. If an employee is confronted with a demand for a
bribe from anyone, such demand must be reported immediately to his/her
supervisor and to the Compliance Officer.
FAIR DEALING
Antitrust laws, also known as "competition laws" outside of the U.S., are
designed to ensure a fair and competitive free market system. While the Company
will compete vigorously in the marketplace, the Company will also comply with
the applicable antitrust and competition laws wherever we do business. This
means that the Company will compete on the merits of its services and products,
the prices charged and the customer loyalty.
Some of the most serious antitrust offenses occur between competitors, such as
agreements to fix prices or to divide customers, territories or markets. It is
therefore important to avoid discussions with competitors regarding pricing,
contractual terms and conditions, costs, marketing or production plans,
customers and any other proprietary or confidential information without seeking
prior guidance and approval from the Company's counsel. Antitrust concerns may
also apply in other circumstances, like benchmarking efforts, trade association
meetings or strategic alliances involving competitors.
-28-
Unlawful agreements need not be written or even consist of express commitments.
Agreements can be inferred based upon "loose talk," informal discussions or the
mere exchange of certain information. If an employee believes that a
conversation with a competitor enters an inappropriate area, the employee must
end the conversation at once and contact the Chief Executive Officer, the Chief
financial Officer or the Company's Counsel.
In addition, the Company will comply with the applicable unfair trade practices
laws wherever it does business. Each employee should endeavor to deal fairly
with the Company's customers, suppliers, competitors and employees. None should
take unfair advantage of anyone through manipulation, deception, concealment,
abuse of privileged information, misrepresentation of material facts or any
other unfair-dealing practice.
Anti-boycott laws prohibit participation in, or cooperation with, international
boycotts which U.S. law does not sanction. For example, it is a violation of
U.S. law to refrain from doing business with such countries or blacklisted
persons, or to furnish information about business relationships of a U.S. person
with such countries or persons. The mere receipt of a request to engage in any
such boycotting activity becomes a reportable event by law. Such requests should
be brought to the attention of the Compliance Officer or the Company's outside
counsel.
The business world is highly competitive, and success in it demands an
understanding of competitors' strategies. While collecting data on the Company's
competitors, employees may utilize all legitimate resources, but actions which
are illegal, unethical or which could cause embarrassment to the Company must be
avoided. Employees of competitors or suppliers should not be used as a source of
non-public information. The Compliance Officer should be consulted for further
guidance in this area.
ENVIRONMENTAL LAWS
It is the Company's policy to conduct all operations in such a manner as to
protect and preserve the environment. To that end, the Company's policy is that
all operations shall be conducted in full compliance with all applicable state,
federal and foreign environmental laws and regulations. These laws and
regulations affect work practices at all Company-owned or leased sites and the
impact of the Company's operations on the air, land and water in the communities
in which the Company operates. Employees must be scrupulous in their observance
of applicable laws and regulations to avoid risks to the environment. The advice
of specialists in these areas should be utilized as needed.
-29-
CONFLICTS OF INTEREST
GENERAL
A "conflict of interest" exists any time an employee faces a choice between what
is in an employee's personal interest (financial or otherwise) and the interest
of the Company. Such situations are not always easy to avoid. When a conflict of
interest arises, it is important that employees act with great care to avoid
even the appearance that their actions are not in the best interest of the
Company. If an employee finds himself/herself in a position where his/her
objectivity may be questioned because of individual interest or family or
personal relationships, the employee should notify the Compliance Officer
immediately.
It is not possible to list every activity that might present a conflict of
interest. However, the following examples are illustrative of situations to
avoid:
1. Undisclosed participation by an employee or a family member in a business
transaction involving the Company and another entity or an individual with whom
the employee (or his family) has a financial relationship;
2. The use for personal gain by employees (or their family members) of any
confidential or proprietary information obtained as a result of their
relationship with the Company (by way of example but not limitation, patents,
trademarks or unpublished "inside" business information);
3. The direct or indirect financial interest in any business or organization
with a Company supplier or competitor where the employee has the ability to
influence the decision with respect to the Company's business;
4. An employee having an outside business or other interest which precludes his
ability to perform his duties;
5. An employee's or family member's receipt of improper personal benefits as a
result of the employee's position in the Company (loans to, or guarantees of
obligations of, such persons are of particular concern);
6. Without obtaining the prior approval of the Company, employees working
simultaneously for a competitor, customer or supplier, or providing services to
a competitor in a consulting capacity or as a board member (employees should
avoid any direct or indirect business connection with the Company's customers,
suppliers or competitors, except on behalf of the Company); or
7. Conducting personal business on Company time or using Company facilities,
equipment and information therefor.
The foregoing is a non-exclusive set of examples. The key to successful
resolution of any conflict of interest situation is prior disclosure. Any
employee of the Company having any doubts as to whether a particular set of
circumstances constitutes an impermissible conflict of interest should seek
appropriate prior advice and clearance from the Compliance Officer.
-30-
The Company may periodically ask employees to submit a formal declaration with
respect to possible conflicts of interest. Providing timely, candid responses in
such declarations is a condition of continuing employment or service. All such
declarations and other information reported by employees relating to conflicts
of interests will be maintained by the Company on a confidential basis, unless
otherwise required to be disclosed by law or court order.
ENTERTAINMENT, FAVORS AND GIFTS
Business gifts and entertainment are customary courtesies designed to build
goodwill among business partners. These courtesies include such things as meals
and beverages, tickets to sporting or cultural events, discounts not available
to the general public, travel, accommodations and other services. A problem may
arise when such courtesies compromise or appear to compromise the employees
ability to make objective and fair business decisions. The same rules apply to
Company employees offering gifts and entertainment to business associates.
Offering or receiving any gift, gratuity or entertainment that might be
perceived to unfairly influence a business relationship should be avoided. These
guidelines apply at all times and do not change during traditional gift-giving
seasons.
The value of gifts should be nominal, both with respect to frequency and amount.
Gifts that are repetitive (no matter how small) may be perceived to be an
attempt to create an obligation to the giver and are therefore inappropriate.
Likewise, business entertainment should be moderately scaled and intended only
to facilitate business goals. Use good judgment in all gift and entertainment
situations.
CORPORATE OPPORTUNITIES
Employees may not personally use opportunities that are discovered through the
use of corporate property, information or their position with the Company. No
employee may use corporate property, information or position for improper
personal gain, and no employee may compete with the Company directly or
indirectly. Employees owe a duty to the Company to advance its legitimate
interests when the opportunity to do so arises.
CONFIDENTIALITY
Information generated in or through the Company's business is a valuable Company
asset. Protecting the information plays a vital role in the Company's continued
growth and ability to compete. Confidential information includes all non-public
information that might be of use to competitors, or harmful to the Company or
its customers, if disclosed. Examples of such information are business and
research plans, objectives and strategies; unpublished financial or pricing
information; processes and formulas; computer programs; salary and benefits
data; employee medical information; and employee, customer and supplier lists.
-31-
Employees who have access to proprietary and confidential information are
obligated to:
1. Safeguard it from unauthorized access;
2. Not disclose this information to persons outside the Company;
3. Not use this information for personal benefit or the benefit of persons
outside of the Company; and
4. Not share this information with other employees except on a legitimate "need
to know" basis.
Written approval from the Compliance Officer is required before this information
can be released outside the Company. This includes speeches, technical papers
for publications, Company references, endorsements of other products and
services and information the Company has received from other companies under an
obligation of confidentiality.
Any Company information created in the course of employment with or service to
the Company belongs to the Company. Employees leaving the Company must return
all proprietary information in their possession. Employees have an obligation to
protect proprietary and confidential information continues even after leaving
the Company.
FINANCIAL INTEGRITY AND DISCLOSURE
The Company requires honest and accurate recording and reporting of information
in order to make responsible business decisions. Business records must always be
prepared accurately and reliably and stored properly. The Company's books,
records and accounts must reflect all transactions of the Company and all other
events that are the subject of a specific regulatory record-keeping requirement.
In addition, full, fair, accurate and timely disclosure in periodic reports is
required and essential to the success of the business. Employees, particularly
the chief executive officer and senior financial officers of the Company, must
exercise the highest standard of care in preparing such reports in accordance
with the following guidelines:
1. All Company accounting records, as well as reports produced from those
records, must be in accordance with the laws of each applicable jurisdiction;
2. All records must fairly and accurately reflect the transactions or
occurrences to which they relate;
-32-
3. All records must fairly and accurately reflect, in reasonable detail, the
Company's assets, liabilities, revenues and expenses
4. The Company's accounting records must not contain any false or intentionally
misleading entries;
5. No transactions should be intentionally misclassified as to accounts,
departments or accounting periods;
6. All transactions must be supported by accurate documentation in reasonable
detail and recorded in the proper account and in the proper accounting period;
7. No information should be concealed from the internal auditors or the
independent auditor; and
8. Compliance with the Company's system of internal accounting controls is
required.
EMPLOYMENT PRACTICES
Employees constitute the Company's most indispensable asset. The Company
recognizes that the inherent value of this asset is reflected in the ability,
integrity, knowledge and talent of its employees. To recruit and retain the
high-caliber employees that reflect these values, the Company's guiding
principle will be to:
1. Aspire to provide an environment where employees will adhere to the Code and
conduct themselves with fairness, honesty, integrity and professionalism in the
performance of their duties and all of their business relationships, treating
each other with respect and professionalism;
2. Aspire to provide equal opportunity for all in recruiting, hiring,
developing, promoting and compensating without regard to age, color,
non-disqualifying disability, gender, national origin, race, marital status,
veteran status, religion or any other basis that is protected under applicable
law; and
3. Foster a professional, safe and discrimination-free work environment, where
mutual respect is the absolute minimum of behavior expected.
It is the Company's policy to hire, evaluate and promote employees on the basis
of their ability, achievements, experience and performance.
Ethnic, racial, religious, sexual or any other type of unlawful harassment is
unacceptable. Inappropriate or unwelcome sexual behavior, either physical or
verbal in nature, that interferes with or obstructs performance in the workplace
violates Company policy and may constitute sexual harassment, which is against
the law in many areas. In order to provide an environment that is conducive to
productivity and personal growth, the Company prohibits illegal workplace
harassment of any kind, whether the harasser or the victim is a co-worker,
supervisor, agent, customer, guest or supplier. The Company's policy also
prohibits retaliation against anyone who has made a harassment complaint.
-33-
If an employee believes he/she has experienced, learned of or witnessed
harassment, the employee must immediately report the incident by following the
procedures provided below under the heading "Reporting of Illegal or Unethical
Behavior." The Company will promptly investigate an alleged harassment complaint
and remedy the situation when a violation of Company policy can be
substantiated.
The laws affecting employment practices are complex and constantly evolving. It
is critical that management maintain awareness of current legal developments and
the Company's employment policies by seeking appropriate advice of those within
the Company who are responsible for keeping abreast of such legal developments
or employment policies.
HEALTH AND SAFETY
The Company is committed to protecting the health and safety of its employees,
customers, suppliers and visitors. The Company's policy is to maintain a
drug-free, secure workplace where all employees are attentive to hazard
prevention and the avoidance of accidents and injuries.
Safety protection is a condition of employment for all employees. Employees are
accountable for their own safety and the safety of those around them. Employees
should report to work in a condition to perform properly their duties, free from
the influence of illegal drugs or alcohol. Violence and threatening behavior
will not be tolerated. No deviations from Company safety practices or procedures
are permitted without the approval of the appropriate Company personnel.
Each employee has responsibility for reporting accidents, injuries and unsafe
equipment, practices or conditions. Employee violations of applicable legal
requirements or Company policy related to health and safety, or the intentional
failure to prevent violations or take reasonable corrective action, are
unacceptable and will be subject to appropriate disciplinary action, including
termination.
COMMUNICATIONS
The Company is committed to conducting business in an open and honest manner.
All communications, whether internal or external, should be accurate, complete
and forthright. These communications may include, but are not limited to,
general internal reports, media releases, marketing and sales brochures, regular
Company reports, government filings and illustrations.
The Company will provide accurate information when promoting its products and
services. False or misleading claims concerning the Company's products and
services or those of the Company's competitors are unacceptable. These same
principles must be adhered to when responding to inquiries from customers,
fellow employees, the media, governmental regulatory agencies and shareholders.
Responses to such inquiries must be made in accordance with Company policies and
procedures.
-34-
The publication or circulation, either internally or externally, of any oral or
written statement that is false, derogatory, malicious or defamatory of any
other person or company, including without being limited to a competitor of the
Company, is prohibited.
The Company has issued and will continue to issue, from time to time, other
policies and directives with regard to communication, including the use of the
Company's electronic communications systems. Employees are expected to be
familiar with and observe all such directives.
PROTECTION AND PROPER USE OF COMPANY ASSETS
GENERAL
Each employee is a steward of the Company's assets. As such, employees have the
obligation to protect and preserve the Company's assets and resources and assist
the Company in its efforts to control costs and to ensure the efficient use of
its assets. Theft, carelessness and waste have a direct impact on the Company's
profitability.
Company assets include, but are not limited to, such things as electronic mail,
computer systems, documents, equipment, facilities, information, the Company
logo and name, materials and supplies. Any use of these assets for purposes
other than legitimate business purposes in the discharge of Company business is
to be avoided. Moreover, the use of the Company's assets and resources for
personal financial gain is strictly prohibited.
Any suspected incident of fraud or theft should be immediately reported for
investigation. Company equipment should not be used for non-Company business,
though incidental personal use may be permitted. If an employee has a question
of whether it is permissible to use any Company asset for a specific purpose,
the employee must obtain prior approval of such use from his/her supervisor.
ELECTRONIC INFORMATION
The Company's computer resources, including the intranet and electronic mail,
should be used to support and advance the Company's business purposes. Any
personal use of these technologies should not create additional costs for the
Company, interfere with work duties or violate any Company policies.
Electronic messages (including voicemail) , to or from Company equipment or
accounts, and computer information are considered Company property, and
employees should not have any expectation of privacy related to the use of such
electronic information. Unless prohibited by law, the Company reserves the right
to access and disclose this information as necessary for business purposes.
Employee should use good judgment and not send a message or access or store any
information that they would not want to be seen or heard by others.
-35-
PERSONAL AND COMPUTER SOFTWARE
Employees have individual and collective responsibilities to understand and
adhere to the license agreements which govern the use, and restrict the
reproduction, of personal computer software. Generally, when the Company
purchases software, it only acquires a license to use the software. The Company
does not become the owner of the software package and programs. Many software
licenses limit the use of the software to a specific computer unit. Multi-user
licenses, such as Local Area Network and Site licenses, also exist, but both
further complicate the issue by requiring detailed administrative controls.
Computer software packages and programs purchased by the Company are also
subject to, and covered by, copyright laws. Employees must not make additional
copies of the purchased software, or its documentation, unless the license
agreement specifically grants the Company the right to do so and Company
management knows about and approves the making of additional copies. Employees
must strictly abide by all license requirements.
CORPORATE CITIZENSHIP
COMMUNITY RELATIONS
The Company has a long-standing commitment to function as a good corporate
citizen. The Company recognizes that constructive interaction with society and
positive relationships with the communities in which it operates are important
to business success and good for the Company, its employees and people
everywhere. These goals are achieved by conducting business, whenever possible,
so as to contribute to the overall economic vitality of the communities in which
the Company operates; by continuing the tradition of volunteerism and support of
local community needs and activities; by operating the facilities in accordance
with environmental laws and regulations; and by supporting and encouraging
public policies that enhance the proper operation of the business and take into
account legitimate employee and community interests.
POLITICAL CONTRIBUTIONS
The Company respects and supports the rights of employees to participate in
political activities. However, these activities should not be conducted on
Company time or involve the use of any Company resources, such as telephones,
computers or supplies. Employees will not be reimbursed for personal political
contributions.
The Company may sometimes express its views on local and national issues that
affect its operations. In such cases, Company funds and resources may be used,
but only when permitted by law and Company policy. The Company may also make
limited contributions to political parties or candidates in jurisdictions where
it is legal and customary to do so. No employee may make or commit to political
contributions on behalf of the Company without approval from the Compliance
Officer.
-36-
REPORTING OF ILLEGAL OR UNETHICAL BEHAVIOR
Any violation of the Code causes harm to the Company, to fellow employees and
ultimately to shareholders. Violations may result in physical injuries, the
impairment of corporate assets, monetary losses, violations of the law and
penalties, and, in certain instances, irreparable injury to the reputation of
the Company. If an employee fails to comply with the Code, he/she may be subject
to disciplinary measures, up to and including immediate dismissal from the
Company. Employees are encouraged to talk to managers or other appropriate
personnel about observed illegal or unethical behavior, as well as actual or
suspected violations of the Code of which they are aware or concerns about the
best course of action in a particular situation. Any employee who is
uncomfortable discussing the matter with management may report directly to the
Compliance Officer or the Company's outside counsel. Employees are expected to
cooperate in internal investigations of misconduct.
No employee shall suffer retaliation in any form for reporting, in good faith,
suspected violations of this Code, or submitting a complaint to the Audit
Committee. Disciplinary action will be taken against anyone who retaliates
directly or indirectly against any employee who reports actual or suspected
violations of the Code or submits a complaint to the Audit Committee. This
policy applies even in those instances where the allegation proves ultimately
groundless, provided that it was made in good faith. Any employee, however, who
knowingly reports false or misleading information will be subject to
disciplinary action.
The Company will make every effort to safeguard the confidentiality of
statements and other information reported by employees where practicable and
consistent with the Company's best interests. Except as required by law, or
where limited disclosure to those with a need to know is necessary to properly
investigate reports of Code violations, the Company will also endeavor to
protect the anonymity of employees who have reported violations or suspected
violations of the Code or submitted a complaint to the Audit Committee.
WAIVERS
Any waiver of this Code for executive officers and directors may be made only by
the Company's Board of Directors or a Board committee and will be promptly
disclosed as required by law, the listing requirements of the Nasdaq Stock
Market, or the regulations of any stock exchange on which the Company's stock is
listed.
COMPLIANCE PROCEDURES
The appropriate Company personnel should be sought for advice whenever there are
any questions or concerns about compliance with the Code, other Company policies
and procedures, applicable laws, suspected violations of the Code or questions
concerning the right thing to do in a particular situation. To obtain advice
about any concerns or to report a violation or suspected violation of the Code,
an employee should discuss the problem with the Compliance Officer. This is the
basic guidance for all situations. In many cases, the supervisor will be more
knowledgeable about the question and will appreciate being brought into the
decision-making process. Employees should remember that it is management's
responsibility to help solve problems.
In cases where it may not be appropriate to discuss an issue with management, or
where an employee does not feel comfortable approaching management with a
question, or if the management does not answer the question or problem to the
employee's satisfaction, an employee should discuss the matter with the
Compliance Officer or outside counsel to Company. The employee can identify
himself or choose to remain anonymous.
-37-
DALECO RESOURCES CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MARCH 16, 2006
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
THE UNDERSIGNED HEREBY APPOINTS DOV AMIR AND STEPHAN V. BENEDIKTSON AND
EACH OF THEM, JOINTLY AND SEVERALLY, PROXIES WITH FULL POWER OF SUBSTITUTION TO
VOTE, AS DESIGNATED BELOW, ALL SHARES OF STOCK WHICH THE UNDERSIGNED IS ENTITLED
TO VOTE AT THE ANNUAL MEETING OF STOCKHOLDERS OF DALECO RESOURCES CORPORATION TO
BE HELD ON MARCH 16, 2006, AT THE HARVARD CLUB, 27, WEST 44TH STREET, NEW YORK,
NEW YORK, OR ANY ADJOURNMENT THEREOF.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING /__/
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.
DATED: ___________________________, 2006
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(Signature)
IMPORTANT: PLEASE SIGN ON THE SIGNATURE LINE EXACTLY AS YOUR NAME IS
PRINTED ON THIS PROXY. WHEN SHARES ARE HELD BY JOINT TENANTS,
BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS
SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PARTNER. IF YOU ARE VOTING AS A
PROXY, PLEASE SO INDICATE AND ATTACH YOUR AUTHORIZATION.
IF INSTRUCTIONS ARE NOT GIVEN IN THE SPACES PROVIDED, THE SHARES REPRESENTED BY
THIS PROXY, DULY EXECUTED, WILL BE VOTED (I) IN FAVOR OF MANAGEMENT'S PROPOSALS
FOR THE ELECTION OF DIRECTORS NAMED IN PROPOSAL 1, (II) IN FAVOR OF THE
APPOINTMENT OF VASQUEZ & COMPANY, CPA, OR SUCH OTHER ACCOUNTING FIRM AS
RECOMMENDED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS AS THE COMPANY'S
INDEPENDENT REGISTERED PUBLIC ACCOUNTANT; AND (III) APPROVE INCREASE IN
AUTHORIZED NUMBER OF SHARES; (IV) RATIFY STOCK AWARD TO SPECIAL COMMITTEE
MEMBERS; (V) IN THE DISCRETION OF THE PERSONS APPOINTED PROXIES HEREBY AS TO ANY
OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING AND ANY ADJOURNMENT
THEREOF IN PROPOSAL 5.
MANAGEMENT RECOMMENDS A VOTE FOR THE FOLLOWING MANAGEMENT PROPOSALS
- -------------------------------------------------------------------
1. ELECTION OF DIRECTORS FOR A TERM EXPIRING IN 2007:
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
NAME OF NOMINEE FOR AGAINST ABSTAIN
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Dov Amir
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Stephan V. Benediktson
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Nathan K. Trynin
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Lord Gilbert [John]
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
William Pipkin
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
Charles T. Maxwell
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
2. PROPOSAL TO RATIFY THE SELECTION OF VASQUEZ & COMPANY, CPA, AS THE
COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS FOR FISCAL YEAR
2006.
FOR /__/ AGAINST /__/ ABSTAIN /__/
3. PROPOSAL TO APPROVE THE INCREASE IN THE AUTHORIZED NUMBER OF SHARES
OF COMMON STOCK FROM 50,000,000 SHARES TO 100,000,000 SHARES.
FOR /__/AGAINST /__/ ABSTAIN /__/
4. PROPOSAL TO RATIFY STOCK AWARD OF 300,000 SHARES OF COMMON STOCK TO
THE MEMBERS OF THE SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS.
FOR /__/AGAINST /__/ ABSTAIN /__/
5. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
FOR /__/AGAINST /__/ ABSTAIN /__/