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NXT LOGO HERE ENERGY August 16, 2002 To Our Shareholders: I am pleased to invite you to attend the 2002 Annual Meeting of Shareholders of Energy Exploration Technologies to be held on Friday, September 20, 2002 at 10:00 a.m., Mountain Standard Time, at Phoenix Place, 3rd Floor, 840-7th Avenue SW, Calgary, Alberta, Canada. In anticipation of the annual meeting, we enclose for your review a formal Notice of Annual Meeting and Proxy Statement, which describes the business to come before the meeting, and a proxy card. We also enclose a copy of our Annual Report on Form 10-K for our 2001 fiscal year, which provides additional current information relating to NXT and our business. If you held our common stock as of the close of business on Thursday, August 8, 2002, you will be entitled to vote at the annual meeting. The principal purpose of the annual meeting, as more particularly described in the enclosed Notice of Annual Meeting and Proxy Statement, is to re-elect five non-series 'A' directors to our board of directors, to approve and adopt the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan and to ratify the appointment of our independent auditors. You should note that our board of directors unanimously recommends a vote for each of the nominated directors, as well as the other proposals. Whether or not you plan to attend the annual meeting, it is important that your shares be represented and voted. For that reason we request that you submit your proxy as soon as possible. If you decide to attend the annual meeting, and desire to vote your shares personally, you will of course have that opportunity. We would like to express our appreciation for your continued interest in NXT, and hope you can be with us at the annual meeting. Sincerely, /s/ George Liszicasz
EXPLORATION
TECHNOLOGIES
Chief Executive Officer
Energy Exploration Technologies
NXT LOGO HERE
ENERGY |
2002 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING
Date and Time |
Friday, September 20, 2002, at 10:00 a.m., Mountain Standard Time |
Place |
3rd Floor, Phoenix Place, 840-7th Avenue SW, Calgary, Alberta, Canada |
Items of Business |
- To elect five non-series 'A' directors to serve until the Annual Meeting of Shareholders to be held in the year 2003;- To approve and adopt the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan;- To ratify the appointment of Deloitte & Touche LLP as our independent auditors for the fiscal year ending December 31, 2002; and- To transact such other business as may properly come before the meeting or any postponements or adjournments thereof. |
Whom May Vote |
You may vote if you are a holder of our common stock as of the record date for our annual meeting. |
Record Date |
Thursday, August 8, 2002. |
Annual Report |
Our 2001 Annual Report on Form 10-K, which is not a part of our proxy soliciting materials, is enclosed. |
Voting By Proxy |
Please submit a proxy as soon as possible so that your shares can be voted at the annual meeting in accordance with your instructions. Depending upon whether you are a shareholder of record or a beneficial owner, you may submit your proxy by the internet, by telephone, by facsimile or by mail. For specific instructions, please refer to the "Questions And Answers" section beginning on page * of this proxy statement and the instructions on the proxy card. |
Mailing Date |
This Notice of Annual Meeting and Proxy Statement and accompanying Proxy Card and Annual Report on Form 10-K are being distributed on or about August 22, 2002. |
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Energy Exploration Technologies Suite 700, Phoenix Place, 840-7 Avenue SW, Calgary, Alberta Canada T2P 3G2 Tel: 403.264.7020 Fax: 403.264.6442 |
Q: Why Am I Receiving These Materials?
A: The board of directors of Energy Exploration Technologies, a Nevada corporation (sometimes referred to in these proxy materials as "we," "our company" or "NXT"), is providing these proxy materials to you in connection with our annual meeting of shareowners to be held on Friday, September 20, 2002. As a holder of record or beneficial owner of our NXT common stock (sometimes referred to in this proxy statement as our "common shares"), you are invited to attend the annual meeting and are entitled to and requested to vote on the proposals described in this proxy statement. If you are a holder of record or beneficial owner (sometimes referred to in these proxy materials as a "series 'A' preferred shareholders") of our series 'A' preferred stock (sometimes referred to in these proxy materials as a "series 'A' preferred shares") you are also invited to attend the annual meeting, although, as discussed below, there are no proposals scheduled to be voted on which re quire your vote. Moreover, our company, through distribution of these materials, is soliciting your proxy to vote your shares of the company at the Annual Meeting.
Q: What Information Is Contained In These Materials?
A: The information included in this proxy statement relates to the proposals to be voted on at the meeting and the voting process, as well as additional information concerning NXT we are required to give you under Securities and Exchange Commission regulations. We are also including with this proxy statement our annual report on Form 10-K for fiscal 2001, which includes an updated description of our business and our consolidated audited financial statements for our most recent fiscal year ended December 31, 2001.
Q: What Proposals Are Our Common Shareholders Entitled To Vote Upon At Our Annual Meeting?
A: There are three proposals scheduled to be voted on at the annual meeting by our common shareholders:
- the election of five non-series 'A' directors, whom we refer to in this proxy statement as our "common directors";
- the approval and adoption of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan; and
- the ratification of Deloitte & Touche LLP as our independent auditors for fiscal 2002.
Q: What Is NXT's Voting Recommendation?
A: Our board of directors recommends that you vote your shares "FOR" each of the five common director nominees to our board of directors, "FOR" the approval and adoption of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan, and "FOR" the ratification of Deloitte & Touche LLP as our independent auditors for fiscal 2002.
Q: What proposals are Our Series 'A' Preferred Shareholders Entitled To Vote Upon At Our Annual Meeting?
A: There are no proposals scheduled to be voted on at the annual meeting by our series 'A' preferred shareholders. While our series 'A' preferred shareholders are entitled to designate or appoint one or more directors under our articles of incorporation, whom we refer to in this proxy statement as our "series 'A' directors," they have advised us that they will take this action separately from our annual meeting.
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Q: What Shares Can I Vote?
A: You may vote all common shares which you own as of the close of business on Thursday, August 8, 2002, the record date for this annual meeting. These shares include:
- shares held directly in your name as the shareowner of record, and
- shares held for you as the beneficial owner through a stockbroker or bank.
Q: What Is The Difference Between Holding Shares As A Shareowner Of Record And As A Beneficial Owner?
A: Most NXT shareowners hold their shares through a stockbroker, bank or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those owned beneficially.
- Shareowner Of Record: If your shares are registered directly in your name with our transfer agent and registrar, Jersey Transfer & Trust Co., you are considered to be the shareowner of record with respect to those shares, and these proxy materials are accordingly being sent directly to you. As the shareowner of record for these shares, you have the right to grant your voting proxy directly to NXT or to vote in person at the meeting. We have enclosed a proxy card for you to use.
- Beneficial Owner: If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in street name, and these proxy materials are being forwarded to you by your broker or nominee, which is considered the shareowner of record with respect to those shares. As the beneficial owner of these shares, you have the right to direct your broker how to vote and are also invited to attend the meeting. However, since you are not the shareowner of record, you may not vote these shares in person at the meeting. Accordingly, your broker or nominee has enclosed a voting instruction card for you to use in directing the broker or nominee how to vote your shares.
Q: How Can I Vote My Shares In Person At The Meeting?
A: You may vote any shares which you hold directly in your name as the shareowner of record in person at the annual meeting. If you choose to do so, please bring the enclosed proxy card and proof of identification.
Even if you currently plan to attend the annual meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend the meeting. Shares held in street name may be voted in person by you only if you obtain a signed proxy from the record holder giving you the right to vote the shares.
Q: Can I Vote My Shares Without Attending The Meeting?
A: You may vote any shares you hold without attending the annual meeting by granting a proxy for those shares or, if they are held in street name, by submitting voting instructions to your broker or nominee.
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- Record Holder: In cases where you are the record holder of the shares, you should submit your proxy directly to NXT's stock transfer and registrar, Jersey Transfer & Trust Company, either by mail or by facsimile. Jersey Transfer & Trust Company's address is 201 Bloomfield Avenue, Verona, New Jersey, USA 07044, and its facsimile number is (973) 239-2361.
- Beneficial Owner: In cases where you are the beneficial holder of shares held in street name, you will be able to submit your proxy over the internet, by telephone, or by mail. Please refer to the summary instructions below and those included on your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee.
By Internet: If you have internet access, you may submit your proxy from any location in the world by following the "Internet Vote" instructions on the proxy card.
By Telephone: If you live in the United States or Canada, you may submit your proxy by following the "Telephone Vote" instructions on the proxy card.
By Mail: You may do this by signing your proxy card or, for shares held in street name, the voting instruction card included by your broker or nominee and mailing it in the enclosed, postage prepaid and addressed envelope.
If you provide specific voting instructions, your shares will be voted as you instruct. If you sign but do not provide instructions, your shares will be voted as described below in "How Are Votes Counted?"
Q: Can I Change My Vote?
A: You may change your proxy instructions at any time prior to the vote at the annual meeting. For shares held directly in your name, you may accomplish this by granting a new proxy bearing a later date (which automatically revokes the earlier proxy) or by attending the annual meeting and voting in person. Attendance at the meeting will not cause your previously granted proxy to be revoked unless you specifically so request. For shares held beneficially by you, you may accomplish this by submitting new voting instructions to your broker or nominee.
Q: How Are Votes Counted?
A: In the election of directors, you may vote "FOR" all of the nominees for which your class of NXT securities entitle you to vote, or your vote may be "WITHHELD" with respect to one or more of those nominees.
For the other proposals for which your class of NXT stock entitles you to vote, you may vote "FOR," "AGAINST" or "ABSTAIN." If you "ABSTAIN," it has the same effect as a vote "AGAINST."
If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of our board of directors, i.e.:
- with respect to the election of common director nominees to our board of directors, "FOR" all of NXT's nominees;
- with respect to the ratification of independent auditors for fiscal 2002, "FOR" the ratification of Deloitte & Touche LLP;
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- with respect to the approval and adoption of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan, "FOR" its approval and adoption;
- with respect to any other matters that properly come before the meeting for which your class of NXT stock entitles you to vote, in the discretion of the proxy holder as discussed below in "Q: What Happens If Additional Proposals Are Presented At The Meeting?"
Each of our director nominees has consented to his nomination for election. Should any director nominee no longer remain a candidate at the time of our annual meeting, your proxy card will be voted for the election of a replacement nominee to be designated by our board of directors to fill that vacancy.
Q: What Is The Voting Requirement To Approve Each Of The Proposals?
A: The five persons receiving the highest number of "FOR" votes by the holders of our common stock will be elected to fill the common director positions.
All other proposals require the affirmative "FOR" vote of a majority of those shares present and entitled to vote. If you are a beneficial owner and do not provide the shareowner of record with voting instructions, your shares may constitute "broker non-votes" as that term is described in "Q: What Is The Quorum Requirement For The Meeting?" below. In tabulating the voting result for any particular proposal, shares that constitute broker non-votes are not considered entitled to vote on that proposal.
Q: What Does It Mean If I Receive More Than One Proxy Or Voting Instruction Card?
A: It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.
Q: Do I Need An Admission Ticket To Attend The Meeting?
A: All NXT shareholders are welcomed to attend our annual meeting. You will, however, be required to provide proof of identification if you are listed as a shareowner of record as of the record date (August 8, 2002), and desire to vote your shares at the annual meeting. If you hold your shares through a stockbroker or other nominee, you will also need to provide proof of ownership by bringing either a copy of the voting instruction card provided by your broker or a copy of a brokerage statement showing your share ownership as of the record date.
Q: Where Can I Find The Voting Results Of The Meeting?
A: We will announce preliminary voting results at the meeting and publish final results in our quarterly report on Form 10-Q for the third quarter of fiscal year 2002, which we expect to file with the Securities and Exchange Commission on or before November 14, 2002. We also intend to post an update on our website at www.nxtenergy.com.
Q: What Happens If Additional Proposals Are Presented At The Meeting?
A: Other than the proposals described in this proxy statement, we do not expect any other matters to be presented for a vote at the annual meeting. If you grant a proxy, the person named as proxy holder, namely, Mr. George Liszicasz (our Chairman and Chief Executive Officer), will have the discretion to vote your shares on any additional matters properly presented for a vote at the meeting. If for any unforeseen reason any of our nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by our board of directors.
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Q: What Classes Of Shares Are Entitled To Vote At the Meeting?
A: Generally speaking, our common shareholders are entitled to vote on all matters that affect our company, with the exception of selected matters outlined in our articles of incorporation that are subject to the consent of or reserved for our series 'A' preferred shareholders. These matters generally relate to the appointment of one or more directors and actions that may adversely affect the rights and privileges reserved for that class of securities.
Each share of common stock outstanding as of the close of business on the record date (August 8, 2002) will be entitled to one vote on all proposals being voted upon at the annual meeting, including any additional proposals. As of the record date, there were 16,971,153 common shares and 800,000 series 'A' preferred shares outstanding.
Q: What Is The Quorum Requirement For The Meeting?
A: The quorum requirement for holding our annual meeting and transacting business is a majority of our common stock present in person or represented by proxy and entitled to be voted. Both abstentions and broker non-votes are counted as present for the purpose of determining the presence of a quorum. Abstentions are also counted as shares present and entitled to be voted. Broker non-votes, however, are not counted as shares entitled to be voted with respect to the matter on which the broker has expressly not voted. Thus, broker non-votes will not affect the outcome of any of the matters being voted upon at the meeting. Generally, broker non-votes occur when shares held by a broker for a beneficial owner are not voted with respect to a particular proposal because the broker has not received voting instructions from the beneficial owner, and the broker lacks discretionary voting power to vote those shares.
Q: Is Cumulative Voting Permitted For The Election Of Directors?
A: Cumulative voting does not apply to our annual meeting as we are not required under Nevada corporate law, and have not elected under our articles of incorporation or bylaws, to provide for cumulative voting.
Q: Who Will Count The Votes?
A: Jersey Trust and Transfer Co. will tabulate the votes and a representative of Zäf tik, US Corporate Compliance Services will act as the inspector of election.
Q: Who Will Bear The Cost Of Soliciting Votes For The Meeting?
A: NXT will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. If you choose to access the proxy materials or vote over the internet, however, you will be responsible for any internet access charges you may incur. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic communication by our directors, officers and employees, who will not receive any additional compensation for those solicitation activities. We will reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding proxy and solicitation materials to shareowners.
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Q: May I Propose Actions For Consideration At Next Year's Annual Meeting Of Shareowners Or Nominate Individuals To Serve As Directors?
A: You may submit proposals for consideration at future shareowner meetings, including director nominations.
Nomination Of Director Candidates: You may propose common director candidates for consideration by our board of directors. Any recommendations for common director candidates should be directed to NXT's corporate secretary at our executive offices in Calgary, Alberta, Canada. In addition, our bylaws permit common shareowners to nominate directors at a shareowner meeting. In order to make a common director nomination at a shareowner meeting, it is necessary that you notify NXT not fewer than 120 days in advance of the day specified as the mailing date in our proxy statement for the prior year's annual meeting of shareowners. Thus, since August 22, 2002 is specified as the mailing date in this year's proxy statement, in order for any such nomination notice to be timely for next year's annual meeting, it must be received by NXT not later than April 23, 2003 (i.e., 120 days prior to August 22, 2003). In addition, the notice must meet all other requirements contained in our bylaws.
Any nomination for a common director nominee must contain the following information:
No person may be elected as a common director unless he or she has been nominated by a holder of our common stock in the manner just described.
The power to nominate or appoint our series 'A' directors is reserved to the holder of our series 'A' preferred stock, and therefore cannot be nominated by our common shareholders.
Shareowner Proposals: In order for a shareowner proposal to be considered for inclusion in NXT's proxy statement for next year's annual meeting, we must also receive the written proposal by no later than the previously noted April 23, 2003 date. These proposals must also comply with Securities and Exchange Commission regulations regarding the inclusion of shareowner proposals in company-sponsored proxy materials. Similarly, in order for a shareowner proposal to be raised from the floor during next year's annual meeting, we must receive written notice by no later than August 5, 2003, and shall contain such information as required under our bylaws.
We suggest that any nominations or proposals be submitted by certified mail-return receipt requested. NXT reserves the right to reject, rule out of order, or take other appropriate action with respect to any nomination or proposal that does not comply with these and other applicable requirements.
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Copy Of Bylaw Provisions: You may contact NXT's corporate secretary at our headquarters for a copy of the relevant bylaw provisions regarding the requirements for making shareowner proposals and nominating common director candidates.
Q: How Are Transactions Denominated in Canadian Dollars Converted Into U.S. Dollars For Purposes Of This Proxy Statement?
A: All references to "dollars" in this proxy statement refer to United States or "U.S." dollars, unless specific reference is made to Canadian or "Cdn." dollars. Since compensation paid to NXT employees, as well as, a number of NXT transactions are effected in transactions denominated in Canadian dollars, certain information contained in this proxy statement, principally salary amounts, have been converted into U.S. dollars in order to satisfy reporting rules. As a general rule of thumb, information relating to historical amounts paid over a period of time are converted at the average exchange rate for that period, while information relating to amounts that will be paid over a prospective period of time are converted at the exchange rate as of the date of this proxy statement or other indicated date.
Q: How Can I Get Further Information?
A: If you have questions or need more information about the annual meeting, please contact NXT investor relations at 840-7th Avenue SW, Suite 700, Calgary, Alberta, Canada T2P 3G2, telephone (403) 264-7020, fax (403) 264-6442, or via the internet at info@nxtenergy.com.
Any questions you may have relating to title to your securities or your address should be addressed to NXT's stock transfer and registrar, Jersey Transfer & Trust Company, 201 Bloomfield Avenue, Verona, New Jersey, USA 07044. You may also contact Jersey Transfer & Trust Company by telephone or fax at (973) 239-2712 or (973) 239-2361, respectively.
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Proposal No. 1: Election Of Common directors
There are five nominees for election to our board of directors as common directors this year, namely, Messrs. Donald Foulkes, Dennis Hunter, George Liszicasz, Douglas Rowe and Robert Van Caneghan. Information regarding the business experience of each of these nominees is provided below. The common directors are elected annually to serve until the next annual meeting of shareholders and until their respective successors are elected and qualified. There are no family relationships among our executive officers and common directors except as described below.
The designated proxy holder will vote each proxy received from our common shareholders as directed on their proxy cards or, if no direction is made, for the five nominees named above. If any of these nominees should be unable or unwilling to serve, the discretionary authority granted to the proxy holder as provided in the proxy card will be exercised to vote for a substitute nominee designated by our board of directors. We have no reason to believe that any substitute nominee will be required.
The five nominees receiving the highest number of votes cast by our common shareholders will be elected to fill the five common director positions. The proxies cannot be voted for more than five nominees.
Our board of directors recommends to our common shareholders that you vote "FOR" the election of Messrs. Foulkes, Hunter, Liszicasz, Rowe and Van Caneghan as our five common directors. Proxies solicited by our board of directors will be so voted unless the common shareholder tendering the proxy specifies otherwise.
Donald E. Foulkes Director since May 2002 |
Mr. Foulkes has been the Chairman of the Board of Bushmills Energy Corp. (TSE:BSH), an oil and gas exploration company, since 2001. Mr. Foulkes was with Causeway Energy Corporation (TSE:CUW), an oil and gas exploration and production company, from 1995 to 2001, where he held the position of President from 1995 until 1998 when he became the Chief Executive Officer. From 1992 to 1995, Mr. Foulkes was the President of Highridge Exploration Ltd. (TSE:HRE) and from 1988 to 1992, he was the President of Union Pacific Resources Inc., a private oil and gas company. Mr. Foulkes serves as a board member on our two Canadian subsidiaries, NXT Energy Canada Inc. and NXT Aero Canada Inc., as well, he also serves as a board member of 669677 Alberta Ltd., a private company. Mr. Foulkes is a professional geologist and received a Bachelor of Science degree in Geology from the University of Calgary in 1970. Mr. Foulkes sits on both our Audit Committee and our Compensation Committee. |
Dennis Hunter Director since September 1998 |
Mr. Hunter is an entrepreneur who splits his time equally between private investment activities and real estate development and management. Since 1973, Mr. Hunter has been President and Chairman of the Board of Investment Development Management Corporation, which acquires, constructs, manages, develops and sells properties in California, Oregon and Nevada. Mr. Hunter has also been Chairman of the Board since 1992, and Vice Chairman of the Board from 1984, of Northern Empire Bancshares, a holding company of Sonoma National Bank, of which Mr. Hunter was a founder in 1982. Mr. Hunter has also been a director, since 1988, of Northbay Corporation, a private holding company in the solid waste industry with 35 companies in solid waste hauling, transfer stations, portable toilets, land fill operations and real property ownership. Mr. Hunter is also the trustee and an investment strategist for five charitable remainder trusts collectively holding over $30 million in net assets. Mr. Hunter received his Bachelor of Arts degree in Economics from California State University Sacramento. Mr. Hunter sits on the board of directors of our two US subsidiaries, NXT Aero USA, Inc. and NXT Energy USA, Inc., and has served on our compensation committee since February 2000. |
George Liszicasz Director since January 1996 |
Mr. Liszicasz is the inventor of our SFD technology and has been our Chairman and Chief Executive Officer since inception Mr. Liszicasz was appointed our interim President and interim Chief Financial Officer in July 2002. Mr. Liszicasz's primary responsibilities, as the Chief Executive Officer, interim President and interim Chief Financial Officer , are to ensure the smooth running of the day to day operations and to further develop our SFD technology. Prior to founding NXT, Mr. Liszicasz was Vice President of Susa Petroleum Inc. from 1993 to 1994. From 1987 to 1995, Mr. Liszicasz was President of Owl Industries Ltd., a developer of electronic controlling devices, where he had both engineering and business responsibilities. Mr. Liszicasz studied electronics and general sciences at the University of British Columbia and obtained a High Voltage Controls and Station Operations degree in Electronics from the Landler Jeno Technitken in Hungary in 1973. Mr. Liszicasz serves as a board member and is the sole officer of each of our four subsidiaries; NXT Energy Canada Inc., NXT Energy USA Inc., NXT Aero Canada Inc. and NXT Aero USA Inc. |
Douglas Rowe Director since May 2002 |
Mr. Rowe has been the President, Chief Executive Officer and a director of Birch Mountain Resources Ltd.(TSX:BMD; OTCBB:BHMNF), a Canadian junior mineral exploration company, since 1994. Prior to that he was Chairman and President of Brougham Geoquest, Ltd., a company engaged in mineral exploration, from 1986 to 1993, and Brougham Energy Corporation, a company engaged in oil and gas exploration and development, from 1984 to 1986. Mr. Rowe is a professional engineer with a Bachelors of Science degree in Electrical Engineering from Queen's University which he obtained in 1967 and has over 30 years of industry experience. Mr. Rowe also sits on the board of directors of our two Canadian subsidiaries, NXT Aero Canada, Inc. and NXT Energy Canada, Inc. and is a member of our Compensation Committee. |
Robert Van Caneghan Director since May 2002 |
Mr. Van Caneghan is a retired businessman who has over 25 years of experience as a market maker and specialist broker. From 1984 to 1994, he was a principal of Micilli-Van Caneghan, a specialist firm located on the AMEX floor. Mr. Van Caneghan was also a member of the American Stock Exchange Board of Governance from 1988 to 1994. Mr. Van Caneghan currently is a board member of our two U.S. subsidiaries, NXT Energy USA Inc. and NXT Aero USA, and of the Financial Resources Federal Credit Union. In 1969, Mr. Van Caneghan graduated from Wagner College with a Bachelor of Science in Economics. He then obtained a Masters Degree in Finance from the New York University Stern School of Business in 1974. Mr. Van Caneghan attended Brooklyn Law School where he graduated with a Juris Doctor degree in 1978. Mr. Van Caneghan is a member of our Compensation Committee. |
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Proposal No. 2:
Approval of 2000 Pinnacle Oil International, Inc.Directors' Stock Option Plan
On February 15, 2000, the board of directors approved the establishment of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan, otherwise referred to in this proxy statement as the Stock Option Plan. The purpose of the Stock Option Plan is to attract, compensate and motivate selected directors providing them with the opportunity to share in the potential capital appreciation in NXT's stock.
Under the Stock Option Plan, 400,000 shares of common stock of NXT will be authorized for issuance. The following description of the material features of the Stock Option Plan is a summary and is qualified in its entirety by reference to the Stock Option Plan attached hereto as Appendix A.
Summary of Plan
Our board of directors approved the establishment of the Stock Option Plan on February 15, 2000 and under its terms, they may issue up to 400,000 common shares.
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The Stock Option Plan is intended to attract, compensate and motivate selected directors providing them with the opportunity to share in the potential capital appreciation in NXT's stock.
Under the terms of the Stock Option Plan, the Plan Administrator may issue Stock Options, Stock Appreciation Rights or Grant Shares. Each issuance of an award shall be deemed to vest immediately upon issuance and shall expire on the first business day prior to the tenth anniversary of the issuance, unless otherwise outlined in the agreement underlying the issuance. To date, only Stock Options have been issued under the Stock Option Plan and each issuance has a vesting schedule of one-third of the issuance vesting on each of the first three anniversaries of the issuance. In addition, each vested portion of these issuances expires five years from the date of vesting.
The Plan Administrator fixes the exercise price for issuances in the exercise of its sole discretion, except that the exercise price for an incentive stock option must be at least the fair market value per share of the common stock at the date of grant (as determined by the plan administrator in good faith), or in the case of greater-than ten percent shareholders, at least one hundred ten percent of the fair market value per share. Historically, all issuances have been priced, on a per share basis, at or above the closing price of NXT's common stock on the day of grant. At this time, the Plan Administrator has not formalized a methodology as to the setting of exercise prices for future issuances. The exercise price may be paid in cash or, with the approval of the Plan Administrator, by other means, including withholding of option shares or delivery of previously held shares.
Unless otherwise provided for in the agreement underlying the issuance, upon the termination of the recipient of the issuance, the expiry date of the vested portions of the issuance shall be accelerated to 30 days after the effective date of termination. Any unvested portions of the issuance shall expire upon termination. All issuances under the Stock Option Plan made to date have a termination clause for vested portions of the issuance of two years from the date of termination.
Should the recipient pay the exercise price of their Stock Options with shares of NXT common stock previously held by them, then, at the discretion of the Plan Administrator, replacement Stock Options may be issued to the recipient to purchase shares equal to the number of shares of common stock delivered to NXT as payment of the exercise price. These Stock Options shall vest immediately, have an exercise price equal to the fair market value of the common stock on the date of conversion and shall expire on the same date as the original Stock Option.
An issuance of a Stock Appreciation Right can be issued in tandem with a Stock Option issuance or as a stand-alone Stock Appreciation Right. If the Stock Appreciation Right is issued in tandem with a Stock Option issuance, the recipient is entitled to exercise the Stock Appreciation Right by surrendering unexercised portions of the accompanying Stock Option issuance.
Grant Shares may be issued from the shares underlying the Stock Option Plan. Certificates representing any unvested Grant Shares shall carry a restrictive legend until such time as the vesting conditions have been met. Holders of Grant Shares shall have the same rights and privileges as holders of NXT's common stock. Should termination of the recipient occur prior to vesting of their Grant Shares, NXT shall be required to pay the recipient the amount per share set forth in the underlying issuance agreement, which may be:
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No issuance is transferable except Grant Shares which have vested. Recipients of Stock Options or Stock Appreciation Rights shall not have the rights and privileges of a stockholder until such time as their issuance, or a portion of their issuance, is exercised and converted into common stock.
The primary difference between "incentive stock options" and non-qualified options is the tax treatment of the option holder. If a holder complies with Internal Revenue Service rules regarding incentive stock options, a holder of an incentive stock can defer recognition of income for tax purposes until the shares underlying the options are sold. A holder of a non-qualified option generally recognizes income on the date of exercise.
The closing price of our common stock as of August 15, 2002 was $0.48 per share.
Our board of directors recommends that you vote "FOR" the approval and adoption of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan. Proxies solicited by our board of directors will be so voted unless the holder of common stock tendering the proxy specifies otherwise.
Proposal No. 3: Ratification of Appointment of Independent Auditors
Our board has approved the appointment of Deloitte & Touche LLP as our independent auditors for our 2002 fiscal year. Since we believe it is important for NXT to receive your input on our selection of independent auditors for our company, that appointment is being presented to you for ratification.
Auditor History
On July 9, 2002, our board of directors accepted the resignation of Arthur Andersen LLP (Canada) as our independent auditors and appointed Deloitte & Touche LLP (Canada) as our new independent auditors. Arthur Andersen LLP had been our auditor for the two fiscal years ended December 31, 2001 and for the interim period through the date of their resignation. Arthur Andersen LLP resigned as they were unable to continue to service NXT's audit requirements due to the partners and employees joining Deloitte & Touche LLP. Deloitte & Touche LLP had previously served as our independent auditors and audited our consolidated financial statements for our fiscal years ended December 31, 1998, 1999 and reviewed our consolidated financial statements for the quarter ended March 31, 2000.
Deloitte & Touche LLP had resigned as our independent auditors on June 28, 2000, in anticipation of a conflict of interest that would arise under the rules of the Securities and Exchange Commission, then in effect, governing the independence of auditors as the consequence of a pending marriage between a sibling of NXT's controller and a partner in Deloitte & Touche LLP's Calgary office. Prior to Arthur Andersen LLP's partners and staff joining Deloitte & Touche LLP this year, both auditing firms reviewed the potential conflict of interest outlined above and concluded that under the current and amended SEC rules governing independence of auditors, a conflict of interest did not exist.
13
The report of Arthur Andersen LLP accompanying the financial statements for our two most recent fiscal years ended December 31, 2001 was not qualified or modified as to audit scope or accounting principles and did not contain an adverse opinion or disclaimer of opinion.
During our two most recent fiscal years ended December 31, 2001, and also during the subsequent interim period through the date of resignation, there were (1) no disagreements between NXT and Arthur Andersen LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; (2) no reportable events as such term is defined by paragraph (a)(1)(v) of Item 304 of Regulation S-K promulgated by the Securities and Exchange Commission ("Regulation S-K"); and (3) no matters identified by Arthur Andersen LLP involving our internal control structure or operations which were considered to be a material weakness.
During our two fiscal years ended December 31, 2001, and also during the subsequent interim period through the date of resignation of Arthur Andersen LLP, NXT did not consult with Deloitte & Touche LLP regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of opinion that might be rendered regarding our financial statements, nor did we consult with Deloitte & Touche LLP with respect to any accounting disagreement or any reportable event at any time prior to the appointment of that firm.
The report of Deloitte & Touche LLP accompanying the financial statements for our fiscal years ended December 31, 1998 and 1999 was not qualified or modified as to audit scope or accounting principles and did not contain an adverse opinion or disclaimer of opinion.
During our two fiscal years ended December 31, 1999, and also during the subsequent interim period through the date of resignation, there were (1) no disagreements between NXT and Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure; (2) no reportable events as such term is defined in Regulation 229.304(a)(1)(v); and (3) no matters identified by Deloitte & Touche LLP involving our internal control structure or operations which were considered to be a material weakness.
During our two fiscal years ended December 31, 1999, and also during the subsequent interim period through the date of resignation of Deloitte & Touche LLP, NXT did not consult with Arthur Andersen LLP regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of opinion that might be rendered regarding our financial statements, nor did we consult with Arthur Andersen LLP with respect to any accounting disagreement or any reportable event at any time prior to the appointment of that firm.
We expect a representative of Deloitte & Touche LLP will attend the annual meeting, and we will extend the opportunity to the representative to make a statement if he or she desires to do so. This representative will also be available to answer any questions you may have.
Summarized below is the aggregate amount of professional fees billed by Arthur Andersen with LLP respect to fiscal 2001:
Audit Fees |
$38,158 |
Financial information systems design and implementation fees |
0 |
All other fees, including |
52,249 |
Total |
$90,407 |
14
You should note that your ratification of our selection of Deloitte & Touche LLP as our independent auditors for our 2002 fiscal year is advisory only and not binding upon NXT, although our audit committee will seriously consider your objections in not ratifying the appointment. Even if our audit committee were to seek other independent auditors as a consequence of your objections, it is likely, because of the difficulty and expense of making any change in independent auditors so long after the beginning of the current year, that the appointment of Deloitte & Touche LLP would stand for our 2002 fiscal year unless the audit committee were to find other good reason to make a change. Our audit committee also reserves the right to engage any other independent auditors at any time, notwithstanding your ratification of Deloitte & Touche LLP as our independent auditors for fiscal 2002, should it deem it to be in the best interests of NXT and its shareholders.
Our board of directors recommends that you vote "FOR" the ratification of the appointment of Deloitte & Touche LLP as our independent auditors for our 2002 fiscal year. Proxies solicited by our board of directors will be so voted unless the holder of common stock tendering the proxy specifies otherwise.
Proposal 4:Other Matters
The enclosed proxy card gives the proxy holder discretionary authority to vote the shares held by the shareholder tendering the proxy in accordance with the proxy holder's best judgment with respect to all additional matters which might come before the annual meeting. In addition to the scheduled items of business, the annual meeting may consider shareholder proposals omitted from this proxy statement pursuant to the proxy rules of the Securities and Exchange Commission and matters related to the conduct of the annual meeting. At the date of printing of this proxy statement, we are not aware of any other matter which would be presented for action before the annual meeting.
Board Of Directors
Our board of directors was comprised of five directors for most of fiscal 2001, and they held six meetings during that fiscal year. No director attended less than 75% of the total number of those meetings. Our board of directors also approved six additional corporate matters during fiscal 2001 through unanimous written consents.
Our bylaws permit our board of directors to fix the number of its authorized members from three to eleven. At present, our board of directors consists of five members, of which five members are "common directors" appointed by our common shareholders, and there are currently no members designated as "series 'A' directors" which are appointed by our series 'A' preferred shareholders. This classification of our board of directors was effectuated pursuant to an amendment to our articles of incorporation made in connection with the private placement in April 1998 of 800,000 shares of our series 'A' preferred stock.
Specifically, our articles of incorporation were amended to provide that our common shareholders would retain the exclusive right to elect all members of our board of directors, unless there are 400,000 or more shares of our series 'A' preferred stock outstanding, in which case our series 'A' preferred shareholders would have the right to appoint one or more additional directors. The number of directors which our series 'A' preferred shareholders may elect under such circumstances would, when aggregated with the number of common directors, equal one-sixth of such aggregated number of directors (or such minimum whole number in excess of one-sixth in the event such number of aggregated directors is not a multiple of six).
15
Our articles of incorporation specifically provide that our common shareholders shall have no right to vote for the series 'A' directors, and our series 'A' preferred shareholders shall have no right to vote for the common directors. The removal of any series 'A' directors shall require only the affirmative vote of holders of a majority of the then outstanding shares of our series 'A' preferred stock. The vacancy of any series 'A' director position, from whatever cause, shall require only the affirmative vote of holders of a majority of the then outstanding shares of our series 'A' preferred stock.
Thusly, the appointment or designation of any series 'A' director(s) will not be taken at our annual meeting, but instead will be taken by exclusive action by the holder of our series 'A' preferred stock.
Standing Board Committees
Our board of directors has established two committees, a Compensation Committee and an Audit Committee.
Due to recent changes in our board and management, our Compensation Committee consisted of only Mr. Hunter until July 9, 2002, when our board of directors appointed Messrs. Foulkes and Rowe to assist Mr. Hunter. Our Compensation Committee reviews and makes recommendations with respect to the compensation of NXT's executive officers, and also administers certain elements of NXT's various stock plans as they relate to grants to executive officers. The Compensation Committee held no meetings during our 2001 fiscal year, as no decisions relating to executive compensation were made during that year.
Due to recent changes in our board and management, our Audit Committee had no members from May 9, 2002 to July 9, 2002 when the Board of Directors appointed Messrs. Foulkes and Van Caneghan to the committee. The Audit Committee's duties, as outlined in its charter, include recommending to our board of directors the engagement of our independent auditors, reviewing the results of the auditor's examination of our periodic financial statements, and determining the independence of those accountants.
Messrs. Foulkes and Van Caneghan are considered "independent" within the meaning of the rules of Nasdaq, the New York and American Stock Exchanges and the Securities and Exchange Commission.
Compensation Of Our Directors
NXT's practice to date in compensating directors has been to grant options to selected directors in lieu of monetary compensation for serving on our board of directors, although we do cover some out of pocket expenses incurred by members of the board in connection with their services. Summarized below are options granted to date to our current board members for serving in that capacity:
16
Compensation Committee Interlocks And Insider Participation
During fiscal 2001, there were no actions taken by our board of directors relating to the compensation of any of our executive officers who were also serving as one of our directors (each of whom is referred to in this proxy statement as an "executive officer-director").
Business Experience Of Our Executive Officers
Set forth below are NXT's executive officers and a summary of their business experience:
17
George Liszicasz |
Mr. Liszicasz is the inventor of our SFD technology and has been our Chairman and Chief Executive Officer since inception Mr. Liszicasz was appointed our interim President and interim Chief Financial Officer in July 2002. Mr. Liszicasz's primary responsibilities, as the Chief Executive Officer, interim President and interim Chief Financial Officer, are to ensure the smooth running of the day to day operations and to further develop our SFD technology. Prior to founding NXT, Mr. Liszicasz was Vice President of Susa Petroleum Inc. from 1993 to 1994. From 1987 to 1995, Mr. Liszicasz was President of Owl Industries Ltd., a developer of electronic controlling devices, where he had both engineering and business responsibilities.Mr. Liszicasz studied electronics and general sciences at the University of British Columbia and obtained a High Voltage Controls and Station Operations degree in Electronics from the Landler Jeno Technitken in Hungary in 1973. Mr. Liszicasz serves as a board member and is the sole officer of each of our four subsidiaries; NXT Energy Canada Inc., NXT Energy USA Inc., NXT Aero Canada Inc. and NXT Aero USA Inc. |
Ownership Of Our Stock
The following table sets forth certain selected information, computed as of August 15, 2002, about the amount and nature of our securities "beneficially owned" by the following persons as of that date:
Voting by Directors and Executive Officers
It is anticipated that the directors and the Named Executive Officers of the Company will vote FOR the election of director nominees as listed, FOR the approval and adoption of the 2000 Pinnacle Oil International, Inc. Directors' Stock Option Plan, and FOR the ratification of the Board of Directors' selection of auditors. Such directors and executive officers, and their affiliates, hold 33.1% of the votes entitled to be cast at the Annual Meeting.
18
The information contained in the following tables was given to us by the individuals or entities named. We believe that each of these individuals or entities has sole or shared investment and voting power with respect to the securities indicated as beneficially owned by them, subject to community property laws, where applicable, except where otherwise noted.
|
Stock |
|||||||
|
|
|||||||
Name |
Amount |
|
% (1) |
|||||
Directors & Officers |
||||||||
George Liszicasz (2) 383 Arbour Lake Way NE Calgary, Alberta T3G 4A2 |
5,238,809(3) |
30.8% |
||||||
Dennis R. Hunter Box 9069 Santa Rosa, CA 95405 |
391,266(4) |
2.3% |
||||||
Donald E. Foulkes 39 Pinnacle Ridge Dr. Calgary, Alberta T3Z 3N7 |
0 |
0% |
||||||
Douglas Rowe 246 Artist View Way Calgary, Alberta T3N 3N1 |
0 |
0% |
||||||
Robert Van Caneghan 123 Redcliff Road Staten Island, NY 10305 |
0 |
0% |
||||||
Current directors, director-nominees |
5,630,075(5) |
33.1% |
||||||
5% Shareholders |
||||||||
SFD Investment LLC c/o Stephens Group Inc. 2500-111 Center Street Little Rock, AR 72201 |
2,525,043(6) |
13.1% |
||||||
Stephens Group Inc. 2500-111 Center Street Little Rock, AR 72201 |
2,591,710(7) |
13.4% |
||||||
R. Dirk Stinson Slot 386 P. O. Box-A.P. 59223 Nassau, Bahamas |
2,586,200(8) |
15.2% |
19
Summary Of Compensation Paid To Our Named Executive Officers
The following table shows the compensation paid over the past three fiscal years with respect to the following persons:
|
|
|
|
|
|
Long Term Compensation |
|
|||||
|
|
Annual Compensation |
|
Awards |
|
Payouts |
|
|||||
|
|
|
|
|
|
|
Securities |
|
Long |
All |
||
George Liszicasz (7) |
2001 |
$ 164,474 |
--- |
--- |
|
--- |
--- |
|
--- |
--- |
||
Daniel C. Topolinsky (3) |
2001 |
$ 164,422 |
--- |
--- |
|
--- |
--- |
|
--- |
--- |
||
James R. Ehrets (4) |
2001 |
$ 164,346 |
--- |
--- |
|
--- |
--- |
|
--- |
--- |
||
John M. Woodbury (5) |
2001 |
$ 144,276 |
--- |
--- |
|
--- |
--- |
|
--- |
--- |
Summary Of Stock Options And Stock Appreciation Rights Granted To Executive Officers
There were no grants to our executive officers of options to purchase our common shares or stock appreciation rights relating to our common shares during the 2001 fiscal year.
The following table sets forth information regarding stock option grants to our officers and directors as of August 15, 2002:
Individual Grants |
Potential Realized Value at Assumed Annual Rates of Stock Price Appreciation for Option Term |
|||||
|
Number of Securities Underlying Options Granted (#) |
% of Total Options Granted (1) |
Exercise or Base Price ($/Sh)(2) |
Expiration Date (mm/dd/yy) |
|
|
Donald Foulkes |
40,000 |
2.4% |
0.38 |
08/13/07 |
51,051 |
64,420 |
Dennis Hunter |
45,000 20,000
|
2.7%
1.2% |
2.00 0.38 |
02/15/06 thru 04/17/08 08/13/07 |
57,433
25,526 |
72,473
32,210 |
George Liszicasz
|
45,000 |
2.7% |
2.00 |
05/05/03 |
58,389 |
74,889 |
Douglas Rowe |
30,000 |
1.8% |
0.38 |
08/13/07 |
38,288 |
48,315 |
Robert Van Caneghan |
30,000 |
1.8% |
0.38 |
08/13/07 |
38,288 |
48,315 |
(1) Based on options exercisable to acquire a total 1,665,525 shares to executive officers, directors and employees.
The potential realizable value is calculated based on the assumption that the common stock appreciates at the annual rate shown, compounded annually, from the date of grant until the expiry of the term of the option. These numbers are calculated based on SEC requirements and do not reflect our projection or estimate of future stock price growth. Potential realizable values are computed by:
- |
multiplying the number of shares of common stock subject to a given option by the exercise price; |
- |
assuming that the aggregate stock value derived from that calculation compounds at the annual 5% or 10% rate shown in the table for the entire term of the option; and |
- |
subtracting from that result the aggregate option exercise price. |
Summary Of Stock Options And Stock Appreciation Rights Exercised By Executive Officers And Year End Balances
The following table provides certain information with respect to each of our executive officers in fiscal 2001 concerning any options to purchase our common shares or stock appreciation rights they may have exercised in fiscal 2001, and the number and value of their unexercised options as of December 31, 2001:
|
|
|
at December 31, 2001 |
|
|
Shares |
|
Options at FY-End |
Value of In-the-Money Options at FY-End (1) (2) |
George Liszicasz |
--- |
--- |
45,000 / 0 |
$0 / $0 |
Daniel C. Topolinsky |
--- |
--- |
175,000 / 325,000 |
$0 / $0 |
James R. Ehrets |
--- |
--- |
155,800 / 325,000 |
$0 / $0 |
John M. Woodbury |
--- |
--- |
33,167 / 33,333 |
$0 / $0 |
The dollar amount shown represents the difference between the fair market value of our common shares underlying the options as of the date of exercise and the option exercise price.
Employment Agreements With Our Executive Officers
Mr. Liszicasz is employed by NXT as our Chief Executive Officer under a five-year employment agreement entered into on April 1, 1997, which contains the following principal compensatory provisions:
23
At the conclusion of his initial term, Mr. Liszicasz's employment agreement renews automatically each year for a successive one year term, unless NXT or Mr. Liszicasz elects by a written, 60-day notice not to renew; or the agreement is terminated earlier in accordance with its terms.
Mr. Liszicasz's employment agreement provides for early termination in the case of any of the following events as defined in the employment agreement:
Under the employment agreement a "change in control" means any of the following:
In general, where a termination is for death, disability, "cause" or by Mr. Liszicasz without "good reason," Mr. Liszicasz's compensation allowances and benefits will accrue only through the effective date of the termination. However, and again in general, where a termination is due to a "change in control," without "cause," or Mr. Liszicasz for "good reason," the employment agreement provides that NXT will pay compensation and certain allowances and benefits to Mr. Liszicasz through the end of the then applicable term. In addition, if the termination is directly or indirectly attributable to a "sale," and the sale is approved by a "disinterested majority" of our board of directors, then NXT will pay Mr. Liszicasz an amount equal to 2% of the total consideration received by NXT in connection with the sale.
24
Report Of Compensation Committee On Executive Compensation
The following is the report from the compensation committee of our board of directors, which is comprised of Messrs. Hunter, Rowe and Foulkes. Messrs. Foulkes and Rowe were appointed to the committee on July 9, 2002. The compensation committee reviews and makes recommendations with respect to compensation of NXT's executive officers and directors, and also administers certain elements of our various stock plans. This report addresses:
Compensation Committee Report
Compensation Policies
For NXT to progress beyond the development stage and to maximize the hydrocarbon revenue-generation potential afforded by our SFD technology, it is necessary for NXT to attract superior executives and key professionals from both the oil & gas exploration and technology sections with the level of skill, knowledge, effort and responsibility necessary to address the issues and strategies unique to NXT and its business plan and technology. These personnel include:
In order to attract and retain qualified executives and key professionals, NXT's executive and professional compensation program is designed to meet the following objectives:
The initial amount of monthly base salary paid to executive officers and key professionals is the amount, as determined by the compensation committee as necessary to attract and retain executives with the requisite superior abilities to both perform their executive and professional functions and, given the developing nature of our business and our desire to maintain a lean staffing profile, to provide cross-support for our other executives and professionals. The determination of which executive officers and key professionals should receive a bonus and/or grant of stock options, and what the amount of the bonus and/or terms of the grant of stock options should be, is based upon a subjective analysis of the executive's or key professional's level of responsibility, performance of duties, and contribution toward NXT's success, and takes into consideration other types and amounts of performance based compensation paid to them. All stock options granted to date are subject to vesting conditions based on contin ued employment, which the compensation committee believes creates a more productive workforce by meeting the following objectives:
25
Our practice in determining compensation for executive officers is for our management and compensation committee to consult, and then for our compensation committee to make a recommendation to the board of directors for approval. With respect to employees other than executive officers, compensation is ordinarily determined based upon the recommendation of management subject, where appropriate, to consultation with our compensation committee and/or board of directors.
On January 3, 2001, our board of directors ratified the cancellation of all outstanding options held by each of our employees and directors employed or engaged by NXT as of that date subject to the approval by that employee or director, and the grant of new options to that person on the same terms (including vesting, term and lapse) as the cancelled grant, except that (1) the exercise price for the new options would equal the closing price for our common stock as of the close of business on July 5, 2001, and (2) the term of the new options would be extended to July 5, 2003 with respect to any options which would otherwise lapse, if unexercised, on or prior to that date. This offer was then presented to and accepted or rejected by each of our employees and directors by the succeeding day. Our employees and directors who accepted the offer agreed that they could not exercise these options until they were priced, and further agreed that their unvested options would lapse should they resign their position wit h our company on or before July 5, 2003.
Our board approved the offer to grant new options based upon its belief that the previously granted options no longer had sufficient value to motivate and retain employees and directors in view of: (1) the significant decline in the market price for NXT common stock given adverse market conditions in general and the impact of those conditions on technical and development stage company stocks such as ours in particular, and the likelihood that market conditions for our common stock would not improve for a significant period of time, particularly given the anticipated delay of our drilling plans and other developments toward the end of fiscal 2000; (2) the increased market demand for our geological, geophysical and technical employees by other companies in the oil and gas sector of the market place, and the critical need for NXT to retain its employees and directors for the longer-term; and (3) the adverse affect on NXT with respect to the loss of those employees and directors, which our board believed coul d set back the company for a period of years and, in some cases, could be terminal to our survival.
Compensation for Chief Executive Officer
Mr. George Liszicasz, our Chief Executive Officer, is entitled to the following compensation under his five-year employment agreement with NXT entered into on April 1, 1997:
26
This compensation arrangement, which was fixed during the early development stage of our company, was predicated on Mr. Liszicasz's unique and critical role in starting and developing NXT. Specifically, Mr. Liszicasz founded and assisted in capitalizing NXT, and is also the inventor of our SFD technology as well as the developer of the methodologies used to interpret SFD data. The services of Mr. Liszicasz was critical to NXT's development during our development stage, and the loss of his service during that stage would have been critical for NXT at that time.
27
Section 162(m) of the Internal Revenue Code
The compensation committee has not formulated a policy in qualifying compensation paid to executive officers for deductibility under Section 162(m) of the Internal Revenue Code, and does not foresee the necessity of doing so in for at least the upcoming year. Should limitations on the deductibility of compensation become a material issue, the compensation committee will, at such time, determine whether such a policy should be implemented, either in general or with respect to specific executives.
The Compensation Committee |
|
Donald Foulkes |
Dennis R. Hunter |
Douglas Rowe |
|
Report Of Audit Committee On Audit And Independent Auditors
The following is the report from the current audit committee of our board of directors, which is comprised of Messrs. Foulkes and Van Caneghan. Messrs. Foulkes and Van Caneghan were appointed to the committee on July 9, 2002. From May 9, 2002 to July 9, 2002, the audit committee had no members due to changes in our board of directors. During this period, the board of directors took on the role and responsibilities of the audit committee. The audit committee reviews and discusses our financial statements with our management and auditors, and makes recommendations with respect to the inclusion of those financial statements in our annual report on form 10-K, and recommends to our board of directors the engagement of our independent auditors. For information concerning the independence of the members of the audit committee, see that section of this proxy statement captioned "Standing Board Committees."
Audit Committee Report
The audit committee reviews NXT's financial reporting process on behalf of NXT's board of directors. Due to changes in the board of directors of NXT, the audit committee went without members from May 9, 2002 to July 9, 2002. The previous audit committee, which consisted of Mr. Lorne Carson at the time of the audit, reviewed and discussed the audited financial statements contained in NXT's annual report on Form 10-K for the year ended December 31, 2001 with NXT's management and independent auditors. Management is responsible for the financial statements and the reporting process, including the system of internal controls. The independent auditors are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States.
Mr. Carson discussed with NXT's independent auditors, Arthur Andersen LLP, the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended. In addition, the independent auditors provided the written disclosures required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, and Mr. Carson discussed with the independent auditors their independence from NXT and its management, including the matters in that disclosure.
In reliance on the reviews and discussion referred to above, the board of directors approved the audited financial statements for inclusion in NXT's annual report on Form 10-K for the year ended December 31, 2001, for filing with the United States Securities and Exchange Commission.
28
The audit committee adopted a written charter, a copy of which was filed as an exhibit to our 2001 proxy statement.
The Audit Committee |
|
Donald Foulkes |
Robert Van Caneghan |
The foregoing audit committee report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, except to the extent that NXT specifically incorporates that report by reference, and shall not otherwise be deemed filed under such acts.
Transactions With Our Management And Principal Shareholders
Summarized below are certain transactions and business relationships between NXT and persons who are or were our executive officers, directors or holders of more than five percent of any class of our securities since January 1, 1999:
Previously, Momentum Resources retained legal possession and control of the Stress Field Detector units while SFD data was collected and remitted to NXT for our exclusive worldwide use for hydrocarbon identification and exploration purposes. Under the new agreement, NXT acquired the full and exclusive right to use, possess and control all existing Stress Field Detector units for hydrocarbon identification and exploration purposes, as well as the right to exclusively conduct and control all SFD data collection activities, thereby eliminating the control and participation of Momentum Resources with respect to any of these activities.
29
The amendment also formally documented NXT's research and development practice with Momentum Resources. Under this practice, NXT would continue research and development activities to design, fabricate and assemble improved Stress Field Detector units while acquiring the exclusive right to use, possess and control these units, and would continue to charge Momentum Resources for these costs in the form of an offset against any royalties payable to Momentum Resources under the license agreement.
The new license agreement also contained several revisions relating to termination and amendment, including the deletion of a provision which would terminate the license should there be a change of control of NXT, and the addition of provisions requiring the approval of a majority of non-Momentum Resources related directors and, in certain cases, non-Momentum Resources related shareholders, to amend or terminate the license. All other terms of the license, including compensation payable to Momentum Resources, remained unchanged.
Stock Performance Graph
Set forth below is a line graph which compares the percentage change in the cumulative total shareholder return of our common stock against the cumulative total shareholder return of the following indexes selected by NXT:
The graph assumes an initial investment of $100 in our common stock and each of the indexes on January 24, 1996, the effective date of commencement of trading following the reverse acquisition by which NXT acquired our current business, and further assumes reinvestment of any dividends. You should note the comparative indexes are comprised of companies with established operating histories and, in most cases, significantly larger resources and market capitalizations than NXT.
30
In here is a graph that represents the information in the table below:
INDEX |
Jan. 26 1996 |
Dec. 31 1996 |
Dec. 31 1997 |
Dec. 31 1998 |
Dec. 31 1999 |
Dec. 31 2000 |
Dec. 31 2001 |
Energy Exploration Technologies |
100 |
165 |
395 |
759 |
1009 |
240 |
40 |
S&P SmallCap 600 Index |
100 |
123 |
154 |
150 |
168 |
186 |
179 |
S&P SmallCap 600 Index/Energy Sector |
100 |
158 |
167 |
90 |
111 |
164 |
173 |
The historical stock performance depicted on the graph is not necessarily indicative of future performance. NXT will not make or endorse any predictions as to future stock performance or dividends. The foregoing price performance comparisons shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or Securities Exchange Act of 1934, except to the extent that NXT specifically incorporates this graph by reference, and shall not otherwise be deemed filed under those acts.
Compliance With Section 16(a) Of The Securities And Exchange Act
Section 16(a) of the Securities and Exchange Act of 1934 requires any person who is a director or executive officer of NXT, or who beneficially holds more than 10% of any class of our securities which have been registered with the Securities and Exchange Commission, to file reports of initial ownership and changes in ownership with the Securities and Exchange Commission. These persons are also required under the regulations of the Securities and Exchange Commission to furnish us with copies of all Section 16(a) reports they file.
31
To our knowledge, based solely on our review of the copies of the Section 16(a) reports furnished to us, all Section 16(a) filing requirements applicable to our directors, executive officers and holders of more than 10% of any class of our registered securities were timely complied with.
By Order of the Board of Directors |
|
|
|
/s/ George Liszicasz Chief Executive Officer |
Calgary, Alberta, Canada
August 16, 2002
32
2000 PINNACLE OIL INTERNATIONAL. INC.
DIRECTORS' STOCK PLAN
The Board of Directors of Pinnacle Oil International. Inc. (the "Company"), a corporation organized under the laws of the State of Nevada, hereby adopts this 2000 Pinnacle Oil International. Inc. Directors' Stock Plan.
WHEREAS, the growth, development and financial success of the Company (and any parents and/or any subsidiaries of the Company) is and will remain dependent, in significant part, upon the judgment, initiative, efforts and/or services their respective directors;
WHEREAS, the Company desires, in order to attract, compensate and motivate selected directors for the Company (and any parent and/or any subsidiaries of the Company), and to appropriately compensate them for their efforts, to create a stock plan which will enable the Company, in its sole discretion and from time-to-time, to offer to or provide such persons with incentives and/or inducements in the form of capital stock of the Company, or rights in the form of options to acquire capital stock of the Company, thereby affording such persons with an opportunity to share in potential capital appreciation in the capital stock of the Company and/or potential distributions made in connection therewith;
WHEREAS, the Company further desires that the stock plan be structured to permit it, in its sole discretion, to offer and issue capital stock or options to acquire capital stock in reliance upon certain exemptions from registration or qualification afforded under certain federal, state, territorial or provincial securities laws to be selected by the Company as are or may become applicable; and
WHEREAS, insofar as the Company's common stock is currently registered under Section12(g) of the Securities and Exchange Act of 1934, the Company desires that the stock plan be structured to comply with the Securities and Exchange Act of 1934 for so long as the Company's common stock or any of its other equity securities are registered under Sections 12(b) or 12(g) of the Securities and Exchange Act of 1934.
Set forth below are definitions of capitalized terms which are generally used throughout the Plan, or references to provisions containing such definitions (Capitalized terms used only in a specific section of the Plan are defined in such section):
1.01 "Applicable Laws" means the requirements relating to the administration of stock plans under:
A. applicable corporate laws of the United States and the State of Nevada and, to the extent applicable, any foreign country or jurisdiction where Awards are, or will be, granted under the Plan, including Canada and the Province of Alberta;
B. applicable Securities Laws, including those of any foreign country or jurisdiction where Awards are, or will be, granted under the Plan, including Canada and the Province of Alberta; and
C. any stock exchange or quotation system on which the Common Stock is listed or quoted.
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1.04 "Award Agreement" shall collectively and severally refer to:
A. in the case of the grant or award of an Option, a Stock Option Certificate in such form as prescribed by the Plan Administrator from time-to-time;
B. in the case of the grant or award of Grant Shares, a Stock Grant Agreement in such form as prescribed by the Plan Administrator from time-to-time; and
C. in the case of the grant or award of SARs, a SAR Agreement in such form as prescribed by the Plan Administrator from time-to-time;
provided, however, the Company may, in its sole discretion, (1) revise any such form of Award Agreement to reflect or incorporate such changes as the Company or its legal counsel may determine is appropriate and consistent with the terms of the Plan, and/or (2) evidence or confirm the grant of an Award in a written employment or consulting agreement in lieu of the form of any of the foregoing Award Agreements.
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(1) "Acquiring Person" shall mean any "Person" (as defined below) with the exception of:
(i) any employee benefit plan (or a trust forming a part thereof) maintained by the Company, or by any corporation or entity in which the Company holds fifty percent (50%) or more of the Voting Securities (each, a "Controlled Subsidiary");
(ii) the Company or any Controlled Subsidiary; or
(iii) any Person which acquires the threshold percentage of Voting Securities through a Non-Control Transaction.
(2) "Non-Control Transaction" shall mean any transaction in which the stockholders of the Company immediately before such transaction directly or indirectly own, immediately following such transaction, at least a majority of the Total Combined Voting Power (as defined below) of the outstanding Voting Securities (as defined below) of the surviving corporation (or other entity) resulting from such transaction, in substantially the same proportion as such stockholders' ownership of the Company's Voting Securities immediately before such transaction.
(3) "Person," "Beneficial Ownership," "Total Combined Voting Power" and "Voting Securities" shall have the meaning described to such terms in Sections 13(d) and 14(d) of the Exchange Act and Rule 13d-3 promulgated thereunder.
(4) "Continuing Director" shall mean:
(i) any member of the Board, while such Person is a member of the Board, who is not an Acquiring Person or an "Affiliate" or "Associate" (as defined below) of an Acquiring Person, or a representative of an Acquiring Person or any such Affiliate or Associate, and was a member of the Board prior to the date of this Plan, or
(ii) any Person who subsequently becomes a member of the Board, while such Person is a member of the Board, who is not an Acquiring Person or an Affiliate or Associate of an Acquiring Person or a representative of an Acquiring Person or any such Affiliate or Associate, if such Person's nomination for election or election to the Board is recommended or approved by a majority of the Continuing Directors. The terms "Affiliate" and "Associates" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange Act.
(5) Notwithstanding the foregoing, a Control Acquisition shall not be deemed to have occurred solely because any Person acquires Beneficial Ownership of more than the threshold percentage of the outstanding Voting Securities as a result of an acquisition of Voting Securities by the Company (each, a "Redemption") which, by reducing the number of Voting Securities outstanding, increased the percentage of outstanding Voting Securities Beneficially Owned by such Person; provided, however, that if
(i) a Control Acquisition would occur as a result of a Redemption but for the operation of this sentence, and
(ii) after such Redemption, such Person becomes the Beneficial Owner of any additional Voting Securities, which increase the percentage of the then outstanding Voting Securities Beneficially Owned by such Person over the percentage owned as a result of the Redemption, then a Control Acquisition shall occur.
B. "Significant Board Change" shall mean any time, during any period of three (3) consecutive years after the date of this Agreement, wherein the individuals who constituted the Board at the beginning of such period (the "Incumbent Board") cease to constitute a majority of the Board, for any reason other than:
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(1) the voluntary resignation of one or more Board members;
(2) the refusal by one or more Board members to stand for election to the Board; and/or
(3) the removal of one or more Board members for good cause;
provided, however,
(i) that if the nomination or election of any new director of the Company was approved by a vote of at least a majority of the Incumbent Board, such new director shall be deemed a member of the Incumbent Board; and
(ii) that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act), or as a result of a solicitation of proxies or consents by or on behalf of an Acquiror, other than a member of the Board (a "Proxy Contest"), or as a result of any agreement intended to avoid or settle any Election Contest or Proxy Contest.
1.09 "Commission" shall mean the United States Securities and Exchange Commission.
1.10 "Common Stock" shall mean the Company's common stock, par value $0.001.
A. the receipt of any disability insurance benefits by the Recipient;
B. a declaration by a court of competent jurisdiction that the Recipient is legally incompetent;
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If the Board determines that the Recipient is Disabled under clause 0 above, and the Recipient disagrees with the conclusion of the Board, then the Company shall engage a qualified independent physician reasonably acceptable to the Recipient to examine the Recipient at the Company's sole expense. The determination of such physician shall be provided in writing to the parties and shall be final and binding upon the parties for all purposes of this Agreement. The Recipient hereby consents to examination in the manner set forth above, and waives any physician-patient privilege arising from any such examination as it relates to the determination of the purported disability.
A. any circumstances which would not be considered to be either a bonus or reward for services provided, or compensation for goods or services rendered; or
B. services rendered wholly or partially in connection with the offer and sale of securities in a capital-raising transaction.
A. If the Common Stock is traded on a stock exchange, the Fair Market Value will be equal to the closing price of Common Stock on the principal exchange on which the Common Stock is then trading as reported by such exchange (or as reported by any composite index which includes such principal exchange) for the trading day previous to the date of valuation, or if the Common Stock is not traded on such date, on the next preceding trading day during which a trade occurred;
B. If the Common Stock is traded over-the-counter on the Nasdaq National Market on the date in question, the Fair Market Value will be equal to the last transaction-price of the Common Stock as reported by Nasdaq for the trading day previous to the date of valuation, or if the Common Stock is not traded on such date, on the next preceding trading day during which a trade occurred;
C. If the Common Stock is traded over-the-counter on the Nasdaq SmallCap Market, the Fair Market Value will equal the mean between the last reported closing representative bid and asked price for the Common Stock as reported by Nasdaq for the trading day previous to the date of valuation, or if the Common Stock is not traded on such date, on the next preceding trading day during which a trade occurred; or
D. If the Common Stock is not publicly traded on an exchange and is not traded over-the-counter on Nasdaq, the Fair Market Value shall be determined by the Board acting in good faith on such basis as it deems appropriate, including quotations by market makers if the Common Stock is traded over-the-counter on the NASD Electronic Bulletin Board or Pink Sheets on the date in question should the Plan Administrator deem such quotations to be appropriate given the volume and circumstances of trades.
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The Fair Market Value as determined above shall be subject to such discount as the Plan Administrator may, in its sole discretion and without obligation to do so, determine to be appropriate to reflect any such impairments to the value of the associated Option Shares and/or Grant Shares to which the valuation relates such as, by way of example and not limitation,
(1) the fact that such Option Shares and/or Grant Shares constitute unregistered securities (whether or not considered "restricted stock" within the meaning of Rule 144 of the Securities Act), and/or
(2) such Option Shares and/or Grant Shares are subject to conditions, risk of forfeiture, or repurchase rights or rights of first refusal which impair their value including, without limitation, those forfeiture conditions more particularly described in 0.
1.19 "Grant Shares" shall mean Plan Shares granted or awarded in accordance with 0.
1.20 "Independent SAR" shall have the meaning ascribed to such term in section 0.
1.21 "Option" shall mean an option to purchase Plan Shares granted or awarded pursuant to 0.
1.22 "Option Price" is defined in section 0 of the Plan.
1.26 "Plan" shall mean this 2000 Pinnacle Oil International. Inc. Directors' Stock Plan.
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1.34 "Reporting Company" shall mean a corporation which registers its equity securities pursuant to Sections 12(b) or 12(g) of the Exchange Act; provided, however, any foreign corporation which registers its equity securities as a "foreign private issuer" shall not be deemed a Reporting Company for purposes of this Plan unless and until such time as it is required or elects to register its equity securities as a foreign issuer other than a foreign private issuer.
1.39 "Tandem SAR" shall have the meaning ascribed to such term in section 0.
1.40 "Termination Of Recipient" is defined as the time when the Recipient's status as a Director ceases for any reason whatsoever, whether voluntary or involuntary (including death or Disability), or with or without good cause, but excluding cases where the Recipient remains a Director of the Company (if such termination relates to the Recipient's status as a Director of any Parent and/or any Subsidiary) and/or by any Parent and/or any Subsidiary (if such termination relates to the Recipient's status as a Director of the Company).
A. the sale, assignment, bequest or gift of the Award;
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B. any transaction that creates or grants an option, warrant, or right to obtain an interest in the Award;
C. any transaction that creates a form of joint ownership in the Award between the Recipient and one or more other Persons;
D. any Transfer of the Award to a creditor of the Recipient, including the hypothecation, encumbrance or pledge of the Award or any interest therein, or the attachment or imposition of a lien by a creditor of the Recipient on the Award or any interest therein which is not released within thirty (30) days after the imposition thereof;
E. any distribution by a Recipient which is an entity to its stockholders, partners, co-venturers or members, as the case may be; or
F. any distribution by a Recipient which is a fiduciary such as a trustee or custodian to its settlors or beneficiaries.
A. all Awards granted pursuant to the Plan prior to the effective date of the Plan shall not be affected by the termination of the Plan; and
B. all other provisions of the Plan shall remain in effect until the terms of all outstanding Awards have been satisfied or terminated in accordance with the Plan and the terms of such Awards.
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A. the Board;
B. the Plan Committee (provided it is comprised solely of "non-employee directors" within the meaning of Rule 16b-3(b)(3)); or
C. a special committee of the Board, or subcommittee of the Plan Committee, comprised solely of two (2) or more members of the Board who are non-employee directors.
3.04 Compliance with Section 162(m) of the Code. Anything in this 0 to the contrary notwithstanding, in the event and commencing at such time as any grant of an Award shall be subject to the deduction limitations prescribed by Section 162(m) of the Code, and the Plan Administrator determines it to be desirable to qualify Awards granted hereunder as "performance-based compensation" within the meaning of Section 162(m), the Plan Administrator shall (for purposes of making such grant) consist of a special committee of the Board comprised solely of two or more "outside directors" within the meaning of Section 162(m).
3.05 Delegation to Director-Officers. Subject to the authority granted to the Board under the Articles of Incorporation and the Bylaws of the Company, the Board may, in its sole discretion and at any time, and subject to the authority granted to it by the Board, the Plan Committee may, in its sole discretion and at any time, delegate all or any portion of their authority described below under section 0 through section 0 to one or more Directors who are also Director-Officers, provided that the Board or the Plan Committee (as the case may be) ratifies such actions by such designated Director-Officers. Notwithstanding the foregoing, so long as this Company continues as a Reporting Company, no authority shall be delegated to the aforesaid Director-Officers with respect to any matter concerning a grant or award of an Award under the Plan to any Director.
B. grant Awards to such selected Eligible Directors or classes of Eligible Directors in such form and amount as the Plan Administrator shall determine;
C. determine the number of Plan Shares to be covered by each Award;
D. approve forms of Award Agreements for use under the Plan;
(1) the date of grant of the Award;
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(2) the time or times when Options or SARs may be exercised (which may be based on performance criteria);
(3) any vesting and/or forfeiture conditions placed upon any Awards; and
(4) and repurchase conditions placed upon grants or awards of Grant Shares;
F. require as a condition of the grant of an Award that the Recipient surrender for cancellation some or all of any unexercised Options which have previously been granted to the Recipient under the Plan or otherwise (an Award, the grant of which is conditioned upon such surrender; may have a price or value lower (or higher) than the surrendered Option; may cover the same (or a lesser or greater) number of shares of Common Stock as such surrendered Option; may contain such other terms as the Plan Administrator deems appropriate and necessary; and shall be exercisable in or granted in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option);
G. approve the reduction in the exercise price of any Option or SAR to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or SAR shall have declined since the date such Option or SAR was granted;
H. determine the type and value of consideration which the Company will accept from Recipients in payment for the exercise of Options and/or the award of Grant Shares;
I. determine the type and value of consideration which the Company will pay in connection with the exercise of SARs;
J. adopt, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws, and make all other determinations and take all other action necessary or advisable for the implementation and administration of the Plan;
K. modify or amend each Award (subject to 0), including the discretionary authority to extend the post-termination exercisability period of Options or SARs longer than is otherwise provided for in the Plan; and
L. agree to withhold Plan Shares in satisfaction of any applicable Withholding Taxes.
In determining the recipient, form and amount of Awards, the Plan Administrator shall consider any factors it may deem relevant such as, by way of example and not limitation or obligation, the Recipient's functions, responsibilities, value of services to the Company, and past and potential contributions to the Company's profitability and sound growth.
All actions taken and all interpretations and determinations made under the Plan in good faith by the Plan Administrator shall be final and binding upon the Recipient, the Company, and all other interested Persons. No member of the Plan Administrator shall be personally liable for any action taken or decision made in good faith relating to the Plan, and all Persons constituting the Plan Administrator shall be fully protected and indemnified to the fullest extent permitted under applicable law by the Company in respect to any such action, determination, or interpretation.
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SHARES OF COMMON STOCK ISSUABLE UNDER PLAN
A. Any shares of Common Stock tendered by a Recipient as payment for Option Shares (in connection with the exercise of the associated Option) or Grant Shares;
B. Any shares of Common Stock underlying any options, warrants or other rights to purchase or acquire Common Stock which options, warrants or rights are surrendered by a Recipient as payment for Option Shares (in connection with the exercise of the associated Option) or Grant Shares;
C. Any shares of Common Stock subject to an Option which, for any reason, is terminated unexercised or expires;
D. Any Forfeitable Grant Shares which, for any reason, are forfeited by the holder thereof or repurchased by the Company; and
E. Any SAR Shares subject to an Independent SAR which, for any reason, is terminated unexercised or expires.
A. When Options are exercised, and when cash is used as full payment for Option Shares issuable upon exercise of such Options, all Option Shares issued in connection with such exercise (including Option Shares, if any, withheld in satisfaction of any applicable Withholding Taxes) shall be counted;
B. When Options are exercised, and when shares of Common Stock are used as full or partial payment for Option Shares issuable upon exercise of such Options, the net Option Shares issued in connection with such exercise (including Option Shares, if any, withheld in satisfaction of any Applicable Withholding Tax Requirements) shall be counted;
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C. When Grant Shares are granted, and when shares of Common Stock are used as full or partial payment therefore, the net Grant Shares issued (including Grant Shares, if any, withheld in satisfaction of any applicable Withholding Taxes) shall be counted;
D. When SARs are exercised, only the Plan Shares issued in payment thereof (including Plan Shares, if any, withheld in satisfaction of any applicable Withholding Taxes) shall be counted; and
E. If the exercise price of an Option or SAR is reduced, the transaction will be treated as a cancellation of the Option or SAR, and the grant of a new Option or SAR.
OPTIONS (TO PURCHASE OPTION SHARES)
5.01 Grant. The Plan Administrator may from time to time, and subject to the provisions of the Plan and such other terms and conditions as the Plan Administrator may prescribe, grant to any Eligible Director one or more options ("Options") to purchase the number of Plan Shares allotted by the Plan Administrator ("Option Shares"). The grant of an Option shall be evidenced by a written Stock Option Certificate, executed by the Recipient and an authorized officer of the Company, stating:
the number of Option Shares subject to the Option;
the Option Price (as such term is defined below) for the Option; and
all other material terms and conditions of such Option.
5.04 Exercise Date. Unless a later exercise date is expressly provided in the underlying Stock Option Certificate or another section of the Plan, each Option shall become exercisable on the later of:
A. the date of its grant as determined by the Plan Administrator; or
B. the date of delivery to the Recipient, and execution by the Company and the Recipient, of the underlying Stock Option Certificate evidencing the grant of the Option.
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No Option shall be exercisable after the expiration of its applicable term as set forth in section 0. Subject to the foregoing, each Option shall be exercisable in whole or in part during its applicable term unless expressly provided otherwise in the underlying Stock Option Certificate.
5.05 Vesting Conditions. Subject to the limitations in 0 relating to Termination Of Recipient, the Plan Administrator may subject any Options granted to such vesting conditions as the Plan Administrator, in its sole discretion, determines are appropriate and necessary, such as, by way of example and not obligation:
A. the attainment of goals by the Recipient; or
B. the continued service by the Recipient as a Director to the Company and/or to any Parent or Subsidiary.
If no vesting is expressly provided in the underlying Stock Option Certificate, the Option Shares shall be deemed fully vested upon date of grant. Where vesting conditions are based upon continued performance of services to the Company, the special rules of 0 relating to Termination Of Recipient shall apply. No vesting conditions may be imposed which are not permitted, or exceed those permitted, under the exemption from registration or qualification to be relied upon under applicable Securities Laws, as selected by the Company in its sole discretion. If no vesting is expressly provided in the underlying Stock Option Certificate, the Option Shares shall be deemed fully vested upon date of grant. The Plan Administrator may waive the acceleration of any vesting and/or expiration provision of any outstanding Option should the Plan Administrator, in its sole and absolute discretion, determine it advisable or necessary to do so inclu ding, without limitation, in connection with any Termination Of Recipient.
5.06 Manner of Exercise. An exercisable Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company at its principal executive offices prior to the time when such Option (or such portion) becomes unexercisable under this 0 of each of the following:
C. a Consent of Spouse from the spouse of the Recipient, if any, duly signed by such spouse;
5.07 Net Conversion of Option. Notwithstanding section 0, if and to the extent expressly permitted in the underlying Stock Option Certificate, or if and to the extent otherwise consented to by the Plan Administrator in writing, the Recipient may convert an Option, in whole or in part, into such net number of Option Shares as shall be determined by dividing (x) the difference between (I) the aggregate Fair Market Value of the total number Option Shares to be exercised as of the conversion date, together with payment in satisfaction of any applicable Withholding Taxes, and (II) the aggregate Exercise Price of such total number of Option Shares, by (y) the Fair Market Value of one Option Share as of the date of conversion.
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The Recipient shall, in the event of such permitted conversion, deliver to the Company all of the items described in section 0 with respect to the underlying Option (other than section 0 to the extent payment therefore is not required by operation of this section 0).
5.08 Grant of Replacement Options. In the event:
A. the Gross Option Exercise Price is paid in the form of shares of Common Stock owned by the Recipient pursuant to section 0; and
B. the exercising Recipient is then an Eligible Director,
C. then the Plan Administrator in its sole discretion may, or the Plan Administrator (if and to the extent expressly required by the underlying Stock Option Certificate) shall, grant to the exercising Recipient options (the "Replacement Options") entitling the exercising Recipient to purchase such number of Plan Shares as shall equal the number of shares of Common Stock delivered to the Company in payment of the Gross Option Exercise Price with respect to the underlying Stock Option Certificate.
Each Replacement Option shall:
(1) Be immediately exercisable upon its grant (without any vesting conditions);
(2) have an Option Price for each Option Share which equals the Fair Market Value of the Common Stock so paid as determined for purposes of payment pursuant to section 0;
(3) have an Option Term co-terminus with that of the underlying Option; and
(4) contain such other terms and conditions as contained in the underlying Stock Option Certificate.
Shares of Common Stock received by the Recipient in connection with the grant of the Replacement Option may not be used as consideration in connection with the exercise of the Replacement Option, unless such shares of Common Stock have been held by the Recipient for a period of at least one (1) year, and such form of payment is otherwise permitted pursuant to the terms of 0.
The grant of a Replacement Option shall be evidenced by a written Stock Option Certificate, executed by the Recipient and an authorized officer of the Company, stating:
(i) the number of Option Shares subject to the Option;
(ii) the Option Price (determined in the manner prescribed above in this section) for the Option; and
(iii) all other material terms and conditions of such Option.
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A. the delivery of the documents described in section 0;
B. the receipt by the Company of full payment for such Option Shares, together with payment in satisfaction of any applicable Withholding Taxes;
C. subject to 0, the satisfaction of any requirements or conditions of the Applicable Laws; and
D. the lapse of such reasonable period of time following the exercise of the Option as the Plan Administrator may establish from time-to-time for administrative convenience.
A. the number of Grant Shares granted;
B. the consideration (if any) for such Grant Shares; and
C. all other material terms and conditions of such grant.
(1) The Stock Grant Purchase Price shall not be less than that allowed under the exemption from registration under the applicable Blue Sky Laws (as selected by the Company in its sole discretion) of the state or territory in which the Recipient then resides;
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(2) If the Common Stock is traded on a stock exchange or over-the-counter on Nasdaq, the purchase price shall not be less than the minimum price per share permitted by such stock exchange or Nasdaq; and
(3) Under no circumstances shall the Stock Grant Purchase Price per Grant Share be less than the then current par value per share of Common Stock.
6.04 Deliveries; Manner of Payment. The Grant Shares may be purchased solely by delivery to the Secretary of the Company at the principal executive offices at the Company prior to the time the Grant Shares become purchasable under this 0 of each of the following:
A. the Stock Grant Agreement for the Grant Shares, duly signed by the Recipient;
B. a Consent of Spouse from the spouse of the Recipient, if any, duly signed by such spouse;
D. such documents, representations and undertakings as provided in the Stock Grant Agreement and/or which the Plan Administrator, in its absolute discretion, deems necessary or advisable pursuant to section 0.
6.05 Conditions to Issuance of Grant Shares. The Company shall not be required to issue or deliver any certificate or certificates representing the Grant Shares prior to fulfillment of all of the following conditions:
A. the delivery of the documents described in section 0;
B. the receipt by the Company of full payment (if applicable) for such Grant Shares, together with payment in satisfaction of any applicable Withholding Taxes;
C. subject to 0, the satisfaction of any requirements or conditions of the Applicable Laws; and
D. the lapse of such reasonable period of time following the award of the Grant Shares as the Plan Administrator may establish from time-to-time for administrative convenience.
FORFEITURE CONDITIONS PLACED UPON GRANT SHARES
7.01 Vesting Conditions; Forfeiture of Unvested Grant Shares. Subject to the limitations in 0 relating to Termination Of Recipient, the Plan Administrator may subject or condition Grant Shares granted or awarded (hereinafter referred to as "Forfeitable Grant Shares") to such vesting conditions based upon continued provision of services or attainment of goals subsequent to such grant of Forfeitable Grant Shares as the Plan Administrator, in its sole discretion, may deem appropriate and necessary, such as, by way of example and not obligation:
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A. the attainment of goals by the Recipient; or
B. the continued service by such Recipient as a Director to the Company and/or to any Parent or Subsidiary; subject to the provisions set forth below.
Where vesting conditions are based upon continued performance of services to the Company, the special rules of 0 relating to Termination Of Recipient shall apply. In the event the Recipient does not satisfy any vesting conditions, the Company may require the Recipient, subject to the repurchase payment terms of section 0, to forfeit such unvested Forfeitable Grant Shares to the Company. All vesting conditions imposed on the grant of Forfeitable Grant Shares, including repurchase payment terms complying with section 0, shall be set forth in a written Stock Grant Agreement, executed by the Company and the Recipient on or before the time of the grant of such Forfeitable Grant Shares, stating the number of said Forfeitable Grant Shares subject to such conditions, and further specifying the vesting conditions.
If no vesting conditions are expressly provided in the underlying Stock Grant Agreement, the Grant Shares shall not be deemed to be Forfeitable Grant Shares, and will not be subject to forfeiture. The Plan Administrator may waive the acceleration of any vesting conditions placed upon any Forfeitable Grant Shares should the Plan Administrator, in its sole and absolute discretion, determine it advisable or necessary to do so including, without limitation, in connection with any Termination Of Recipient.
7.02 Repurchase of Forfeitable Grant Shares Which Are Forfeited.
(1) The repurchase price per Forfeitable Grant Share in any event may not be less that the "original cost" (as such term is defined below) of such Forfeitable Grant Shares to be forfeited or, if elected by the Plan Administrator in its sole discretion and without any obligation to do so in the underlying Stock Grant Agreement, the "book value" (as such term is defined below) of such Forfeitable Grant Shares to be forfeited, if higher than the original cost; and
(2) The "original cost" per Forfeitable Grant Share means the aggregate amount originally paid to the Company by the Recipient (or his, her or its predecessor) to purchase or acquire all of the Grant Shares to be forfeited, divided by the total number of such shares. The amount of consideration paid by any Recipient (or his, her or its predecessor) who originally received the Grant Shares as compensation for services or a bonus, or otherwise without payment of consideration in cash or property, shall be zero
The "book value" per Forfeitable Grant Share means the difference between the Company's total assets and total liabilities as of the close of business on the last day of the calendar month preceding the date of forfeiture, divided by the total number of shares of Common Stock then outstanding. The book value per Forfeitable Grant Share shall be determined by the independent certified public accountant regularly engaged by the Company. The determination shall be conclusive and binding and made in accordance with generally accepted accounting principles applied on a basis consistent with those previously applied by the Company.
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The securities represented by this certificate are subject to forfeiture in the event certain vesting conditions based upon the continued provision of services to the company by the holder hereof are not satisfied. This risk of forfeiture and underlying vesting conditions are set forth in full in that certain Stock Grant Agreement between the holder of this certificate and the company dated the _______day of ___________, _____________, and that certain 2000 Pinnacle Oil International. Inc. Directors' Stock Plan dated February 15, 2000, a copy of which may be inspected by authorized persons at the principal office of the company and all the provisions of which are incorporated by reference in this certificate.
The conditions shall similarly apply to any new, additional or different securities the Recipient may become entitled to receive with respect to such Forfeitable Grant Shares by virtue of a stock split or stock dividend or any other change in the corporate or capital structure of the Company.
The Plan Administrator shall also have the right, should it elect to do so, to require the Recipient to deposit the share certificate for the Forfeitable Grant Shares with the Company or its agent, endorsed in blank or accompanied by a duly executed irrevocable stock power or other instrument of transfer, until such time as the conditions lapse. The Company shall remove the legend with respect to any Forfeitable Grant Shares which become vested, and remit to the Recipient a share certificate evidencing such vested Grant Shares.
NON-CASH PURCHASE CONSIDERATION
(1) in the case of the exercise of an Option, to the aggregate Gross Option Exercise Price of the Option Shares with respect to which the Option or portion thereof is thereby exercised, or
(2) in the case of the purchase of Grant Shares, to the Gross Stock Grant Purchase Price;
B. The surrender or relinquishment of options, warrants or other rights to acquire Common Stock held by the Recipient, with a Fair Market Value on the date of delivery (or date of grant if permitted by the Plan Administrator) equal:
(1) in the case of the exercise of an Option, to the aggregate Gross Option Exercise Price of the Option Shares with respect to which the Option or portion thereof is thereby exercised, or
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(2) in the case of the purchase of Grant Shares, to the Gross Stock Grant Purchase Price;
C. A reduction in the amount of any Company liability to the Recipient, including any liability attributable to the Recipient's participation in any Company-sponsored deferred compensation program or arrangement;
D. A full recourse promissory note bearing interest at a rate as shall then preclude the imputation of interest under the Code, and payable upon such terms as may be prescribed by the Plan Administrator. The Plan Administrator shall prescribe the form of such note and the security to be given for such note. Notwithstanding the foregoing, no Option may be exercised by delivery of a promissory note or by a loan from the Company if such loan or other extension of credit is prohibited by law at the time of exercise of this Option or does not comply with the provisions of Regulation G promulgated by the Federal Reserve Board with respect to "margin stock" if the Company and the Recipient are then subject to such Regulation;
E. Any combination of the foregoing methods of payment; and/or
F. Such other good and valuable consideration and method of payment for the issuance of Plan Shares to the extent permitted by Applicable Laws.
STOCK APPRECIATION RIGHTS
A. in connection with all or any part of an Option granted to such Eligible Director, either concurrently with the grant of such underlying Option or at any time thereafter during the term of such underlying Option (a "Tandem SAR"); or
B. independently of the grant of any Option to such Eligible Director (an "Independent SAR").
The grant of an SAR shall be evidenced by a written Stock Appreciation Rights Agreement ("SAR Agreement"), executed by the Recipient and an authorized officer of the Company, stating:
C. if the SAR is a Tandem SAR, the underlying Option to which the SAR relates;
D. if the SAR is an Independent SAR, the number of Plan Shares covered by the SAR (the "SAR Shares");
E. if the SAR is an Independent SAR, the term of the SAR; and
F. all other material terms and conditions of such SAR.
9.02 Tandem SARs. The following provisions apply to each grant of a Tandem SAR:
A. The Tandem SAR shall entitle the Recipient to exercise such Tandem SAR by surrendering to the Company unexercised a portion of the underlying Option. The Recipient shall receive in exchange from the Company an amount, payable pursuant to section 0, equal to the excess of (x) the aggregate Fair Market Value on the date of exercise of the Tandem SAR of the Option Shares covered by the surrendered portion of the underlying Option, over (y) the aggregate Option Price of the Option Shares covered by the surrendered portion of the underlying Option.
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Notwithstanding the foregoing, the Plan Administrator may place limits on the amount that may be paid upon exercise of a Tandem SAR; provided, however, that such limit shall not restrict the exercisability of the underlying Option;
B. When a Tandem SAR is exercised, the underlying Option, to the extent surrendered, shall no longer be exercisable;
C. A Tandem SAR shall be exercisable only when and to the extent that the underlying Option is exercisable, and shall expire no later than the date on which such underlying Option expires; and
D. A Tandem SAR may only be exercised at a time when the Fair Market Value of the Option Shares covered by the underlying Option exceeds the exercise price of the Option Shares covered by the underlying Option.
9.03 Independent SARs. The following provisions apply to each grant of an Independent SAR:
A. The Independent SAR shall entitle the Recipient, by exercising the Independent SAR, to receive from the Company an amount equal to the excess of (x) the Fair Market Value of the SAR Shares covered by exercised portion of the Independent SAR, as of the date of such exercise, over (y) the Fair Market Value of the SAR Shares covered by the exercised portion of the Independent SAR, as of the date on which the Independent SAR was granted; provided, however, that the Plan Administrator may place limits on the amount that may be paid upon exercise of a Independent SAR; and
B. Independent SARs shall be exercisable, in whole or in part, at such times as the Plan Administrator shall specify in the SAR Agreement.
9.04 Form of Payment. The Company's obligation arising upon the exercise of
A. Tandem SARs shall be paid in cash (either outright or pursuant to such deferred payment arrangement as the Plan Administrator specifies in the underlying SAR Agreement); and
B. Independent SARs shall be paid in cash (either outright or pursuant to such deferred payment arrangement as the Plan Administrator specifies in the underlying SAR Agreement) or SAR Shares, or in any combination of cash and SAR Shares, as the Plan Administrator, in its sole discretion, may determine;
provided, however, the Plan Administrator may, in the case of the exercise of either Tandem SARs or Independent SARS, withhold such amount of cash and, if applicable, SAR Shares, as the Plan Administrator deems necessary to satisfy any applicable Withholding Taxes. SAR Shares issued upon the exercise of an Independent SAR shall be valued at their Fair Market Value as of the date of exercise.
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A. the date of its grant as determined by the Plan Administrator; or
B. the date of delivery to the Recipient, and execution by the Company and the Recipient, of the underlying SAR Agreement evidencing the grant of the SAR.
No SAR shall be exercisable after the expiration of its applicable term as set forth in section 0. Subject to the foregoing, each SAR shall be exercisable in whole or in part during its applicable term unless expressly provided otherwise in the underlying SAR Agreement.
9.07 Vesting Conditions. Subject to the limitations in 0 relating to Termination Of Recipient, the Plan Administrator may subject any SARs granted to such vesting conditions (in addition, in the case of any Tandem SARs, to such vesting conditions as are specified in the underlying Option) as the Plan Administrator, in its sole discretion, determines are appropriate and necessary, such as, by way of example and not obligation:
A. the attainment of goals by the Recipient; or
B. the continued service by the Recipient as a Director to the Company and/or to any Parent or Subsidiary.
Where vesting conditions are based upon continued performance of services to the Company, the special rules of 0 relating to Termination Of Recipient shall apply. If no vesting is expressly provided in the underlying SAR Agreement, the SAR shall be deemed fully vested upon date of grant (subject, in the case of any Tandem SAR, to such vesting conditions as are specified under the underlying Option). The Plan Administrator may waive the acceleration of any vesting and/or expiration provision of any outstanding SAR should the Plan Administrator, in its sole and absolute discretion, determine it advisable or necessary to do so including, without limitation, in connection with any Termination Of Recipient.
A. a Notice of Exercise of the SAR in the form attached to the underlying SAR Agreement, duly signed by the Recipient or other Person then entitled to exercise the SAR or portion thereof, stating the number of Option Shares (in the case of a Tandem SAR) or SAR Shares (in the case of an Independent SAR) to be exercised;
B. a Consent of Spouse from the spouse of the Recipient, if any, duly signed by such spouse;
D. such documents, representations and undertakings as provided in the SAR Agreement and/or which the Plan Administrator, in its absolute discretion, deems necessary or advisable pursuant to section 0.
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A. the delivery of the documents described in section 0;
B. the receipt by the Company of full payment in satisfaction of any applicable Withholding Taxes;
C. subject to 0, the satisfaction of any requirements or conditions of the Applicable Laws; and
D. the lapse of such reasonable period of time following the exercise of the Independent SAR as the Plan Administrator may establish from time-to-time for administrative convenience.
SPECIAL RULES FOR VESTING OR FORFEITURE
A. in the case of unvested Options, the prospective right to purchase unvested Option Shares shall immediately lapse upon such termination if not exercised prior thereto;
B. in the case of unvested SARs, the prospective right to exercise the unvested portion of such SARs shall immediately lapse upon such termination if not exercised prior thereto; and
C. in the case of unvested Forfeitable Grant Shares, all such unvested Forfeitable Grant Shares shall be immediately forfeited upon such termination unless such forfeiture is expressly waived in writing by the Company;
provided, however, in each of the foregoing cases, the Plan Administrator may, but without any obligation to do so, provide in the underlying Award Agreement that such unvested Options, SARs or Forfeitable Grant Shares shall immediately vest upon the occurrence of one or more events expressly specified in the underlying Award Agreement.
A. in the event of a Change In Control; and/or
B. in the event of an Approved Corporate Transaction.
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A. The expiration date for vested Options and vested SARs shall be accelerated to thirty (30) days after the effective date of Termination Of Recipient; provided, however, the Plan Administrator may, but without any obligation to do so, provide in the underlying Award Agreement that the expiration date for vested Options or vested SARs shall not be accelerated in any event, or be accelerated to a date later than said thirty (30) days after the effective date of Termination Of Recipient.
B. The expiration date for unvested Options and unvested SARs (insofar as they do not become immediately vested pursuant to section 0)) shall be upon Termination Of Recipient if earlier than the expiration date specified in section 0 in the case of an Option and section 0 in the case of an SAR.
ASSIGNABILITY OF CERTAIN AWARDS
A. Options registered under the Securities Act with the Commission on Form S-8; and/or
B. Options granted pursuant to any other exemption from registration or qualification to be relied upon by the Company under applicable Securities Laws which prohibits such assignment.
Options, SARs and unvested Forfeitable Grant Shares so Transferred shall not be further Transferred by the Recipient's Successors except to the extent the original Recipient of such Options, SARs and unvested Forfeitable Grant Shares would have been permitted to Transfer such Options and SARs pursuant to section 0.
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NO STOCKHOLDER RIGHTS FOR HOLDERS OF OPTIONS OR SARs
12.01 General. The Recipient of any Option or SAR (whether vested or unvested) shall not be, nor shall such Recipient have any of the rights or privileges of, a stockholder of the Company with respect to the Option Shares underlying the Option or SAR Shares underlying the SAR including, by way of example and not limitation, the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders, or to receive dividends, distributions, subscription rights or otherwise, unless and until all conditions for exercise of the Option or SARs shall be satisfied, and the Option or SAR duly exercised and underlying Option Shares or SAR Shares duly issued and delivered, at which time the Recipient shall become a stockholder of the Company with respect to such issued Optio n Shares or SAR Shares and, in such capacity, shall thereafter be fully entitled to receive dividends (if any are declared and paid), to vote, and to exercise all other rights of a stockholder with respect to such issued Option Shares or SAR Shares.
COMPLIANCE WITH APPLICABLE SECURITIES LAWS
13.01 Registration or Exemption from Registration. Unless expressly stipulated in the underlying Award Agreement, in no event shall the Company be required at any time to register any securities issued under or derivative from the Plan, including any Option, Option Shares, Grant Shares or SAR Shares awarded or granted hereunder (collectively, the "Plan Securities"), under the Securities Act (including, without limitation, as part of any primary or secondary offering, or pursuant to Form S-8) or to register or qualify the Plan Securities under any applicable Securities Laws. In the event the Company does not register or qualify the Plan Securities, the Plan Securities shall be issued in reliance upon such exemptions from registration or qualification under the applicable Securities Laws that the Company and its legal counsel, in their sole discretion, shall determine to be appropriate and necessary wi th respect to any particular offer or sale of securities under the Plan.
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A. If required by the Company, the Recipient shall provide a Recipient's Representative's Letter from a purchaser representative with credentials reasonably acceptable to the Company to the effect that such purchaser representative has reviewed the Recipient's proposed investment in the Plan Securities and has determined that an investment in the Plan Securities:
B. is appropriate in light of the Recipient's financial circumstances,
C. that the purchaser representative and, if applicable, the Recipient, have such knowledge and experience in financial and business matters that such persons are capable of evaluating the merits and risks of an investment in the Plan Securities, and
D. that the purchaser representative and, if applicable, the Recipient, have such business or financial experience to be reasonably assumed to have the capacity to protect the Recipient's interests in connection with the purchase of the Plan Securities.
REPORTS TO RECIPIENTS OF AWARDS
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A. (outstanding shares of Common Stock are subdivided into a greater number of shares by reason of recapitalization or reclassification,
B. a dividend in Common Stock shall be paid or distributed in respect of the Common Stock,
then the number of Plan Shares, if any, available for issuance under the Plan, and the Option Price of any outstanding Options in effect immediately prior to such subdivision or at the record date of such dividend shall, simultaneously with the effectiveness of such subdivision or immediately after the record date of such dividend, be proportionately increased and reduced, respectively. If outstanding shares of Common Stock are combined into a lesser number of shares by reason of combination or reverse stock split, then the number of Plan Shares, if any, available for issuance under the Plan, and the Option Price of any outstanding Option in effect immediately prior to such combination shall, simultaneously with the effectiveness of such combination, be proportionately reduced and increased, respectively.
A. the consolidation, merger, combination or exchange of shares of capital stock with another entity,
B. the divisive reorganization of the Company (i.e., split-up, spin-off or split-off), or
C. any capital reorganization or any reclassification of Common Stock (other than a recapitalization or reclassification described above in section 0),
then the Recipient shall thereafter be entitled upon exercise of the Option to purchase the kind and number of shares of capital stock or other securities or property of the Company (or its successor{s}) receivable upon such event by a Recipient of the number of Option Shares which such Option entitles the Recipient to purchase from the Company immediately prior to such event. In every such case, the Company may appropriately adjust the number of Option Shares which may be issued under the Plan, the number of Option Shares subject to Options theretofore granted under the Plan, the Option Price of Options theretofore granted under the Plan, and any and all other matters deemed appropriate by the Plan Administrator.
15.04 No Other Rights to Recipient. Except as expressly provided in this 0:
A. the Recipient shall have no rights by reason of any subdivision or consolidation of shares of capital stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and
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B. the dissolution, liquidation, merger, consolidation or divisive reorganization or sale of assets or stock to another corporation (including any Approved Corporate Transactions), or any issue by the Company of shares of capital stock of any class, or warrants or options or rights to purchase securities (including securities convertible into shares of capital stock of any class), shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of, or the Option Price for, the Option Shares.
The grant of an Award pursuant to the Plan shall not in any way affect or impede the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets.
APPROVED CORPORATE TRANSACTIONS - AFFECT ON OPTIONS
16.01 General. Notwithstanding 0 above, in the event of the occurrence of any Approved Corporate Transaction, or in the event of any change in applicable laws, regulations or accounting principles, the Plan Administrator in its discretion is hereby authorized to take any one or more of the following actions whenever the Plan Administrator determines that such action is appropriate in order to facilitate such Approved Corporate Transactions or to give effect to changes in laws, regulations or principles:
(1) the purchase of any such Option for an amount of cash equal to the amount that could have been attained upon the exercise of such Option, or realization of the Recipient's rights had such Option been currently exercisable or payable or fully vested; and/or
(2) the replacement of such Option with other rights or property (which may or may not be securities) selected by the Plan Administrator in its sole discretion.
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CERTAIN TRANSACTIONS WITHOUT CHANGE IN
BENEFICIAL OWNERSHIP - AFFECT ON OPTIONS
17.01 General. Notwithstanding 0 above, in the event of a transaction whose principal purpose is to change the State in which the Company is incorporated, or to form a holding company, or to effect a similar reorganization as to form of entity without change of beneficial ownership, including, without limitation, through:
A. a merger or consolidation or stock exchange or divisive reorganization (i.e., spin-off, split-off or split-up) or other reorganization with respect to the Company and/or its stockholders, or
B. the sale, transfer, exchange or other disposition by the Company of its assets in a single or series of related transactions,
then the Plan Administrator may provide, in its sole and absolute discretion, and on such terms and conditions as it deems appropriate, either by the terms of the underlying Award Agreement or by action taken prior to the occurrence of such transaction or event, that such Option shall be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be substituted for by similar options covering the capital stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices.
DRAG-ALONG RIGHTS
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"The securities represented by this certificate are subject to certain drag-along rights set forth in full in that certain 2000 Pinnacle Oil International. Inc. Directors' Stock Plan dated February 15, 2000, as it may be amended or restated from time to time, a copy of which may be inspected by authorized persons at the principal office of the company, and all the provisions of which are incorporated by reference in this certificate."
AMENDMENT AND DISCONTINUATION OF PLAN; MODIFICATION OF AWARDS
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A. comport with changes in securities, tax or other laws or rules, regulations or regulatory interpretations thereof applicable to the Plan or Awards thereunder or to comply with the rules or requirements of any stock exchange or Nasdaq and/or
B. ensure that the Plan is and remains exempt from the application of any participation, vesting, benefit accrual, funding, fiduciary, reporting, disclosure, administration or enforcement requirement of either the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or the corresponding provisions of the Internal Revenue Code of 1986, as amended (Subchapter D of Title A, Chapter 1 of the Code {encompassing Sections 400 to 420 of the Code}).
ARTICLE XX
MISCELLANEOUS
20.01 Employment Status. In no event shall the granting of an Award be construed to:
A. grant a continued right of employment to a Recipient if such Person is employed by the Company and/or by the Parent and/or any Subsidiary, or
B. affect, restrict or interfere with in any way any right the Company and/or Parent and/or any Subsidiary may have to terminate or otherwise discharge the employment and/or engagement of such Person, at any time, with or without cause, except to the extent that such Person and the Company and/or Parent and/or any Subsidiary may have otherwise expressly agreed in writing.
20.02 Non-Liability For Debts; Restrictions Against Transfer. No Options or unvested Forfeitable Grant Shares granted hereunder, or any part thereof, shall:
A. be liable for the debts, contracts, or engagements of a Recipient, or such Recipient's successors in interest as permitted under this Plan, or
B. be subject to disposition by transfer, alienation, or any other means whether such disposition be voluntary or involuntary or by operation of law, by judgment, levy, attachment, garnishment, or any other legal or equitable proceeding (including bankruptcy), and any attempted disposition thereof shall be null and void ab initio and of no further force and effect.
20.04 Relationship Of Plan To Other Options And Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Parent or Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company to:
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A. establish any other forms of incentives or compensation for Directors of the Company and/or of any Parent and/or any Subsidiary; or
B. to grant options to purchase shares of Common Stock or to award shares of Common Stock or grant any other securities or rights otherwise under this Plan in connection with any proper corporate purpose including but not by way of limitation, in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, firm or association.
20.05 Severability. If any term or provision of this Plan or the application thereof to any person or circumstance shall, to any extent, be determined to be invalid, illegal or unenforceable under present or future laws, then, and in that event:
the performance of the offending term or provision (but only to the extent its application is invalid, illegal or unenforceable) shall be excused as if it had never been incorporated into this Plan, and, in lieu of such excused provision, there shall be added a provision as similar in terms and amount to such excused provision as may be possible and be legal, valid and enforceable; and
the remaining part of this Plan (including the application of the offending term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable) shall not be affected thereby, and shall continue in full force and effect to the fullest extent provided by law.
20.06 Headings; References; Incorporation; Gender; Statutory References. The headings used in this Plan are for convenience and reference purposes only, and shall not be used in construing or interpreting the scope or intent of this Plan or any provision hereof. References to this Plan shall include all amendments or renewals thereof. All cross-references in this Plan, unless specifically directed to another agreement or document, shall be construed only to refer to provisions within this Plan, and shall not be construed to be referenced to the overall transaction or to any other agreement or document. Any Exhibit referenced in Plan shall be construed to be incorporated in this Plan by such reference. As used in this Plan, each gender shall be deemed to include the other gender, including neutral genders appropriate for entities, if applicable, and the singular shall be deemed to include the plural, and vice versa, as the context r equires. Any reference to statutes or laws will include all amendments, modifications, or replacements of the specific sections and provisions concerned.
20.07 Applicable Law. This Plan and the rights and remedies of each party arising out of or relating to this Plan (including, without limitation, equitable remedies) shall (with the exception of the Securities Laws) be solely governed by, interpreted under, and construed and enforced in accordance with the laws (without regard to the conflicts of law principles) of the State of Nevada, as if this Plan were made, and as if its obligations are to be performed, wholly within the State of Nevada.
* * * * *
The undersigned hereby certifies that the foregoing 2000 Pinnacle Oil International. Inc. Directors' Stock Plan was duly adopted by the Board of Directors and stockholders of Pinnacle Oil International. Inc. as of February 15, 2000.
/s/ John M. Woodbury
John M. Woodbury, Secretary
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