SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
[Amendment No. ____]
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Filed by a Party other than the Registrant [_]
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14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material under ss. 240.14a-12
PYR ENERGY CORPORATION
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(Name of Registrant as Specified in Its Charter)
Not Applicable
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PYR ENERGY CORPORATION
1675 Broadway, Suite 2450
Denver, Colorado 80202
(303) 825-3748
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June __, 2004
The Annual Meeting of Stockholders of PYR Energy Corporation will be held
on June __, 2004 at 9:00 a.m. (Denver, Colorado time) at Wells Fargo Bank, 1740
Broadway, Main Floor - Forum Room, Denver, Colorado 80202, for the following
purposes:
1. To consider and vote upon a proposal recommended by the Board of
Directors to approve the issuance and private placement sale by PYR
Energy of 3,000,000 restricted shares of our common stock, at a
purchase price of $___ per share, to a limited number of accredited
investors in the second stage of a two-stage private offering as more
fully described in this proxy statement;
2. To elect a Board of Directors consisting of four Directors;
3. To consider and vote upon a proposal recommended by the Board of
Directors to amend our 2000 Stock Option Plan to increase from
1,500,000 to 2,250,000 the number of shares of common stock issuable
pursuant to options granted under our 2000 Stock Option Plan;
4. To consider and vote upon a proposal recommended by the Board of
Directors to ratify the selection of Hein + Associates LLP to serve as
our certified independent accountants for the fiscal year ending
August 31, 2004; and
5. To transact any other business that properly may come before the
Annual Meeting.
Only the stockholders of record as shown on our transfer books at the close
of business on April 12, 2004 are entitled to notice of, and to vote at, the
Annual Meeting. Our Annual Report for the fiscal year ended August 31, 2003 is
being mailed to stockholders with this proxy statement. The Annual Report is not
part of the proxy soliciting material.
All stockholders, regardless of whether they expect to attend the meeting
in person, are requested to complete, date, sign and return promptly the
enclosed form of proxy in the accompanying envelope (which requires no postage
if mailed in the United States). The person executing the proxy may revoke it by
filing with our Secretary an instrument of revocation or a duly executed proxy
bearing a later date, or by electing to vote in person at the Annual Meeting.
All stockholders are extended a cordial invitation to attend the Annual
Meeting.
By the Board of Directors
Denver, Colorado D. Scott Singdahlsen
May __, 2004 Chief Executive Officer
PROXY STATEMENT
PYR ENERGY CORPORATION
1675 Broadway, Suite 2450
Denver, Colorado 80202
(303) 825-3748
ANNUAL MEETING OF STOCKHOLDERS
To be held June __, 2004
SOLICITATION AND REVOCATION OF PROXIES
This proxy statement is provided in connection with the solicitation of
proxies by and on behalf of the Board of Directors of PYR Energy Corporation, a
Maryland corporation (referred to as the "Company" or "PYR Energy" or "we" or
"us"), to be voted at the Annual Meeting of Stockholders to be held at 9:00 a.m.
(Denver, Colorado time) on June __, 2004 at Wells Fargo Bank, 1740 Broadway,
Main Floor - Forum Room, Denver, Colorado 80202, or at any adjournment or
postponement of the Annual Meeting. We anticipate that this proxy statement and
the accompanying form of proxy will be first mailed or given to stockholders on
or about May __, 2004.
The shares represented by all proxies that are properly executed and
submitted will be voted at the Annual Meeting in accordance with the
instructions indicated on the proxies. Unless otherwise directed, the shares
represented by proxies will be voted (1) in favor of the issuance and sale by
PYR Energy of 3,000,000 restricted shares of our common stock, at a purchase
price of $__ per share, to a limited number of accredited investors in the
second stage of a two-stage private offering, (2) for each of the four nominees
for director whose names are set forth on the proxy card, (3) in favor of the
amendment of our 2000 Stock Option Plan to increase from 1,500,000 to 2,250,000
the number of shares of common stock issuable pursuant to options granted under
our 2000 Stock Option Plan, and (4) in favor of ratification of Hein +
Associates LLP as our certified independent accountants.
A stockholder giving a proxy may revoke it at any time before it is
exercised by delivering written notice of revocation to our Secretary, by
substituting a new proxy executed at a later date, or by requesting, in person
at the Annual Meeting, that the proxy be returned.
The solicitation of proxies is to be made principally by mail; however,
following the initial solicitation, further solicitations may be made by
telephone or oral communication with stockholders. Our officers, directors and
employees may solicit proxies, but these persons will not receive compensation
for that solicitation other than their regular compensation as employees.
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries to forward solicitation materials to beneficial owners
of the shares held of record by those persons. We may reimburse those persons
for reasonable out-of-pocket expenses incurred by them in so doing. We will pay
all expenses involved in preparing, assembling and mailing this proxy statement
and the enclosed material. A majority of the issued and outstanding shares of
common stock entitled to vote, represented either in person or by proxy,
constitutes a quorum at any meeting of the stockholders. If sufficient votes for
approval of the matters to be considered at the Annual Meeting have not been
received prior to the meeting date, we intend to postpone or adjourn the Annual
Meeting in order to solicit additional votes. The form of proxy we are
soliciting requests authority for the proxies, in their discretion, to vote the
stockholders' shares with respect to a postponement or adjournment of the Annual
Meeting. At any postponed or adjourned meeting, we will vote any proxies
received in the same manner described in this proxy statement with respect to
the original meeting.
AVAILABLE INFORMATION
Copies of the Annual Report are being sent to each stockholder with this
proxy statement. Upon written request, we will provide, without charge, a copy
of our quarterly reports on Forms 10-QSB for the quarters ended November 30,
2003 and February 29, 2004 to any stockholders of record, or to any stockholder
who owns common stock listed in the name of a bank or broker as nominee, at the
close of business on April 12, 2004. Any request for a copy of these reports
should be mailed to the Secretary, PYR Energy Corporation, 1675 Broadway, Suite
2450, Denver, Colorado 80202, (303) 825-3748. Stockholders may also receive
copies of these reports by accessing our website at www.pyrenergy.com or the
SEC's website at www.sec.com.
2
1. APPROVAL OF THE ISSUANCE OF COMMON STOCK
AND RELATED TRANSACTIONS
Our Board of Directors has determined that it is in the best interests of
the Company and our stockholders to raise up to $_______ through the private
placement of shares of our common stock at a price of $__ per share. This would
require the issuance of approximately 7,500,000 shares of our common stock, or
approximately 31.6% of the total shares issued and outstanding, assuming that
100% of the shares offered are subscribed for in the private placement.
The American Stock Exchange ("AMEX") Company Guide Section 713 requires
stockholder approval as a prerequisite for AMEX's approval to list newly issued
shares on the AMEX if (i) the aggregate number of shares to be issued would
result in the issuance of 20% or more of the amount of common stock issued and
outstanding, and (ii) the sale price of the shares would be less than the
greater of the market value and the book value of the common stock.
To comply with AMEX regulations, we have arranged the private placement of
our common stock in two stages. The number of shares issued in the first stage
of our private placement constitutes an amount equal to less than 20 percent of
our issued and outstanding common stock. The number of shares to be issued in
the second stage of our private placement, when combined with the first stage,
constitutes an amount equal to 20% or more of our issued and outstanding common
stock. We are requesting that our stockholders approve the second stage of our
private placement in order to comply with the AMEX listing requirements for
those shares.
The principal terms of the two-stage private placement are described below
under "Principal Terms of the Two-Stage Private Placement" below.
Principal Terms of the Two-Stage Private Placement
The following summary of the principal terms of the two-stage private
placement of an aggregate of 7,500,000 shares is qualified in its entirety by
the Subscription and Registration Rights Agreement filed as an exhibit to our
Current Report on Form 8-K dated April __, 2004 that was filed with the
Securities and Exchange Commission and incorporated by reference herein. We urge
you to read that document when deciding whether to vote for the approval of the
issuance of shares of common stock in the second stage of the private placement.
On or about May 7, 2004, in connection with the first stage of the
two-stage private placement, we intend to issue up to 4,500,000 shares of our
common stock at a purchase price of $__ per share. We also intend to place,
subject to approval of our stockholders, up to an additional 3,000,000 shares of
common stock at a purchase price of $___ per share. Both prices represent a
discount from the market value of our common stock primarily because the stock
will not be immediately tradable in the open market. On April 15, 2004, the
closing price for our common stock on the AMEX was $1.25 per share.
We plan to use a majority of the proceeds of the two-stage private
placement for our current and proposed oil and gas operations, including
geological costs, land related costs and drilling and completion costs. The
remainder will be used for general working capital, including general and
administrative expenses, at our sole discretion.
3
We currently are not in compliance with the American Stock Exchange
continued listing requirements because our stockholders' equity is less than
$4,000,000 and because the market capitalization of our outstanding common stock
is less than $50,000,000. If we raise at least $3,200,000 in the first stage of
the Offering, we will regain our compliance with the AMEX continued listing
requirements. If we do not raise at least that amount, we will propose to AMEX a
plan for regaining compliance with the continued listing requirements. If AMEX
approves our proposed plan, we will have 18 months in which to accomplish it.
Effect on Existing Stockholders
All the existing holders of our common stock will be diluted
proportionately in connection with the issuance of 3,000,000 shares of our
common stock in the closing of the second stage, as well as in connection with
the issuance of 4,500,000 shares in the closing of the first stage, of the
two-stage private placement.
We currently are obligated to file a registration statement covering the
resale of the shares of common stock issued in the closing of the first stage of
the private placement. If stockholder approval is obtained for the issuance of
shares of common stock in the second stage of the private placement, we will be
obligated to amend the registration statement to include the resale of those
shares on that registration statement or file another registration statement
covering the resale of the shares sold in the second stage. We must file the
registration statement covering the resale of the shares of common stock issued
in the closing of the first stage within 60 days of the closing.
Our common stock has no preemptive or similar rights.
Principal Effects of Nonapproval
If stockholder approval is not obtained, the closing of the second stage of
the private placement will not occur. Our inability to obtain the additional
financing may adversely affect our ability to pursue our business plan in the
manner we believe is most advantageous to our stockholders.
Required Vote; Board Recommendation
An affirmative vote of the majority of shares represented at the Annual
Meeting in person or by proxy is necessary to approve the issuance and sale by
PYR Energy of 3,000,000 shares of our common stock at a purchase price of $___
per share to a limited number of accredited investors in the second stage of the
private placement.
Our Board of Directors unanimously recommends that the stockholders vote
for approval of the issuance and sale by PYR Energy of 3,000,000 shares of our
common stock at a purchase price of $___ per share to a limited number of
accredited investors in the second stage of the private placement.
2. ELECTION OF DIRECTORS
At the Annual Meeting, the stockholders will elect four directors to serve
as our Board of Directors. Each director will be elected to hold office until
the next annual meeting of stockholders and thereafter until his successor is
elected and qualified. The affirmative vote of a majority of the shares
represented at the Annual Meeting in person or by proxy is required to elect
each director. Cumulative voting is not permitted in the election of directors.
Consequently, each stockholder is entitled to one vote for each share of common
stock held in his or her name. In the absence of instructions to the contrary,
the person named in the accompanying proxy shall vote the shares represented by
that proxy for the persons named below as management's nominees for directors.
Each of the nominees currently is a director of the Company.
4
It is not anticipated that any of the nominees will become unable or
unwilling to accept nomination or election, but, if that should occur, the
persons named in the proxy intend to vote for the election of such other person
as the Board of Directors may recommend.
Required Vote; Board Recommendation
An affirmative vote of the majority of shares represented at the Annual
Meeting in person or by proxy is necessary to elect each director.
The Board of Directors unanimously recommends a vote for each of the
nominees for election as directors.
The following table sets forth, with respect to each nominee for director,
the nominee's age, his positions and offices with the Company, the expiration of
his term as a director and the year in which he first became a director.
Individual background information concerning each of the nominees follows the
table. For additional information concerning the nominees, including stock
ownership and compensation, see "--Executive Compensation", "--Stock Ownership
Of Directors And Principal Stockholders", and "--Certain Transactions With
Management And Principal Stockholders".
Position(s) and
Office(s) with Expiration of Initial Date
Name Age the Company Term of Director as Director
--------------------------------------------------------------------------------
D. Scott Singdahlsen 45 Chief Executive 2005 Annual August 1997
Officer, President Meeting
and Chairman of
the Board
S. L. Hutchison 71 Director 2005 Annual April 1999
Meeting
David Kilpatrick 53 Director 2005 Annual June 2002
Meeting
Bryce W. Rhodes 50 Director 2005 Annual April 1999
Meeting
5
D. Scott Singdahlsen has served as President, Chief Executive Officer, and
Chairman of the Board of the Company since August 1997. Mr. Singdahlsen
co-founded PYR Energy, LLC in 1996, and served as General Manager and
Exploration Coordinator. In 1992, Mr. Singdahlsen co-founded Interactive Earth
Sciences Corporation, a 3-D seismic management and interpretation consulting
firm in Denver, where he served as vice president and president and lead seismic
interpretation specialist from 1992 to 1996. Prior to forming Interactive Earth
Sciences Corporation, Mr. Singdahlsen was employed as a Development Geologist
for Chevron USA in the Rocky Mountain region. At Chevron, Mr. Singdahlsen was
involved in 3-D seismic reservoir characterization projects and geostatistical
analysis. Mr. Singdahlsen started his career at UNOCAL as an Exploration
Geologist in Midland, Texas. Mr. Singdahlsen earned a B.A. in Geology from
Hamilton College and a M.S. in Structural Geology from Montana State University.
S. L. Hutchison has been a Director of the Company since April 1999, when
he was nominated and elected to the Board in connection with the sale by the
Company of convertible promissory notes issued in a private placement
transaction in October and November 1998. Since 1979, Mr. Hutchison has served
as Vice President and Chief Financial Officer of Victory Oil Company, an oil and
gas production company based in California, and other companies in the Victory
Group of Companies. Also during that period, Mr. Hutchison has served as Vice
President and Chief Financial Officer and a Director of Crail Capital, a real
estate investment company that is owned by Victory Oil Company, and Victex,
Inc., a real estate and oil and gas company. Mr. Hutchison also serves as Chief
Financial Officer and a director of each of the Crail Johnson Foundation and the
Independent Oil Producers Agency, and is the Treasurer and a director of the Los
Angeles Maritime Institute. Mr. Hutchison received a Bachelor's degree in
accounting from the University of Washington in 1954.
David B. Kilpatrick has been a Director of the Company since June 2002. He
is currently President of Kilpatrick Energy Group, which provides strategic
management consulting services to the California oil and gas industry. Prior to
the 1998 merger with Texaco, he was President and Chief Operating Officer of
Monterey Resources, Inc., the largest independent oil and gas producer in
California. Previously, he served as Western Division Manager of Monterey's
corporate predecessor, Santa Fe Energy Resources, from 1990 to 1996. Mr.
Kilpatrick has served as President of the California Independent Petroleum
Association and is a member of its Board of Directors and also serves as a
Director of the Independent Oil Producers Agency. In the past, he has served on
the Board of Directors of the Western States Petroleum Association and the
Conservation Committee of California Oil and Gas Producers. He earned a Bachelor
of Science degree in Petroleum Engineering from the University of Southern
California and a Bachelor's Degree in Geology and Physics from Whittier College.
Bryce W. Rhodes has been a Director of the Company since April 1999, when
he was nominated and elected to the Board in connection with the sale by the
Company of convertible promissory notes issued in a private placement
transaction in October and November 1998. From 1996 until September 2003, Mr.
Rhodes has served as Vice President of Whittier Energy Company ("WEC"), an oil
and gas investment company. In September 2003, WEC merged with Olympic
Resources, Inc. and Mr. Rhodes was appointed as President and Chief Executive
Officer. Mr. Rhodes served as Investment Manager of WEC from 1990 until 1996.
Mr. Rhodes received B.A. degrees in Geology and Biology from the University of
California, Santa Cruz, in 1976 and an MBA degree from Stanford University in
1979.
6
Other Executive Officers
Kenneth R. Berry, Jr., 52, has served as Vice President of Land since
August 1999, and as land manager for the Company since October 1997. Mr. Berry
is responsible for the management of all land issues including leasing and
permitting. Prior to joining the Company, Mr. Berry served as the managing land
consultant for Swift Energy Company in the Rocky Mountain region. Mr. Berry
began his career in the land department with Tenneco Oil Company after earning a
B.A. degree in Petroleum Land Management at the University of Texas - Austin.
Each of our officers serves at the pleasure of the Board of Directors.
There are no family relationships among our officers and directors.
Board of Directors and Committees
The Board of Directors met five times during the fiscal year ended August
31, 2003 and each director participated in at least 75 percent of the aggregate
of the total number of meetings of the Board and of all committees on which that
director served during the year. We encourage all incumbent directors, as well
as all nominees for election as director, to attend the annual meeting of
stockholders. Five of six of our incumbent directors attended the 2003 Annual
Meeting of Stockholders held on March 18, 2003.
The standing committees of the Board include the Audit Committee and the
Compensation Committee. The Audit Committee and the Compensation Committee each
consists entirely of non-employee directors. The Board has not appointed a
nominating committee.
The Audit Committee met four times during the fiscal year ended August 31,
2003. The Audit Committee is primarily responsible for the effectiveness of the
Company's accounting policies and practices, financial reporting and internal
controls. The Audit Committee charter was adopted by the Board of Directors in
June 2000 and was amended by the Board in April 2001. A copy of the Audit
Committee charter was attached as Exhibit A to our definitive Proxy Statement
regarding the Annual Meeting of our stockholders held on June 18, 2001 and can
be found on the SEC's website at www.sec.gov. The functions of the Audit
Committee and its activities during the fiscal year ended August 31, 2003 are
described below under the heading "Audit Committee Report". During the fiscal
year ended August 31, 2003, the Board examined the composition of the Audit
Committee in light of the adoption by the SEC and the AMEX of rules governing
audit committees of issuers, such as the Company, whose securities are quoted on
the AMEX. Based upon this examination, the Board confirmed that all members of
the Audit Committee are "independent" within the meaning of the AMEX's rules. As
a result of the Sarbanes-Oxley Act of 2002, the AMEX has approved new rules that
impact the Audit Committee's operation and membership. We intend to modify the
Audit Committee charter to correspond to the new rules. The Audit Committee
currently consists of Messrs. Hutchison (Chairman), Kilpatrick and Rhodes. The
Board of Directors has determined that Mr. Hutchison is the Company's audit
committee financial expert.
The Compensation Committee met one time during the fiscal year ended August
31, 2003. The Compensation Committee has the authority to establish policies
concerning compensation and employee benefits. The Compensation Committee
reviews and makes recommendations concerning the compensation policies and the
implementation of those policies and determines compensation and benefits for
executive officers. The Compensation Committee currently consists of Messrs.
Hutchison (Chairman), Kilpatrick and Rhodes. None of the members of the
Compensation Committee is an employee of the Company.
7
The Company does not have a nominating committee because it believes that
the nominating functions should be relegated to the full Board. Nominees for
director will be selected or recommended by a majority of the Company's
directors who meet the AMEX independence standards, Messrs. Hutchinson,
Kilpatrick and Rhodes. In selecting nominees for the Board, the Company is
seeking a board with a variety of experiences and expertise, and in selecting
nominees will consider business experience in the industry in which the Company
operates, financial expertise, independence from transactions with the Company,
experience with publicly traded companies, experience with relevant regulatory
matters in which the Company is involved and reputation for integrity and
professionalism. The independent directors will consider in good faith director
candidates who meet the minimum qualifications and who are recommended by
stockholders.
To be considered for nomination by the Board at the next annual meeting of
stockholders, the nominations must be made by stockholders of record entitled to
vote. Stockholder nominations must be made by notice in writing, delivered or
mailed by first class U.S. mail, postage prepaid, to the Secretary of the
Company at the Company's principal business address, not less than 53 days nor
more than 90 days prior to any meeting of the stockholders at which directors
are to be elected. Each notice of nomination of directors by a stockholder shall
set forth the nominee's name, age, business address, if known, residence address
of each nominee proposed in that notice, the principal occupation or employment
of each nominee for the five years preceding the date of the notice, the number
of shares of the Company's common stock beneficially owned by each nominee and
any arrangement, affiliation, association, agreement or other relationship of
the nominee with any Company stockholder.
Stockholders wishing to send communications to the Board may contact D.
Scott Singdahlsen, our Chief Executive Officer, President and Chairman of the
Board, at the Company's principal executive office address. All such
communications shall be shared with the members of the Board, or if applicable,
a specified committee or director.
Employee Code of Conduct and Code of Ethics and Reporting of Accounting Concerns
We adopted an Employee Code of Conduct (the "Code of Conduct"). We require
all employees to adhere to the Code of Conduct in addressing legal and ethical
issues encountered in conducting their work. The Code of Conduct requires that
our employees avoid conflicts of interest, comply with all laws and other legal
requirements, conduct business in an honest and ethical manner and otherwise act
with integrity and in our best interest.
We also adopted a Code of Ethics for our Chief Executive Officer, our Chief
Financial Officer, our Controller and all other financial officers and
executives. This Code of Ethics supplements our Code of Conduct and is intended
to promote honest and ethical conduct, full and accurate reporting, and
compliance with laws as well as other matters. The Code of Conduct and Code of
Ethics were filed with the SEC as exhibits to our Annual Report on Form 10-K for
the year ended August 31, 2003.
Further, we have established "whistle-blower procedures" which provides a
process for the confidential and anonymous submission, receipt, retention and
treatment of complaints regarding accounting, internal accounting controls or
auditing matters. These procedures provide substantial protections to employees
who report company misconduct.
8
Audit Committee Financial Expert
Our Board of Directors has determined that Mr. S.L. Hutchison is the
Company's audit committee financial expert.
Audit Committee Report
The report of the Audit Committee shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or the Exchange Act, except
to the extent that we specifically incorporate this information by reference,
and shall not otherwise be deemed filed under such Acts.
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. Management has the primary responsibility for
the financial statements and the reporting process, including the systems of
internal controls. In fulfilling its oversight responsibilities, the Committee
reviewed and discussed with management the audited financial statements in the
Company's Annual Report on Form 10-K for the year ended August 31, 2003 and the
unaudited financial statements included in the Quarterly Reports on Form 10-Q
for the first three quarters of the fiscal year ended August 31, 2003.
The Committee discussed with the independent auditors, who are responsible
for expressing an opinion on the conformity of audited financial statements with
generally accepted accounting principles, the auditors' judgments as to the
quality, not just the acceptability, of the Company's accounting principles and
such other matters as are required to be discussed by the auditors with the
Committee under Statement on Auditing Standard No. 61, as amended. In addition,
the Committee discussed with the independent auditors the auditors' independence
from management and the Company, including the matters in the written
disclosures and the letter required by the Independence Standards Board Standard
No. 1. The Committee considered whether the auditors' providing services on
behalf of the Company other than audit services is compatible with maintaining
the auditors' independence.
The Committee discussed with the Company's independent auditors the overall
scope and plans for their respective audits. The Committee meets with the
independent auditors, with and without management present, to discuss the
results of the auditors' examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The Committee met four times during the fiscal year ended August 31, 2003 and
has thus far subsequently met two times.
9
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board approved, that the audited
financial statements be included in the Annual Report on Form 10-K for the year
ended August 31, 2003 for filing with the SEC. The Committee also has
recommended to the Board the selection of the Company's independent auditors.
The Audit Committee
S.L. Hutchison
David B. Kilpatrick
Bryce W. Rhodes
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Compensation Committee during the
year ended August 31, 2003 was, during that year, an officer or employee of the
Company or of any of its subsidiaries, or was formerly an officer of the Company
or of any of its subsidiaries.
Compensation Committee Report on Executive Compensation
None of the members of the Compensation Committee of the Board of Directors
is an employee of the Company. The Compensation Committee sets and administers
the policies that govern the annual and long-term compensation of executive
officers of the Company. The Compensation Committee makes recommendations to the
full Board concerning compensation of executive officers and awards of stock
options under the Company's stock option plans.
Compensation Policies Toward Executive Officers. The Compensation
Committee's executive compensation policies are designed to provide competitive
levels of compensation that relate compensation to the Company's annual and
long-term performance, reward above average corporate performance compared to
other companies in the oil and gas industry, recognize individual initiative and
achievements, and assist the Company in retaining and attracting qualified
executive officers. The Compensation Committee attempts to achieve these
objectives through a combination of base salary, stock options, and cash bonus
awards. In determining compensation, the Compensation Committee considers the
matters discussed in this report as well as the recommendations of the Chief
Executive Officer concerning other executive officers and employees. The
Compensation Committee met during the year ended August 31, 2003 to consider
executive salaries for the 2003 fiscal year, as well as stock option grants and
cash bonuses for performance during the year ended August 31, 2002.
Executive Salaries. Executive salaries are reviewed by the Compensation
Committee on a yearly basis and are set for individual executive officers based
on subjective evaluations of each individual officer's performance and
contributions to the Company, the Company's past performance, the Company's
future prospects and long-term growth potential and a comparison of the salary
ranges for executives of other companies in the oil and gas industry. Through
consideration of these criteria, the Compensation Committee believes that
salaries may be set in a manner that is both competitive and reasonable within
the Company's industry. The Committee did not adjust executive salaries for the
fiscal year ending August 31, 2003.
10
Stock Options. Stock options are granted to executive officers and other
employees of the Company by the full Board after recommendations of the
Compensation Committee as a means of providing long-term incentive to the
Company's employees. The Compensation Committee believes that stock options
encourage increased performance by the Company's employees and align the
interests of the Company's employees with the interests of the Company's
stockholders. Decisions concerning recommendations for the granting of stock
options to a particular executive officer are made after reviewing the number of
options previously granted to that officer, the number of options granted to
other executive officers (with higher ranking officers generally receiving more
options in the aggregate), and a subjective evaluation of that officer's
performance and contributions to the Company as described above under
"--Executive Salaries" and anticipated involvement in the Company's future
prospects. While stock options are viewed by the Committee on a more
forward-looking basis than cash bonus awards based on prior performance, an
executive officer's prior performance will impact the number of options that may
be granted. After considering the foregoing factors, the Committee recommended
that the Company grant options to three executive officers as follows:
Number of Exercise Price
Name/Title Options Per Share
------------------------------ --------- --------------
D. Scott Singdahlsen, 200,000 $0.29
President and Chief Executive Officer 81,750 $1.30
Andrew P. Calerich 75,000 $0.29
Chief Financial Officer, 77,500 $1.30
Vice President and Secretary
Kenneth R. Berry, Jr. 75,000 $0.29
Vice President--Land 82,500 $1.30
Cash Bonus Awards. The Compensation Committee considers on an annual basis
whether to pay cash bonuses to some or all of the Company's employees, including
the Company's executive officers. The Compensation Committee considers the
granting of bonuses with the objective that the Company will remain competitive
in its compensation practices and be able to retain highly qualified executive
officers. In determining the amounts of bonuses, the Compensation Committee
considers the performance of the Company and each executive officer in the past
year as described above under "--Executive Salaries". The Committee's review of
the Company's performance concentrates on exploration success, prospect
generation, investment community recognition of the Company and financial
stability. The Committee did not pay cash bonuses to any of its employees for
the fiscal year ended August 31, 2003.
11
Chief Executive Officer Compensation. Generally, the compensation of the
Company's Chief Executive Officer is determined in the same manner as the
compensation for other executive officers of the Company as described above. The
Committee did not adjust Mr. Singdahlsen's compensation for the fiscal year
ending August 31, 2003.
The Compensation Committee
S. L. Hutchison
David B. Kilpatrick
Bryce W. Rhodes
* * * *
Mr. Calerich resigned as an employee and officer of the Company in June
2003. The options granted to him in 2003 expired by their terms following Mr.
Calerich's resignation without being exercised.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company. We believe that during the year ended August 31, 2003, our
officers, directors and holders of more than 10% of our common stock complied
with all Section 16(a) filing requirements, except that each of D. Scott
Singdahlsen, our Chief Executive Officer and a director, Andrew P. Calerich, our
former Chief Financial Officer, and Kenneth R. Berry, Jr., our Vice President,
was late filing a Form 4 with respect to their receipt of stock options on
February 5, 2003. In making these statements, we have relied upon
representations and our review of copies of the Section 16(a) reports filed for
the fiscal year ended August 31, 2003 on behalf of our directors, officers and
holders of more than 10% of our common stock.
12
Executive Compensation
Summary Compensation Table
The following table sets forth in summary form the compensation received
during each of the last three completed fiscal years ended August 31, 2003 by D.
Scott Singdahlsen, our Chief Executive Officer, President, Chief Financial
Officer and Chairman of the Board, and Andrew P. Calerich, our former Chief
Financial Officer, Vice President and Secretary. Other than Mr. Singdahlsen,
none of our executive officers received total salary and bonus exceeding
$100,000 during any of the last three fiscal years.
Summary Compensation Table
Long-Term Compensation
Annual Compensation Awards Payouts
---------------------------------------- -----------------------------------
Restricted
Fiscal Other Annual Stock LTIP All Other
Name and Year Salary Bonus Compensation Awards Options Payouts Compensation
Principal Position Ended ($)(1) ($)(2) ($)(3) ($) (#) ($)(4) ($)(5)
-------------------- ------ ------- ------ ------------ ---------- -------- ------- ------------
D. Scott Singdahlsen 2003 175,000 -0- -0- -0- 281,750 -0- -0-
Chief Executive 2002 175,000 -0- -0- -0- -0- -0- -0-
Officer, 2001 128,250 40,000 -0- -0- -0- -0- -0-
President,
Chief Financial
Officer and
Chairman
of the Board
Andrew P. Calerich 2003 96,772 -0- -0- -0- 152,500(7)
Former Chief 2002 95,682 -0- -0- -0- -0- -0- -0-
Financial 2001 90,666 10,000 -0- -0- -0- -0- -0-
Officer,
Vice President
and Secretary(6)
----------
(1) The dollar value of base salary (cash and non-cash) received during the
year indicated.
(2) The dollar value of bonus (cash and non-cash) received during the year
indicated.
13
(3) During the period covered by the Summary Compensation Table, we did not pay
any other annual compensation not properly categorized as salary or bonus,
including perquisites and other personal benefits, securities or property.
(4) We do not have in effect any plan that is intended to serve as incentive
for performance to occur over a period longer than one fiscal year except
for our 1997 and 2000 Stock Option Plans.
(5) All other compensation received that we could not properly report in any
other column of the Summary Compensation Table including annual Company
contributions or other allocations to vested and unvested defined
contribution plans, and the dollar value of any insurance premiums paid by,
or on behalf of, the Company with respect to term life insurance for the
benefit of the named executive officer, and, the full dollar value of the
remainder of the premiums paid by, or on behalf of, the Company.
(6) Mr. Calerich resigned as an employee and officer of the Company in June
2003.
(7) These options expired by their terms following Mr. Calerich's resignation
without being exercised.
Option Grants Table
The following table provides certain summary information concerning
individual grants of stock options made during the fiscal year ended August 31,
2003 to the following named executive officers.
Option Grants For Fiscal Year Ended August 31, 2003
(Individual Grants)
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#) Fiscal Year ($/Sh) Date
---- ----------- ----------- ------ ----
D. Scott Singdahlsen 281,750 29.9% (1) 2/5/2010
Andrew P. Calerich 152,500 16.2% (2) 2/5/2010(3)
----------
(1) Options to purchase 81,750 shares are exercisable at $1.30 per share and
options to purchase 200,000 shares are exercisable at $.29 per share.
(2) Options to purchase 77,500 shares were exercisable at $1.30 per share and
options to purchase 75,000 shares were exercisable at $.29 per share.
(3) Mr. Calerich resigned as an employee and officer of the Company in June
2003, and these options expired by their terms following Mr. Calerich's
resignation without being exercised.
14
Aggregated Option Exercises And Fiscal Year-End Option Value Table
The following table provides certain summary information concerning stock
option exercises during the fiscal year ended August 31, 2003 by the named
executive officers and the value of unexercised stock options held by the named
executive officers as of August 31, 2003.
Aggregated Option Exercises In Fiscal Year Ended August 31, 2003
And Fiscal Year-End Option Values (1)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-The-Money
Options at Options at
Fiscal Fiscal
Year End(#)(4) Year End($)(5)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#)(2) Realized ($)(3) Unexercisable Unexercisable
---- --------------- --------------- ------------- -------------
D. Scott Singdahlsen None -0- 171,666/325,084 -0-/42,000
Andrew P. Calerich None -0- 165,000(6)/197,500(6) -0-/15,750
----------
(1) No stock appreciation rights are held by any of the named executive
officers.
(2) The number of shares received upon exercise of options during the year
ended August 31, 2003.
(3) With respect to options exercised during the year ended August 31, 2003,
the dollar value of the difference between the option exercise price and
the market value of the option shares purchased on the date of the exercise
of the options.
(4) The total number of unexercised options held as of August 31, 2003,
separated between those options that were exercisable and those options
that were not exercisable on that date.
(5) For all unexercised options held as of August 31, 2003, the aggregate
dollar value of the excess of the market value of the stock underlying
those options over the exercise price of those unexercised options. These
values are shown separately for those options that were exercisable and
those options that were not yet exercisable on August 31, 2003 based on the
closing sale price of our common stock on that date, which was $.50 per
share.
(6) Mr. Calerich resigned as an employee and officer of the Company in June
2003, and these options expired by their terms following Mr. Calerich's
resignation without being exercised.
Employee Long-Term Incentive Plans
Excluding the Company's stock option plans, we do not have any long-term
incentive plan to serve as incentive for performance to occur over a period
longer than one fiscal year.
15
Compensation Committee Interlocks and Insider Participation
No person who served as a member of the Compensation Committee during the
year ended August 31, 2003 was, during that year, an officer or employee of the
Company or of any of its subsidiaries, or was formerly an officer of the Company
or of any of its subsidiaries.
Equity Compensation Plan Information
Number of Securities
Remaining Available for
Number of Securities to be Weighted-Average Exercise Future Issuance Under Equity
Issued Upon Exercise of Price of Outstanding Compensation Plans (Excluding
Outstanding Options, Options, Warrants and Securities Reflected in
Plan Category Warrants and Rights Rights Column (a))*
---------------------------- -------------------------- ------------------------- -----------------------------
(a) (b) (c)
---------------------------- -------------------------- ------------------------- -----------------------------
Equity compensation plans
approved by security holders 1,667,500 $2.07 549,000
Equity compensation plans not
approved by security holders -0- -- -0-
Total 1,667,500 $2.07 549,000
-------------
* As of February 29, 2004
1997 Stock Option Plan
In August 1997, our 1997 Stock Option Plan (the "1997 Plan") was adopted by
the Board of Directors and subsequently approved by the stockholders. Pursuant
to the 1997 Plan, we may grant options to purchase an aggregate of 1,000,000
shares of common stock to key employees, directors, and other persons who have
contributed or are contributing to our success. The options granted pursuant to
the 1997 Plan may be either incentive options qualifying for beneficial tax
treatment for the recipient or they may be nonqualified options. The 1997 Plan
may be administered by the Board of Directors or by an option committee.
Administration of the 1997 Plan includes determination of the terms of options
granted under the 1997 Plan. As of February 29, 2004, options to purchase
190,000 shares were outstanding under the Plan, and 526,500 options were
available to be granted under the 1997 Plan.
16
2000 Stock Option Plan
In March 1999, our 2000 Stock Option Plan (the "2000 Plan") was adopted by
the Board of Directors and subsequently approved by the stockholders. Pursuant
to the 2000 Plan, we may grant options to purchase shares of our common stock to
key employees, directors, and other persons who have contributed or are
contributing to our success. We initially could grant options to purchase up to
500,000 shares pursuant to the 2000 Plan. In June 2001, our stockholders
approved an amendment that allows us to grant options to purchase up to
1,500,000 shares pursuant to the 2000 Plan. The options granted pursuant to the
2000 Plan may be either incentive options qualifying for beneficial tax
treatment for the recipient or non-qualified options. The 2000 Plan may be
administered by the Board of Directors or by an option committee. Administration
of the 2000 Plan includes determination of the terms of options granted under
the 2000 Plan. As of February 29, 2004, options to purchase 1,477,500 shares
were outstanding under the 2000 Plan, and 22,500 options were available to be
granted pursuant to the 2000 Plan.
Compensation Of Outside Directors
On April 12, 2002, we granted options to purchase 20,000 shares of common
stock to Mr. Hutchison and Mr. Rhodes who, at that time, were the only outside
directors of the Company. The exercise price of the options is $1.65 per share,
with 5,000 of the options immediately vesting and the remaining 15,000 of the
options vesting 2,500 options for each fiscal quarter served as Director
beginning June 1, 2002. Effective with Mr. Kilpatrick becoming a non-employee
member of the Board of Directors on June 4, 2002, we granted him options to
purchase 20,000 shares of common stock at an exercise price of $1.72 per share.
The options vest 2,500 options for each fiscal quarter served as Director
beginning with our fiscal quarter ended August 31, 2002. There were no options
granted to any of our directors during the fiscal year ended August 31, 2003.
Employment Contracts And Termination of Employment And Change-In-Control
Arrangements
We do not have any written employment contracts with any of our officers or
other employees. We have no compensatory plan or arrangement that results or
will result from the resignation, retirement, or any other termination of an
executive officer's employment or from a change-in-control or a change in an
executive officer's responsibilities following a change-in-control, except that
both the 1997 Plan and the 2000 Plan provide for vesting of all outstanding
options in the event of the occurrence of a change-in-control.
Performance Graph
The following line graph compares the yearly percentage change in the
cumulative total stockholder return, assuming reinvestment of dividends
(regarding shares other than our common stock, on which no dividends have been
paid) for (1) our common stock, (2) the American Stock Exchange Oil Index, and
(3) the Standard & Poors S&P 500 Index. The comparison shown in the graph is for
the years ended August 31, 1999, 2000, 2001, 2002 and 2003. The cumulative total
stockholder return on the Company's common stock was measured by dividing the
difference between the Company's share price at both the end and at the
beginning of the measurement period by the share price at the beginning of the
measurement period.
17
TOTAL RETURN TO STOCKHOLDERS
(Assumes $100 investment on August 31, 1998)
[GRAPHIC OMITTED]
8/29/98 8/31/99 8/31/00 8/31/01 8/30/02 8/29/03
------- ------- ------- ------- ------- -------
PYR Energy Corporation $100 740.00 780.00 332.80 160.00 80.00
Amex Oil Index $100 133.50 133.16 140.48 125.55 122.88
S&P 500 $100 137.93 158.54 118.42 95.70 105.30
Stock Ownership Of Directors And Principal Stockholders
As of February 29, 2004, there were 23,701,357 shares of common stock
outstanding. The following table sets forth certain information as of that date
with respect to the beneficial ownership of common stock by each director and
nominee for director, by all executive officers and directors as a group, and by
each other person known by us to be the beneficial owner of more than five
percent of our common stock:
Number of Shares Percentage of
Name and Address of Beneficially Class Beneficially
Beneficial Owner Owned(1) Owned
------------------------ ---------------- ------------------
Victory Oil Company 3,079,384(2) 13.0%
222 West Sixth Street, Suite 1010
San Pedro, California 90731
Eastbourne Capital Management, L.L.C. 8,605,194(3) 36.3%
1101 Fifth Avenue, Suite 160
San Rafael, California 94901
D. Scott Singdahlsen 2,102,617(4) 8.8%
1675 Broadway, Suite 2450
Denver, Colorado 80202
S.L. Hutchinson 3,290,908(5) 13.9%
c/o Victory Oil Company
222 West Sixth Street, Suite 1010
San Pedro, California 90731
Bryce W. Rhodes 269,039(6) 1.1%
c/o Whittier Energy Company
462 Stevens Avenue, Suite 109
Solana Beach, California 92075
David Kilpatrick 20,000(7) *
9105 St. Cloud Land
Bakersfield, California 93311
All Executive Officers and Directors 5,975,329 24.8%
as a group (five persons) (4)(5)(6)(7)(8)
18
----------
(*) Less than one percent.
(1) "Beneficial ownership" is defined in the regulations promulgated by the
U.S. Securities and Exchange Commission as having or sharing, directly or
indirectly (1) voting power, which includes the power to vote or to direct
the voting, or (2) investment power, which includes the power to dispose or
to direct the disposition of shares of the common stock of an issuer. The
definition of beneficial ownership includes shares underlying options or
warrants to purchase common stock, or other securities convertible into
common stock, that currently are exercisable or convertible or that will
become exercisable or convertible within 60 days. Unless otherwise
indicated, the beneficial owner has sole voting and investment power.
(2) Includes 100,000 shares owned by Crail Fund, a partnership that is owned by
the shareholders of Victory Oil Company. See "Certain Transactions With
Management And Principal Stockholders."
(3) The shares reflected include the shares beneficially owned by Eastbourne
Capital Management, L.L.C., a registered investment adviser, Richard Jon
Barry, Manager of Eastbourne and the following companies to which
Eastbourne is investment adviser: Black Bear Offshore Master Fund Limited,
a Cayman Island exempted company, Black Bear Fund I, L.P. and Black Bear
Fund II, LLC. These shares include the equivalent shares of common stock
underlying $6,462,552 of convertible notes held by Black Bear Offshore
Master Fund Limited, Black Bear Fund I, L.P. and Black Bear Fund II, LLC in
the aggregate amount of 4,971,194 shares.
(4) The shares shown for Mr. Singdahlsen include 200,000 shares owned by Mr.
Singdahlsen's two minor children. Also includes the following options that
are currently exercisable or that will become exercisable within the next
60 days owned by Mr. Singdahlsen: options to purchase 100,000 shares at
$4.40 per share until May 15, 2005, options to purchase 100,000 shares at
$5.98 per share until November 27, 2005, options to purchase 10,000 shares
at $1.815 shares until April 12, 2007 and options to purchase 66,667 shares
at $0.29 per share and options to purchase 27,250 shares at $1.30 per share
until February 4, 2010.
19
(5) Includes options to purchase 20,000 shares at $1.65 per share until April
11, 2007 that currently are exercisable or that will become exercisable
within the next 60 days. Also includes the shares shown as beneficially
owned by Victory Oil Company as described in note (7) below. Mr. Hutchison
is the Vice President and Chief Financial Officer of Victory Oil Company.
Mr. Hutchison disclaims beneficial ownership of the shares beneficially
owned by Victory Oil Company.
(6) Includes 13,000 shares of common stock owned by Mr. Rhodes and 64,414
shares of common stock owned by Adventure Seekers Travel, Inc. Adventure
Seekers is owned by Mr. Rhodes' wife and Mr. Rhodes is the President of
Adventure Seekers. Also includes 171,625 shares that are held by Whittier
Energy Company. Mr. Rhodes is a Vice President of Whittier Energy Company.
Mr. Rhodes disclaims beneficial ownership of the shares beneficially owned
by Whittier Energy Company. Also includes options to purchase 20,000 shares
at $1.65 per share until April 11, 2007 that currently are exercisable or
that will become exercisable within the next 60 days.
(7) Includes options to purchase 20,000 shares at $1.72 per share until June 4,
2007 that currently are exercisable or that will become exercisable within
the next 60 days owned by Mr. Kilpatrick.
(8) Includes the following securities held directly or indirectly by Kenneth R.
Berry, Jr., who is Vice President of Land: an aggregate of 70,265 shares
owned by various entities, IRAs, and trusts with which Mr. Berry, or his
spouse or minor daughter, is associated; and options to purchase 222,500
shares of common stock at exercise prices ranging from $.29 to $5.44 per
share that currently are exercisable or that will become exercisable within
the next 60 days.
Certain Transactions With Management And Principal Stockholders
On May 24, 2002, certain investment entities managed by Eastbourne Capital
Management, LLC purchased $6 million of convertible notes from the Company. The
notes provide for semi-annual interest payments at an annual rate of 4.99% and
are convertible into shares of common stock at a conversion price of $1.30 per
share. At the time of the transaction, these entities had an aggregate ownership
in PYR Energy of approximately 15%. Concurrent with the sale, we agreed to add
Messrs. Eric Sippel and Borden Putnam of Eastbourne to our Board of Directors.
Messrs. Sippel and Putnam resigned from the Board in August 2003, although
Eastbourne still has the right to designate two individuals to serve on the
Board. On February 24, 2004, we entered into an amendment to the convertible
promissory note with Black Bear Fund II, L.L.C., one of the three investment
fund holders of the notes to which Eastbourne is investment adviser, and a
beneficial owner of more than 10% of our common stock. The amendment provides
that the number of shares of common stock that may be acquired by Black Bear
Fund II, L.L.C. upon any conversion of the notes shall be limited to the extent
necessary to ensure that, following exercise of the note, the total number of
shares of common stock then beneficially owned by Black Bear Fund II, L.L.C. and
its affiliates does not exceed 9.999% of the total number of issued and
outstanding shares of our common stock (including for such purpose the shares of
common stock issuable upon such conversion.
20
3. PROPOSAL TO AMEND 2000 STOCK OPTION PLAN
Our Board of Directors has adopted, subject to stockholder approval, an
amendment to the 2000 Plan to increase from 1,500,000 to 2,250,000 the number of
shares of common stock issuable pursuant to options granted under the 2000 Plan.
The options granted pursuant to the 2000 Plan may be either incentive options or
non-qualified options. The 2000 Plan is intended to provide incentives to key
employees and other persons who have or are contributing to our success by
offering them options to purchase shares of common stock. The effect of the
increase in the number of shares issuable upon the exercise of options granted
under the 2000 Plan is to allow us to grant more options from time to time and
thereby augment our program of providing incentives to employees. The terms of
the 2000 Plan concerning incentive options and non-qualified options are
substantially the same except that only employees of the Company or its
subsidiaries are eligible for incentive options and employees and other persons
are eligible for non-qualified options. The number of options authorized is a
maximum aggregate so that the number of incentive options granted reduces the
number of non-qualified options that may be granted. There currently are
approximately six employees eligible to receive incentive options and an
unspecified number of persons eligible to receive non-qualified options. Grants
of options under the 2000 Plan to our named executive officers in fiscal year
ended August 31, 2003 are disclosed in this proxy statement under the heading
"Executive Compensation--Option Grants Table" above.
The portion of the 2000 Plan concerning incentive options and non-qualified
options is administered by the option committee, which may consist of either (a)
the entire Board of Directors, or (b) a committee, appointed by the Board of
Directors, of two or more non-employee directors. If the option committee
consists of less than the entire Board, each member of the committee is required
to be a "non-employee director" as defined in SEC regulations. A "non-employee
director" is a director who (1) is not currently an officer or employee of the
Company or any of its subsidiaries; (2) does not receive compensation from the
Company in excess of $60,000 for services rendered other than as a director; and
(3) is not involved in any transaction that is required to be disclosed in our
Form 10-KSB and proxy reports as a related party transaction. An "outside
director" means, generally, a director who (1) is not a current employee of the
Company, (2) is not a former employee of the Company who receives compensation
for prior services during the taxable year in question, (3) has not been an
officer of the Company, and (4) does not receive compensation from the Company,
either directly or indirectly, in any capacity other than as a director. The
Board of Directors has determined that the compensation committee will act as
the option committee at all times that the members of the compensation committee
meet these criteria. The option committee has discretion to select the persons
to whom incentive options and non-qualified options will be granted, the number
of shares to be granted, the term of these options and the exercise price of
these options. However, no option may be exercisable more than 10 years after
the granting of the option, and no option may be granted under the 2000 Plan
after December 19, 2009.
The 2000 Plan provides that the exercise price of incentive options granted
cannot be less than the fair market value of the underlying common stock on the
date the incentive options are granted. No incentive option may be granted to an
employee who, at the time the incentive option would be granted, owns more than
10% of our outstanding stock unless the exercise price of the incentive option
granted to the employee is at least 110% of the fair market value of the stock
subject to the incentive option, and the incentive option is not exercisable
more than five years from the date of grant. In addition, the aggregate fair
market value (determined as of the date an option is granted) of the common
stock underlying incentive options granted to a single employee which become
exercisable in any single calendar year may not exceed the maximum permitted by
the Internal Revenue Code of 1986, as amended (the "Code") for incentive stock
options.
21
All options granted under the 2000 Plan will become fully exercisable upon
the occurrence of a change in control or certain mergers or other
reorganizations or asset sales described in the 2000 Plan.
Options granted pursuant to the 2000 Plan will not be transferable during
the optionee's lifetime except in limited circumstances set forth in the 2000
Plan. Subject to the other terms of the 2000 Plan, the option committee has
discretion to provide vesting requirements and specific expiration provisions
with respect to the incentive options and non-qualified options granted.
Although we may in the future file a registration statement covering the
issuance of the options and underlying shares of common stock issuable pursuant
to the 2000 Plan, we currently plan to use the exemption from registration set
forth in Section 4(2) of the Securities Act of 1933 and related rules and
regulations due to the limited number, and of our relationship with the persons
currently anticipated to participate in the 2000 Plan. The common stock acquired
through the exercise of the options may be reoffered or resold only pursuant to
an effective registration statement or pursuant to Rule 144 under the Securities
Act or another exemption from the registration requirements of the Securities
Act.
If a change, such as a stock split, is made in our capitalization which
results in an exchange or other adjustment of each share of common stock for or
into a greater or lesser number of shares, appropriate adjustment shall be made
in the exercise price and in the number of shares subject to each outstanding
option. In the event of a stock dividend, each optionee shall be entitled to
receive, upon exercise of the option, the equivalent of any stock dividend that
the optionee would have received had he or she been the holder of record of the
shares purchased upon exercise. The option committee also may make provisions
for adjusting the number of shares subject to outstanding options if we have one
or more reorganizations, recapitalizations, rights offerings, or other increases
or reductions of shares of outstanding common stock.
The Board of Directors may at any time terminate the 2000 Plan or make such
amendments or modifications to the 2000 Plan that the Board of Directors deems
advisable, except that no amendments may impair previously outstanding options
and amendments that materially modify eligibility requirements for receiving
options, that materially increase the benefits accruing to persons eligible to
receive options, or that materially increase the number of shares under the 2000
Plan without the approval of our stockholders.
The incentive options issuable under the 2000 Plan are structured to
qualify for favorable tax treatment provided for "incentive stock options" by
Section 422 of the Code. All references to the tax treatment of the incentive
options are under the Code as currently in effect. Pursuant to Section 422 of
the Code, optionees will not be subject to federal income tax at the time of the
grant or at the time of exercise of an incentive option. In addition, provided
that the stock underlying the incentive option is not sold less than two years
after the grant of the incentive option and is not sold less than one year after
the exercise of the incentive option, then the difference between the exercise
price and the sales price will be treated as long-term capital gain or loss. An
optionee also may be subject to the alternative minimum tax upon exercise of his
incentive options. We will not be entitled to receive any income tax deductions
with respect to the granting or exercise of incentive options or the sale of the
common stock underlying the incentive options.
22
Non-qualified options will not qualify for the special tax benefits given
to incentive options under Section 422 of the Code. An optionee does not
recognize any taxable income at the time the optionee is granted a non-qualified
option. However, upon exercise of these options, the optionee recognizes
ordinary income for federal income tax purposes measured by the excess, if any,
of the then fair market value of the shares over the exercise price. The
ordinary income recognized by the optionee will be treated as wages and will be
subject to income tax withholding. Upon an optionee's sale of shares acquired
pursuant to the exercise of a non-qualified option, any difference between the
sale price and the fair market value of the shares on the date when the option
was exercised will be treated as long-term or short-term capital gain or loss.
Upon an optionee's exercise of a non-qualified option, we will be entitled to a
tax deduction in the amount recognized as ordinary income to the optionee
provided that the compensation amount is reasonable and we satisfy the
applicable reporting requirements required under U.S. Treasury regulations.
As of February 29, 2004, there were options to purchase 1,477,500 shares of
common stock outstanding under the 2000 Plan. There are 22,500 additional
options to purchase shares that could be granted under the 2000 Plan.
Required Vote; Board Recommendation
An affirmative vote of the majority of shares represented at the Annual
Meeting in person or by proxy is necessary to amend the 2000 Plan.
The Board of Directors unanimously recommends that the stockholders vote
for the proposal to amend the 2000 Plan.
4. PROPOSAL TO RATIFY THE SELECTION OF HEIN + ASSOCIATES LLP
AS CERTIFIED INDEPENDENT ACCOUNTANTS
On January 14, 2004, we dismissed Wheeler Wasoff, P.C. as our independent
auditors and engaged Hein + Associates LLP as our new independent auditors. The
decision to change was based on Wheeler Wasoff's inability to serve as our
independent auditors due to audit partner rotation requirements. This decision
was approved by the Audit Committee of our Board of directors. A current report
on Form 8-K was filed with the SEC on January 15, 2004 regarding the change of
auditors. Wheeler Wasoff's reports on our financial statements for either of the
past two years did not contain an adverse opinion or a disclaimer of opinion,
nor were such reports qualified or modified as to uncertainty, audit scope or
accounting principles. There have been no disagreements between the Company and
Wheeler Wasoff on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the satisfaction of Wheeler Wasoff, would have caused Wheeler Wasoff to make
reference in connection with its report to the subject matter of the
disagreement.
It is expected that one or more representatives of Hein + Associates LLP
will be present at the Annual Meeting and will be given the opportunity to make
a statement and to respond to appropriate questions from stockholders.
23
The Board of Directors recommends that the stockholders vote in favor of
ratifying the selection of the certified public accounting firm of Hein +
Associates LLP of Denver, Colorado as the auditors who will audit financial
statements, prepare tax returns and perform other accounting and consulting
services we request for the fiscal year ended August 31, 2004 or until the Board
of Directors, in its discretion, replaces them.
Principal Accountant Fees and Services
Audit Fees
Wheeler Wasoff, P.C. billed the Company $29,058 for the year ended August
31, 2003 and $32,973 for the year ended August 31, 2002 for professional
services rendered by Wheeler Wasoff, P.C. for the audit of the Company's annual
financial statements and review of financial statements included in the
Company's Forms 10-Q and services normally provided by Wheeler Wasoff, P.C. in
connection with statutory and regulatory filings or engagements for those fiscal
years.
Audit-Related Fees
For the years ended August 31, 2003 and August 31, 2002, Wheeler Wasoff,
P.C. did not provide the Company with any services for assurance and related
services provided by Wheeler Wasoff, P.C. that are reasonably related to the
performance of the audit or review of the Company's financial statements and are
not reported above under "--Audit Fees."
Tax Fees
For the years ended August 31, 2003 and August 31, 2002, Wheeler Wasoff,
P.C. billed the Company $2,150 and $2,750, respectively, for professional
services for tax compliance, tax advice, and tax planning.
All Other Fees
For the years ended August 31, 2003 and August 31, 2002, Wheeler Wasoff,
P.C. did not bill the Company for products and services other than those
described above.
Audit Committee Pre-Approval Policies
The Audit Committee did not have any pre-approval policies or procedures
concerning services performed by Wheeler Wasoff, P.C. for the years ended August
31, 2003 and August 31, 2002 and does not currently have any pre-approval
policies or procedures concerning services performed and to be performed by Hein
+ Associates LLP for the year ended August 31, 2004. All of the services
performed by Wheeler Wasoff, P.C. that are described above were pre-approved by
the Audit Committee. Less than 50% of the hours expended on Wheeler Wasoff,
P.C.'s engagement to audit the Company's financial statements for the fiscal
years ended August 31, 2003 and 2002 were attributed to work performed by
persons other than Wheeler Wasoff, P.C.'s full-time, permanent employees.
Required Vote; Board Recommendation
An affirmative vote of the majority of shares represented at the Annual
Meeting in person or by proxy is necessary to ratify the selection of auditors.
There is no legal requirement for submitting this proposal to the stockholders;
however, the Board of Directors believes that it is of sufficient importance to
seek ratification. Whether the proposal is approved or defeated, the Board may
reconsider its selection of Hein + Associates LLP.
24
The Board of Directors unanimously recommends that the stockholders vote
for approval of Hein + Associates LLP as the Company's certified independent
accountants.
OTHER BUSINESS
The Board of Directors is not aware of any other matters that are to be
presented at the Annual Meeting, and it has not been advised that any other
person will present any other matters for consideration at the meeting.
Nevertheless, if other matters should properly come before the Annual Meeting,
the stockholders present, or the persons, if any, authorized by a valid proxy to
vote on their behalf, shall vote on such matters in accordance with their
judgment.
VOTING PROCEDURES
Votes at the Annual Meeting are counted by an inspector of election
appointed by the Chairman of the meeting. If a quorum is present, an affirmative
vote of a majority of the votes entitled to be cast by those present in person
or by proxy is required for the approval of items submitted to stockholders for
their consideration, unless a different number of votes is required by Maryland
law or our certificate of incorporation. Abstentions by those present at the
Annual Meeting are tabulated separately from affirmative and negative votes and
do not constitute affirmative votes. If a stockholder returns his proxy card and
withholds authority to vote for any or all of the nominees, the votes
represented by the proxy card will be deemed to be present at the meeting for
purposes of determining the presence of a quorum but will not be counted as
affirmative votes. Shares in the names of brokers that are not voted are treated
as not present.
RESOLUTIONS PROPOSED BY INDIVIDUAL STOCKHOLDERS;
DISCRETIONARY AUTHORITY TO VOTE PROXIES
Under Rule 14a-8(e) of the Securities Exchange Act of 1934, in order to be
considered for inclusion in the proxy statement and form of proxy relating to
our next annual meeting of stockholders following the end of our 2004 fiscal
year, proposals by individual stockholders must be received by us no later than
November 30, 2004.
In addition, under Rule 14a-4(c)(1) of the Securities Exchange Act, the
proxy solicited by the Board of Directors for the next annual meeting of
stockholders following the end of our 2004 fiscal year will confer discretionary
authority on any stockholder proposal presented at that meeting unless we are
provided with notice of that proposal no later than November 30, 2004.
FORWARD-LOOKING STATEMENTS
This proxy statement includes "forward-looking" statements within the
meaning of Section 21E of the Exchange Act. All statements other than statements
of historical facts included in this proxy statement, including without
limitation statements under "Recent Developments Concerning The Company"
regarding our financial position, business strategy and plans and objectives of
management for future operations and capital expenditures are forward-looking
statements. Although we believe that the expectations reflected in the
forward-looking statements and the assumptions upon which the forward-looking
25
statements are based are reasonable, we can give no assurance that such
expectations and assumptions will prove to have been correct. Additional
statements concerning important factors that could cause actual results to
differ materially from our expectations ("Cautionary Statements") are disclosed
in the "Forward-Looking Statements--Cautionary Statements" section of our Annual
Report on Form 10-K for the fiscal year ended August 31, 2003. All written and
oral forward-looking statements attributable to us or persons acting on our
behalf subsequent to the date of this proxy statement are expressly qualified in
their entirety by the Cautionary Statements.
* * * * *
This Notice and Proxy statement are sent by order of the Board of
Directors.
Dated: May __, 2004 ____________________________________
D. Scott Singdahlsen
Chief Executive Officer
* * * * *
26
PROXY PROXY
PYR ENERGY CORPORATION
For the Annual Meeting of Stockholders on June __, 2004
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints D. Scott Singdahlsen and Kenneth R. Berry,
Jr., or either of them, as proxies with full power of substitution to vote all
the shares of the undersigned with all of the powers which the undersigned would
possess if personally present at the Annual Meeting of Stockholders of PYR
Energy Corporation (the "Corporation") to be held at 9:00 a.m. (Denver, Colorado
time) on June __, 2004, at Wells Fargo Bank, Main Floor-Forum Room, 1740
Broadway, Denver, Colorado 80202, or any adjournments thereof, on the following
matters:
[X] Please mark votes as in this example.
1. To approve the issuance and private placement sale by the Corporation of
3,000,000 restricted shares of our common stock, at a purchase price of
$___ per share, to a limited number of accredited investors in the second
stage of a two-stage private offering as more fully described in the proxy
statement.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To elect the following four directors:
Nominees: S. L. Hutchison, David B. Kilpatrick, Bryce W. Rhodes and D.
Scott Singdahlsen.
FOR ALL NOMINEES [ ]
WITHHELD AUTHORITY FOR ALL NOMINEES [ ]
FOR ALL NOMINEES EXCEPT AS NOTED ABOVE [ ]
3. To amend our 2000 Stock Option Plan to increase from 1,500,000 to 2,250,000
the number of shares of common stock issuable pursuant to options granted
under our 2000 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To ratify the selection of Hein + Associates LLP as the Corporation's
certified independent accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. In their discretion, the proxies are authorized to vote upon an adjournment
or postponement of the meeting.
[ ] YES [ ] NO [ ] ABSTAIN
6. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
[ ] YES [ ] NO [ ] ABSTAIN
(Continued and to be signed on the reverse side)
Unless contrary instructions are given, the shares represented by this
proxy will be voted in favor of Items 1, 2, 3 and 4. This proxy is solicited on
behalf of the Board of Directors of PYR Energy Corporation.
EVEN IF YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN
THIS PROXY IN THE ACCOMPANYING ENVELOPE.
MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW [ ]
Dated: ____________________________________
Signature: ____________________________________
Signature: ____________________________________
Signature if held jointly
(Please sign exactly as shown on your stock
certificate and on the envelope in which this
proxy was mailed. When signing as partner,
corporate officer, attorney, executor,
administrator, trustee, guardian, etc., give
full title as such and sign your own name as
well. If stock is held jointly, each join owner
should sign.)