SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE
ACT OF 1934
Filed
by the Registrant x
Filed
by a Party other than the Registrant o
Check
the
appropriate box:
| o |
Preliminary
Proxy Statement
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| o |
Confidential,
For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
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| x |
Definitive
Proxy Statement
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| o |
Definitive
Additional Materials
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| o |
Soliciting
Material under §240.14a-12
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TETON
ENERGY CORPORATION
(Name
of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
| x |
No
fee required
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| o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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| (1) |
Title
of each class of securities to which transaction
applies:
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| (2) |
Aggregate
number of securities to which transaction
applies:
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| (3) |
Per
unit price or other underlying value of transaction computed
pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was
determined):
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| (4) |
Proposed
maximum aggregate value of transaction:
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| (5) |
Total
fee paid:
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| o |
Fee
paid previously with preliminary
materials.
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| o |
Check
box
if
any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously.
Identify the previous filing by registration statement number,
or the form
or schedule and the date of its
filing.
|
| (1) |
Amount
Previously Paid:
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| (2) |
Form,
Schedule or Registration Statement No.:
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| (3) |
Filing
Party:
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| (4) |
Date
Filed:
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TETON
ENERGY CORPORATION
410
17th
Street, Suite 1850
Denver,
Colorado 80202
(303)
565-4600
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD April 13, 2006
TO
THE
STOCKHOLDERS OF TETON ENERGY CORPORATION:
You
are
cordially invited to attend the annual meeting of stockholders (the “Annual
Meeting”) of Teton Energy Corporation to be held at Marriott City Center, 1701
California Street, Denver, Colorado 80202 on Thursday, April 13, 2006, at 9:30
AM (local time). At the Annual Meeting, you will be asked to vote on the
following:
| 1. |
To
elect five Directors to the Company’s Board, to hold office until his
successor is elected and qualified or until his earlier resignation
or
removal (Proposal No. 1);
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| 2. |
To
consider and act upon a proposal to ratify the Board’s selection of
Ehrhardt Keefe Steiner & Hottman PC as the Company’s independent
auditors for the fiscal year ending December 31, 2006 (Proposal No.
2);
and
|
| 3. |
To
consider and act upon any other business that may properly come before
the
meeting or any adjournments
thereof.
|
BECAUSE
OF THE SIGNIFICANCE OF THESE PROPOSALS TO THE COMPANY AND ITS STOCKHOLDERS,
IT
IS VITAL THAT EVERY STOCKHOLDER VOTES AT THE ANNUAL MEETING IN PERSON OR BY
PROXY.
The
foregoing items of business are more fully described in the Proxy Statement
that
is attached and made a part of this Notice.
The
Board
has fixed the close of business on March 6, 2006 as the Record Date for
determining the stockholders entitled to notice of and to vote at the Annual
Meeting and any adjournment or postponement thereof.
All
stockholders are cordially invited to attend the Annual Meeting in person.
Your
vote is important regardless of the number of shares you own. Whether or not
you
plan to attend the meeting, please take the time to vote in one of these
ways:
| · |
By
mail - fill in, sign and date the enclosed proxy card and return
it
promptly in the enclosed postage-paid
envelope.
|
| · |
By
telephone - call the toll-free telephone number on your proxy card
to vote
by phone.
|
| · |
Via
Internet - visit the website noted on your proxy card to vote via
the
Internet.
|
You
may
attend the meeting and vote in person even if you have previously voted by
proxy
in one of the three ways listed above. Your proxy is revocable in accordance
with the procedures set forth in the Proxy Statement.
The
Annual Report to stockholders for the Company’s fiscal year ended December 31,
2005, has been mailed with or prior to this Proxy Statement. This Proxy
Statement and the enclosed proxy are expected to be mailed to stockholders
on or
about March 23, 2006.
| By Order of the Board of Directors, | ||
| James J. Woodcock | ||
| Chairman | ||
IMPORTANT
WHETHER
OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED
PROXY
CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. IF A
QUORUM IS NOT REACHED, THE COMPANY WILL HAVE THE ADDED EXPENSE OF RE-ISSUING
THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW
YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.
TABLE
OF CONTENTS
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Page
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WHO
CAN HELP ANSWER YOUR QUESTIONS?
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4
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CORPORATE
GOVERNANCE
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4
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BOARD
COMMITTEES
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5
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ELECTION
OF DIRECTORS
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8
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INFORMATION
ABOUT STOCK OWNERSHIP
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11
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INFORMATION
ABOUT EXECUTIVE OFFICERS
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13
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EXECUTIVE
COMPENSATION
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14
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STOCK
OPTIONS
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15
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COMPENSATION
COMMITTEE REPORT
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19
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AUDIT
COMMITTEE REPORT
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21
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RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
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25
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IMPORTANT:
Please
SIGN, DATE, and RETURN the enclosed proxy or submit your proxy by telephone
or
the Internet immediately whether or not you plan to attend the Annual Meeting.
A
return envelope, which requires no postage if mailed in the United States,
is
enclosed for your convenience.
i
TETON
ENERGY CORPORATION
410
17th
Street, Suite 1850
Denver,
Colorado 80202
PROXY
STATEMENT
FOR
2006
ANNUAL MEETING OF STOCKHOLDERS
Our
Board
of Directors is soliciting proxies to be voted at the 2006 Annual Meeting of
Stockholders to be held on April 13, 2006. Your vote is very important. For
this
reason, our Board of Directors is requesting that you permit your common stock
to be represented at the meeting by the proxies named on the enclosed proxy
card. This proxy statement contains important information for you to consider
when deciding how to vote on the matters brought before the meeting. Please
read
it carefully.
Voting
materials, which include this proxy statement, the proxy card and our annual
report on Form 10-K for the fiscal year ended December 31, 2005, were mailed
to
stockholders beginning March 23, 2006. Teton’s principal executive offices are
located at 410 17th Street, Suite 1850, Denver, Colorado 80202. Teton’s main
telephone number is (303) 565-4600. In this proxy statement, Teton Energy
Corporation is referred to as the “Company,” “Teton” and “we.”
A: You
may
vote your Teton stock if our records show that you owned your shares on March
6,
2006, which is referred to as the Record Date. At the close of business on
the
Record Date, 11,666,079 shares of Teton common stock were outstanding and
eligible to vote. You may cast one vote for each share of common stock held
by
you on all matters presented, except for the election of the directors. Please
see “Vote required” at the end of “Proposal 1 — Election of Directors” below for
further explanation.
A: There
are
two proposals scheduled to be voted on at the annual meeting:
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Election of five members of the Board; and |
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•
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Ratification
of the appointment of Ehrhardt Keefe Steiner & Hottman PC as our
independent registered public accounting firm for the fiscal year
ending
December 31, 2006.
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We
will
also consider other business that properly comes before the meeting.
A: Our
Board
recommends that you vote:
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•
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“FOR” each of the nominees to the Board; |
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•
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“FOR”
ratification of the appointment of Ehrhardt Keefe Steiner & Hottman PC
as our independent registered public accounting firm for the
fiscal year
ending December 31,
2006;
|
A: If
your
shares are registered directly in your name with our transfer agent,
Computershare, you are considered the stockholder of record with respect to
those shares and the proxy materials and proxy card are being sent directly
to
you by Teton. As the stockholder of record, you have the right to vote in person
at the meeting. If you choose to do so, you can bring the enclosed proxy card
or
vote using the ballot provided at the meeting. Even if you plan to attend the
annual meeting, we recommend that you vote your shares in advance as described
below so that your vote will be counted if you later decide not to attend the
annual meeting.
1
Most
stockholders of Teton hold their shares in street name through a stockbroker,
bank or other nominee rather than directly in their own name. In that case,
you
are considered the beneficial owner of shares held in street name, and the
proxy
materials are being forwarded to you together with a voting instruction card.
As
the beneficial owner, you are also invited to attend the annual meeting. Because
a beneficial owner is not the stockholder of record, you may not vote these
shares in person at the meeting unless you obtain a “legal proxy” from the
broker, trustee or nominee that holds your shares, giving you the right to
vote
the shares at the meeting. You will need to contact your broker, trustee or
nominee to obtain a legal proxy, and you will need to bring it to the meeting
in
order to vote in person.
A: Whether
you hold shares directly as the stockholder of record or beneficially in street
name, you may direct your vote without attending the annual meeting by Internet,
telephone or completing and mailing your proxy card or voting instruction card
in the enclosed pre-paid envelope. Please refer to the enclosed materials for
details.
A: Other
than the two items of business described in this proxy statement, we are not
aware of any other business to be acted upon at the annual meeting. If you
grant
a proxy, the person named as proxy holder, Karl Arleth, will have the discretion
to vote your shares on any additional matters properly presented for a vote
at
the meeting.
A: If
you
hold shares in your name, and you sign and return a proxy card without giving
specific voting instructions, your shares will be voted as recommended by our
Board on all matters and as the proxy holders may determine in their discretion
with respect to any other matters properly presented for a vote before the
meeting. If you hold your shares through a broker, bank or other nominee and
you
do not provide instructions on how to vote, your broker or other nominee will
have authority to vote your shares on all matters to be considered at the
meeting.
A: A
majority of Teton’s outstanding shares as of the record date must be present at
the meeting in order to hold the meeting and conduct business. This is called
a
quorum. Your shares will be counted for purposes of determining if there is
a
quorum, even if you wish to abstain from voting on some or all matters
introduced at the meeting, if you:
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•
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are present and vote in person at the meeting; or |
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•
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have
properly submitted a proxy card or voted by telephone or by using
the
Internet.
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A: You
may
revoke your proxy and change your vote at any time before the final vote at
the
meeting. You may do this by signing a new proxy card with a later date, voting
on a later date by telephone or by using the Internet (only your latest
telephone or Internet proxy submitted prior to the meeting will be counted),
or
by attending the meeting and voting in person. However, your attendance at
the
meeting will not automatically revoke your proxy unless you vote at the meeting
or specifically request in writing that your prior proxy be revoked.
A. Proxy
instructions, ballots and voting tabulations that identify individual
stockholders are handled in a manner that protects your voting privacy. Your
vote will not be disclosed either within Teton or to third parties, except:
(1)
as necessary to meet applicable legal requirements, (2) to allow for the
tabulation of votes and certification of the vote, and (3) to facilitate a
successful proxy solicitation. Occasionally, stockholders provide written
comments on their proxy card, which may be forwarded to Teton management.
A: The
preliminary voting results will be announced at the meeting. The final voting
results will be tallied by our Transfer Agent and Inspector of Elections and
published in our quarterly report on Form 10-Q for the fiscal quarter ended
June
30, 2006. We will also make the results available on our website, which is
www.teton-energy.com. We will identify a link to the results on our website’s
home page.
2
A: To
reduce
the expense of delivering duplicate voting materials to our stockholders who
may
have more than one Teton stock account, we are delivering only one set of the
proxy statement and the annual report on Form 10-K for the fiscal year ended
December 31, 2005 to certain stockholders who share an address, unless otherwise
requested. A separate proxy card is included in the voting materials for each
of
these stockholders. If you share an address with another stockholder and have
received only one set of voting materials, you may write or call us to request
to receive a separate copy of these materials at no cost to you. Similarly,
if
you share an address with another stockholder and have received multiple copies
of our proxy materials, you may write or call us at the address and phone number
below to request delivery of a single copy of these materials. For future annual
meetings, you may request separate voting materials, or request that we send
only one set of voting materials to you if you are receiving multiple copies,
by
writing or calling us at:
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Teton
Energy Corporation
Attn:
Investor Relations
410
17th Street, Suite 1850
Denver,
CO, USA 80202
Phone: 1.303.565.4600
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||
A: We
will
pay the costs of the solicitation of proxies. We may engage Georgeson
Shareholder Communications Inc. as our proxy solicitor to help us solicit
proxies from brokers, bank nominees and other institutions for a fee of
approximately $15,000, plus reasonable out-of-pocket expenses. We may also
reimburse brokerage firms and other persons representing beneficial owners
of
shares for expenses incurred in forwarding the voting materials to their
customers who are beneficial owners and obtaining their voting instructions.
In
addition to soliciting proxies by mail, our board members, officers, and
employees may solicit proxies on our behalf, without additional compensation,
personally or by telephone, or we may ask our proxy solicitor to solicit proxies
on our behalf by telephone for a fee of $5.00 per phone call, plus reasonable
expenses.
A: A
copy of
our 2005 Form 10-K is enclosed. You may obtain an additional copy of our 2005
Form 10-K by sending a written request to the address listed above under “How
can I obtain a separate set of voting materials?” We will furnish the Form 10-K
without exhibits at no charge. If you prefer a copy of the 2005 Form 10-K
including exhibits, you will be charged a fee (which will be limited to our
reasonable expenses in furnishing such exhibits). Our Form 10-K is available
in
PDF format through our Investor Relations website at http://www.teton-energy.com
and our Form 10-K with exhibits is available on the SEC website at
http://www.sec.gov.
A: In
the
election of directors, the five persons receiving the highest number of (or
plurality) “FOR” votes at the annual meeting will be elected. The proposal
regarding the ratification of our auditors requires the affirmative “FOR” vote
of a majority of those shares present in person or represented by proxy and
entitled to vote on this proposal at the annual meeting. If you hold shares
beneficially in street name and do not provide your broker with voting
instructions, your shares may constitute “broker non-votes.” Generally, broker
non-votes occur when a beneficial owner fails to give voting instructions with
respect to “non-routine” matters. In tabulating the voting result for any
particular proposal, shares that constitute broker non-votes are not considered
entitled to vote on that proposal. Thus, although broker non-votes are counted
for purposes of determining a quorum, broker non-votes will not otherwise affect
the outcome of any matter being voted on at the meeting. There are no votes
scheduled that are considered “non-routine.”
A: The
Board
encourages stockholders who are interested in communicating directly with the
non-employee directors as a group to do so by writing to the non-employee
directors in care of the Secretary. Stockholders can send communications by
mail
to Secretary, Teton Energy Corporation, 410 17th Street, Suite 1850, Denver,
Colorado 80202. Correspondence received that is addressed to the non-employee
directors will be reviewed by our general counsel or his designee, who will
regularly forward to the non-employee directors a summary of all such
correspondence and copies of all correspondence that, in the opinion of our
general counsel, deals with the functions of the board or committees thereof
or
that the general counsel otherwise determines requires their attention.
Directors may at any time review a log of all correspondence received by Teton
that is addressed to the non-employee members of the board and request copies
of
any such correspondence.
3
WHO
CAN HELP ANSWER YOUR QUESTIONS?
You
may
seek answers to your questions by calling or emailing:
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Ms.
Gillian Kane
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Tel.
(303) 565-4600
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gkane@teton-energy.com
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Or
by
writing or calling the Company at its principal executive offices:
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Teton
Energy Corporation
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410
17th Street, Suite 1850
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Denver,
Colorado 80202
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Tel.
(303) 565-4600
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Fax.
(303) 565-4606
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Board
of Directors
The
Board
oversees our business affairs and monitors the performance of management. In
accordance
with our
corporate governance principles, the Board does not involve itself in day-to-day
operations. The Directors keep themselves informed through discussions with
the
Chief Executive Officer, other key executives and by reading the reports and
other materials that we send them and by participating in Board and committee
meetings. Our Directors hold office until their successors have been elected
and
duly qualified unless the director resigns or by reason of death or other cause
is unable to serve in the capacity of director. Biographical information about
our Directors is provided in “Election of Directors - Proposal No. 1” on page
8.
Director
Independence
The
Board
has determined that all of the Directors and nominees who would serve after
April 13, 2006 are independent except for Mr. Arleth, President, Chief Executive
Officer of the Company. The Board’s determinations of independence were made in
accordance with Section 121A of the American Stock Exchange (“AMEX”) Company
Guide. The Company was a small business issuer within the meaning of Rule 12b-2
of the Securities Exchange Act of 1934, as amended (the “1934 Act”) through
December 31, 2003. On that date the Company ceased to be a small business
issuer because its public float exceeded $25 million at the end of two
consecutive years. As a result, the Company ceased reporting as a small business
issuer commencing with the Form 10-Q filed for the quarter ended
March 31, 2004. Small business issuers are not required to have a majority
of independent directors until their first annual meeting of stockholders after
July 1, 2005. However, as a result of its ceasing to be eligible to report
as a small business issuer, the Company is now required to have a majority
of
independent directors within the meaning of Section 121A of the AMEX Company
Guide. The Directors the Board has determined to be independent are Messrs.
Woodcock, Connor, Conroy, and White.
Board
Meetings and Attendance
During
2005, the Board held 8 physical and telephonic meetings. There was 100%
attendance at all meetings of the Board and committees on which he served either
in person or via telephone. The Board also approved certain actions by unanimous
written consent.
Annual
Meeting Attendance
It
is the
Company’s policy that Directors should make every effort to attend the annual
meeting of stockholders. In 2005, all directors attended the Company’s annual
meeting in person.
4
Code
of Business Conduct and Ethics
We
have
adopted a Code of Business Conduct and Ethics that applies to all of our
Directors, officers and employees, including our principal executive officer,
principal financial officer and principal accounting officer. A copy of the
Company’s Code of Business Conduct and Ethics is available on our website at
http://www.teton-energy.com.
We will
post on our website any amendment to the Company’s Code of Business Conduct and
Ethics or waivers of the Company’s Code of Business Conduct and Ethics for
directors and executive officers.
Complaints
Regarding Accounting Matters
The
Audit
Committee has established procedures for (i) the receipt, retention and
treatment of complaints regarding accounting, internal accounting controls,
or
auditing matters (“accounting matters”), and (ii) the confidential, anonymous
submission by employees of the Company of concerns regarding questionable
accounting or auditing matters.
Communications
with Directors
The
Board
has approved procedures for stockholders to send communications to individual
Directors or the non-employee Directors as a group.
Written
correspondence should be addressed to the Director or Directors in care of
Secretary of the Company at the Company’s primary address. All correspondence
will be forwarded directly to the intended recipient.
You
may
also contact individual Directors by calling the Company’s principal executive
offices at (303) 565-4600.
BOARD
COMMITTEES
The
Board
has standing Audit, Compensation, and Governance and Nominating committees.
Each
committee has a written charter. The charters are included as appendices to
this
Proxy Statement and available on the Company’s website at http://www.teton-energy.com.
Information concerning the membership and function of each committee is as
follows:
| Board Committee Membership | ||||||
|
Name
|
Audit
Committee
|
Compensation
Committee
|
Governance
and Nominating Committee
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Mr.
Arleth
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||||||
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Mr.
Connor
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X (1)
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Mr.
Conroy
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X
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X
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X(1)
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Mr.
White
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X
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X
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||||
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Mr.
Woodcock
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X(1)
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X
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||||
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_____________________
(1) Chairman.
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Audit
Committee
The
Audit
Committee is responsible for determining the adequacy of the Company’s internal
accounting and financial controls, reviewing the results of the audit of the
Company performed by the independent public accountants, and recommending the
selection of independent public accountants. The functions of the Audit
Committee and its activities during 2005 are described in more detail under
“Report of the Audit Committee” on page 20 as well as in the Committee’s
charter, which can be found at our website, http://www.teton-energy.com. During
the year, the Board examined the composition of the Audit Committee in light
of
the adoption by the AMEX of new listing standards governing audit committees.
Based upon this examination, the Board has determined that each of the members
of the Audit Committee is unrelated, is an outside member with no other current
affiliation with the Company, and is independent as defined by AMEX listing
standards. The Board has determined that Mr. John Connor is an “audit committee
financial expert” as that term is defined by the SEC and AMEX, and is
“independent” from the Company’s management as that term is defined in Item
7(d)(3)(iv) of Regulation 14A promulgated under the 1934 Act. During 2005,
the
Audit Committee held four meetings by teleconference.
During
the year, the Board examined the composition of the Audit Committee in light
of
the relevant AMEX listing standards governing audit committees. Based upon
this
examination, the Board has determined that Mr. Connor, Mr. Conroy, and Mr.
White, are unrelated, are outside members with no other current affiliation
with
the Company, and are independent as defined by AMEX listing
standards.
5
Compensation
Committee
James
J. Woodcock - Chairman, Thomas F. Conroy, and William K.
White
The
Compensation Committee determines matters pertaining to the compensation of
certain executive officers of the Company and administers the Company’s stock
option and incentive compensation. During 2005, the Compensation Committee
held
two meetings by teleconference and held an executive session during a regularly
scheduled board meeting to discuss compensation. The Committee’s report starts
on page 18. The Committee’s charter is reproduced on our website and
http://www.teton-energy.com.
Governance
and Nominating Committee
Thomas
F. Conroy - Chairman and James J. Woodcock
The
Board
has established a Governance and Nominating Committee for purposes of nominating
Directors and for all other purposes outlined in the Governance and Nominating
Committee charter, including nominees submitted to the Board by stockholders.
The Board has determined that each of the members of the Governance and
Nominating Committee is unrelated, is an outside member with no other
affiliation with the Company, and is independent as defined by the AMEX listing
standards. The Committee’s charter is reproduced on our website and
http://www.teton-energy.com.
Nomination
of Directors
As
provided in the Governance and Nominating Committee’s charter and our Company’s
corporate governance principles, the Governance and Nominating Committee is
responsible for identifying individuals qualified to become Directors. The
Governance and Nominating Committee seeks to identify director candidates based
on input provided by a number of sources, including (1) the Governance and
Nominating Committee members, (2) our other Directors, (3) our stockholders,
(4)
our Chief Executive Officer or Chairman, and (5) third parties such as
professional search firms. In evaluating potential candidates for director,
the
Governance and Nominating Committee considers the entirety of each candidate’s
credentials.
Qualifications
for consideration as a director nominee may vary according to the particular
areas of expertise being sought as a complement to the existing composition
of
the Board. However, at a minimum, candidates for director must
possess:
| · |
high
personal and professional ethics and
integrity;
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the
ability
to exercise sound judgment;
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the
ability to make independent analytical
inquiries;
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a
willingness and ability to devote adequate time and resources to
diligently perform Board and committee duties;
and
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the
appropriate
and relevant business experience and
acumen.
|
In
addition to these minimum qualifications, the Governance and Nominating
Committee also takes into account when considering whether to nominate a
potential director candidate the following factors:
| · |
whether
the person possesses specific industry expertise and familiarity
with
general issues affecting our
business;
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whether
the person’s nomination and election would enable the Board to have a
member that qualifies as an “audit
committee financial expert” as such term is defined by the Securities and
Exchange Commission (the “SEC”);
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| · |
whether
the person would qualify as an “independent” director under the rules of
the SEC and AMEX listing standards;
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the
importance of continuity of the existing composition of the Board
to
provide long-term stability and experienced oversight;
and
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the
importance of diversified Board membership, in terms of both the
individuals involved and their various experiences
and areas of expertise.
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6
The
Governance and Nominating Committee will consider director candidates
recommended by stockholders provided such recommendations are submitted in
accordance with the procedures set forth below. In order to provide for an
orderly and informed review and selection process for director candidates,
the
Board has determined that stockholders who wish to recommend director candidates
for consideration by the Governance and Nominating Committee must comply with
the following:
| · |
the
recommendation must be made in writing to the attention of the Chairman
of
the Company’s Governance and Nominating
Committee;
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| · |
the
recommendation must include the candidate’s name, home and business
contact information, detailed biographical data and qualifications,
information regarding any relationships between the candidate and
the
Company
within the last three years and evidence of the recommending person’s
ownership of the Company’s Common
Stock;
|
| · |
the
recommendation shall also contain a statement from the recommending
stockholder in support of the candidate; professional references,
particularly within the context of those relevant to Board membership,
including issues of character, judgment, diversity, age, independence,
expertise, corporate experience, length of service, other commitments;
and
personal references; and
|
| · |
a
statement
from the stockholder nominee indicating that such nominee wants to
serve
on the Board and could be considered independent under SEC rules
and AMEX
listing standards, as in effect at that
time.
|
All
candidates submitted by stockholders will be evaluated by the Governance and
Nominating Committee according to the criteria discussed above and in the same
manner as all other director candidates.
Compensation
Committee Interlocks and Insider Participation
In
January 2006, the Board elected James J. Woodcock, Thomas F. Conroy, and William
K. White to serve on the Compensation Committee for fiscal 2006. All
Compensation committee members are independent pursuant to Rule 121A of the
AMEX
Company Guide.
7
ELECTION
OF DIRECTORS
PROPOSAL
NO. 1
The
Board
proposes the election of the current Directors of the Company for an additional
term of one year. The following is information about each nominee, including
biographical data for at least the last five years. Should one or more of these
nominees become unavailable to accept nomination or election as a director,
the
individuals named as proxies on the enclosed proxy card will vote the shares
that they represent for the election of such other persons as the Board may
recommend, unless the Board reduces the number of Directors.
The
Board
adheres to corporate governance principles designed to assure the continued
vitality of the Board and excellence in the execution of its duties. The Board
is responsible for supervision of the overall affairs of the Company. Following
the Annual Meeting, the Board will consist of five Directors. All Directors
are
U.S. citizens. The term of each director continues until the next annual meeting
or until successors are elected. The nominees for director are:
|
Name
|
Biographical
Information and Current Directorships
|
Age
|
||
|
James
J. Woodcock
|
James
J. Woodcock has been a Director since 2002 and Chairman of the Company
since February 2005. Mr. Woodcock also chairs the Company’s Compensation
Committee. Since 1981, Mr. Woodcock has been the owner and CEO of
Hy-Bon
Engineering Company, based in Midland, Texas. Hy-Bon is an engineering
firm and manufacturer of vapor recovery, gas boosters, and casing
pressure
reduction systems for the oil industry. From 1997 to 2002, Mr. Woodcock
was the Chairman of Transrepublic Resources, a private oil and gas
exploration firm located in Midland Texas. From 1996 to 2003, Mr.
Woodcock
was a board member of Renovar Energy, a private waste to energy firm
located in Midland Texas and was its Chairman of the Board from 1996
until
2003.
|
67
|
||
|
Karl
F. Arleth
|
Karl
F. Arleth has been our President and Chief Executive Officer since
May
2003 and a Director since 2002. From 2002 to 2003, Mr. Arleth was
the
Chief Operating Officer of Sefton Resources, Inc., an oil and gas
exploration and production company. Since 2002, Mr. Arleth has served
as a
Board member of Sefton Resources, Inc. Between 1999 and 2001, he
served as
Chairman and CEO of Eurogas, Inc in London. Ending in 1999, Mr. Arleth
spent 21 years with Amoco and BP-Amoco.
ouston
|
57
|
||
|
John
T. Connor, Jr.
|
John
T. Connor, Jr. has been a Director since 2003 and chairs the Board’s audit
committee. He is the Founder and Portfolio Manager of the Third Millennium
Russia Fund, a US based mutual fund specializing in the equities
of
Russian public companies, which he founded in 1998. Mr. Connor is
a member
of the Council on Foreign Relations and the American Law Institute.
He is
a Director of Port.ru., Inc., a Delaware corporation, which operates
the
leading internet portal in Russia, mail.ru. and is also a member
of the
board of directors of Swissfone Ltd., based in Washington, D.C.,
an Irish
company which is a telecom wholesaler.
|
65
|
||
|
Thomas
F. Conroy
|
Thomas
F. Conroy was our interim Chief Financial Officer and Corporate Secretary
from March 2002 until May 1, 2003, and a Director since 2002. Since
2002,
Mr. Conroy has been a principal member of Mann-Conroy-Eisenberg &
Assoc. LLC, a life insurance and reinsurance consulting firm, and
since
2001, has been a managing principal of Strategic Reinsurance Consultants
International LLC, a life reinsurance consulting and brokerage firm.
Ending in 2001, Mr. Conroy, spent 27 years with ING and its predecessor
organizations, serving in various financial positions and leading
two of
its strategic business units as President. Mr. Conroy is a Certified
Public Accountant.
|
67
|
||
|
William
K. White
|
Mr.
White is currently President of Amado Energy L.P., an investment
vehicle
formed to focus on the acquisition of oil and gas minerals in the
United
States. Between 1996-2002, Mr. White was Chief Financial Officer
of Pure
Resources, Inc., a NYSE-listed independent exploration and production
concern.
|
63
|
||
8
All
officers hold office until the first meeting of the Board after the annual
meeting of stockholders next following his election or until his successor
is
elected and qualified. A director or officer may also resign at any time.
Messrs. Connor, Conroy, White, and Woodcock have been determined by the Board
to
be Independent Directors within the meaning of Section 121A of the AMEX
Company Guide. There are no family relationships among directors or executive
officers of Teton.
THE
BOARD
RECOMMENDS A VOTE FOR THE ELECTION OF ALL THE ABOVE NOMINEES.
9
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS.
Transactions
Involving Mr. Arleth
Mr.
Arleth, President and Chief Executive Officer, signed an employment agreement
on
May 1, 2003. The agreement is for a three-year term, with an initial salary
of
$10,000 per month. Mr. Arleth’s salary has been raised each year since the
initial agreement and, effective, January 1, 2006, his salary under his
employment agreement is paid at $20,833 per month. Under the terms of the
agreement, Mr. Arleth is entitled to 24 months severance pay in the event of
a
change of position or control of the Company.
DIRECTOR
COMPENSATION
In
addition to these fees, Directors are reimbursed for reasonable travel expenses,
are eligible to participate in the Company’s stock option plan, and are covered
by the Company’s directors and officers insurance.
During
2005, the Directors received the following compensation based on retainers
and
attendance at each meeting: Messrs. Connor, Conroy, Woodcock each received
$24,000 in cash compensation in respect of quarterly retainers and Mr. White
received $6,000; Messrs. Connor and Conroy each received $21,000 and Mr.
Woodcock received $22,300 in respect of stock paid for attendance at physical
meetings and participation in teleconferences. Mr. White received no stock
compensation during for 2005 in respect of meetings attended. In addition,
all
directors participate in the Company’s Long-term Incentive Program. In addition,
during 2005, Mr. Woodcock, as chairman, was awarded 120,000 shares of restricted
stock, which vest in equal tranches each year over a three-year period beginning
January 1, 2006. Additionally, since Mr. White was not a member of the Board
when the LTIP grants were awarded in July 2005, he was awarded 25,000 shares
which vest in equal tranches each year over a three-year period.
10
INFORMATION
ABOUT STOCK OWNERSHIP
The
following tables set forth certain information as of the Record Date, available
to the Company with respect to the shares of the Company (i) held by those
persons known to the Company to be beneficial owners (as determined under the
rules of the SEC) of more than 5% of the Common Stock then outstanding and
(ii)
held by each of the Directors, each of the executive officers named in the
Summary Compensation Table below, and by all of the Directors and such executive
officers as a group. The business address for all Directors and executive
officers is c/o Teton Energy Corporation, 410 17th Street, Suite 1850, Denver,
Colorado 80202.
5%
BENEFICIAL OWNERS
|
NAME
AND ADDRESS(1)
of Beneficial Owner
|
Common
Stock
Beneficially
Owned
|
Percent
of Class
|
|||||
|
H.
Howard Cooper (2)
|
1,388,910
|
10.93
|
%
|
||||
|
Karl
F. Arleth (3)
|
891,745
|
7.34
|
%
|
||||
|
Parties
Affiliated with PGR Partners LLC (4)
|
650,000
|
5.74
|
%
|
||||
|
Sound
Energy Partners (5)
|
643,400
|
5.68
|
%
|
||||
|
ATEC/Apollo
(6)
|
619,992
|
5.44
|
%
|
||||
|
James
J. Woodcock (7)
|
618,556
|
5.23
|
%
|
||||
| (1) |
Unless
otherwise indicated, the address for all beneficial owners is c/o
Teton
Energy Corporation, 410 17th
Street, Suite 1850, Denver, CO
80202.
|
| (2) |
Includes
(i) 10,621 shares of common stock, (ii) 375,000 shares underlying
warrants, with an exercise price of $3.24, (iii) 603,289 shares underlying
options exercisable at $3.48 per share and (iv) 400,000 shares underlying
options exercisable at $3.60 per
share.
|
| (3) |
Includes
(i) 75,850 shares of common stock, (ii) 105,557 shares underlying
warrants, with exercise prices ranging from $3.24 to $4.92 per share,
(iii) 410,338 shares underlying options exercisable at $3.48 per
share,
and (iv) 300,000 shares underlying options exercisable at $3.60 per
share.
|
| (4) |
Includes
650,000 shares of common stock owned directly. 450,000 shares (as
well as
200,000 warrants, which warrants were subsequently exercised) were
issued
directly to five entities controlled by individuals who are affiliated
with PGR Partners, LLC and involved in the sale of the 25% membership
interest in Piceance Gas Resources, LLC, which membership interest
constituted our interest in the Piceance Basin until the fee owner
of the
land on which Piceance LLC’s oil and gas rights and leases are located
consented to transfer the interests directly to each of the members.
The
address for those individuals who are affiliated with PGR Partners,
LLC is
730 17th
Street, Suite 410, Denver, Colorado
80202.
|
| (5) |
According
to a Schedule 13G filed with the Securities and Exchange Commission
(the
“SEC”) by Sound Energy Partners, Inc., dated February 9, 2006 and
effective as of December 31, 2005, Sound Energy Partners, Inc., a
registered investment advisor, has shared power to vote or to direct
the
vote with respect to 643,400 shares of our common stock. The address
of
Sound Energy Partners, Inc. listed in the Schedule 13G is 354 Pequot
Avenue, Southport, Connecticut
06890.
|
| (6) |
Includes
(i) 436,485 shares of common stock owned directly and (ii) 183,437
shares
of common stock underlying warrants exercisable at $1.75 per share.
The
shares and warrants were issued directly to nine individuals who
are
affiliated with ATEC/Apollo and involved in the sale of the acreage
to the
Company that constitutes our DJ Basin acreage. ATEC/Apollo’s address is
1557 Ogden Street, Suite 300, Denver, Colorado
80218.
|
| (7) |
Includes
(i) 115,828 shares of common stock, (ii) 92,590 shares underlying
warrants, with exercise prices ranging from $3.24 to $4.92 per share,
(iii) 210,148 shares underlying options exercisable at $3.48 per
share,
and (iv) 200,000 shares underlying options exercisable at $3.60 per
share.
|
11
DIRECTORS
AND OFFICERS
|
NAME
AND ADDRESS(1)
of Beneficial Owner
|
Common
Stock
Beneficially
Owned
|
Percent
of Class
|
|||||
|
Karl
F. Arleth (2)
|
891,745
|
7.34
|
%
|
||||
|
James
J. Woodcock (3)
|
618,556
|
5.23
|
%
|
||||
|
John
T. Connor (4)
|
373,718
|
3.25
|
%
|
||||
|
Thomas
F. Conroy (5)
|
161,031
|
1.41
|
%
|
||||
|
William
K. White (6)
|
15,000
|
0.13
|
%
|
||||
|
Patrick
A. Quinn (7)
|
100,000
|
0.88
|
%
|
||||
|
Directors
and Executive Officers as a Group
(six
(6) persons)
|
2,160,060
|
18.24
|
%
|
||||
| (1) |
Unless
otherwise indicated, the address for all beneficial owners is c/o
Teton
Energy Corporation, 410 17th
Street, Suite 1850, Denver, CO
80202.
|
| (2) |
Includes
(i) 75,850 shares of common stock, (ii) 105,557 shares underlying
warrants, with exercise prices ranging from $3.24 to $4.92 per share,
(iii) 410,338 shares underlying options exercisable at $3.48 per
share,
and (iv) 300,000 shares underlying options exercisable at $3.60 per
share.
|
| (3) |
Includes
(i) 115,828 shares of common stock, (ii) 92,590 shares underlying
warrants, with exercise prices ranging from $3.24 to $4.92 per share,
(iii) 210,148 shares underlying options exercisable at $3.48 per
share,
and (iv) 200,000 shares underlying options exercisable at $3.60 per
share.
|
| (4) |
Includes
(i) 183,554 shares of common stock owned indirectly, (ii) 15,164
shares of
common stock owned directly, (iii) 100,000 shares of common stock
underlying options exercisable at $3.71 per share and (iv) 75,000
shares
of common stock underlying options exercisable at $3.60 per
share.
|
| (5) |
Includes
(i) 31,261 shares of common stock, (ii) 26,112 shares underlying
warrants,
with exercise prices ranging from $3.24 to $6.00, (iii) 28,658 shares
underlying options exercisable at $3.48 per share and (iv) 75,000
shares
underlying options exercisable at $3.60 per
share.
|
| (6) |
Includes
15,000 shares of common stock.
|
| (7) |
The
shares owned by Mr. Quinn are held subject to a restricted stock
award
agreement.
|
12
INFORMATION
ABOUT EXECUTIVE OFFICERS
The
Chairman, the Chief Executive Officer, and other corporate officers are elected
annually by our Board. Each holds office until their successors are elected
and
duly qualified or until their resignation.
The
current executive officers of the Company are as follows:
|
Name
|
Age
|
Position
|
||
|
Karl
F. Arleth
|
57
|
Chief
Executive Officer, President, and Director
|
||
|
Patrick
A. Quinn
|
52
|
Chief
Financial Officer & Secretary
|
Karl
F. Arleth has been our President and Chief Executive Officer since May
2003 and a Director since 2002. From 2002 to 2003, Mr. Arleth was the Chief
Operating Officer of Sefton Resources, Inc., an oil and gas exploration
and
production company. Since 2002, Mr. Arleth has served as a Board member
of
Sefton Resources, Inc. Between 1999 and 2001, he served as Chairman and
CEO of
Eurogas, Inc in London. Ending in 1999, Mr. Arleth spent 21 years with
Amoco and
BP-Amoco.
Patrick
A. Quinn, CPA, CVA. Mr. Quinn joined Teton in February 2004 to serve as
the Company’s Chief Financial Officer on a contract basis. For the past 15
years, Mr. Quinn has been the CEO of Quinn & Associates, P.C., a firm he
founded that provides accounting, tax, and auditing services primarily
to the
oil and gas industry.
13
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table provides information about the total compensation for services
in all capacities to the Company or its subsidiary for the Chief Executive
Officer and the other most highly compensated executive officers of the Company
whose total annual salary and bonus exceeded $100,000 (collectively, the “named
executive officers”). See the Compensation Committee Report beginning on page 18
for an explanation of our compensation philosophy.
| Annual Compensation | Long Term Compensation | ||||||||||||||||||||||||
| Awards | Payouts | ||||||||||||||||||||||||
|
Name
& Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compen-
sation
($)
|
Restricted
Stock
awards
|
Securities
Underlying
Options
SARs
(#)
|
LTIP
Payouts
($)
|
All
Other
Compen-sation
|
|||||||||||||||||
|
Karl
F. Arleth CEO
|
2005
|
205,000
|
265,000
|
(1)(6)
|
17,250
|
0
|
0
|
0
|
0
|
||||||||||||||||
| 2004 |
180,000
|
80,000
|
(2)
|
16,800
|
0 |
300,000
|
0
|
0
|
|||||||||||||||||
|
2003
|
85,000
|
0
|
0
|
0
|
410,338
|
0
|
0
|
||||||||||||||||||
|
H.
Howard Cooper,
Chairman
|
2005
|
200,000
|
(3)
|
0
|
11,181
|
0
|
0
|
0
|
0
|
||||||||||||||||
| (until February 2005)CEO | 2004 | 200,000 |
160,000
|
(2)
|
8,200
|
0
|
400,000
|
0 |
0
|
||||||||||||||||
| (untilMay 2003) |
2003
|
160,000
|
0
|
0
|
0
|
603,289
|
0
|
0
|
|||||||||||||||||
|
Patrick
A. Quinn
|
2005
|
0
|
0
|
(6)
|
182,901
|
(4)
|
441,000
|
(5)
|
0
|
0
|
0
|
||||||||||||||
|
CFO
|
2004
|
0
|
0
|
105,745
|
(4)
|
0
|
0
|
0
|
0
|
||||||||||||||||
| (1) |
$60,000
of Mr. Arleth’s bonus was paid in respect of performance during 2004 and
$205,000 was in respect of performance during
2005.
|
| (2) |
Bonus
paid for 2003 performance.
|
| (3) |
Mr.Cooper
resigned as Chairman in February 2005 and later resigned as
a director in
October 2005. Amounts paid to Mr. Cooper in 2005 included his
service as
executive chairman in January - February 2005 and in respect
of negotiated
severance payments during the balance of
2005.
|
|
(4)
|
Mr.
Quinn has rendered services to the Company as its Chief Financial
Officer
on a contract basis. Amounts paid in respect of Mr. Quinn’s services were
paid to Mr. Quinn’s firm, Quinn & Associates, P.C. in respect of Mr.
Quinn’s services and for services of other employees of Quinn &
Associates, P.C.
|
|
(5)
|
Mr.
Quinn was awarded 140,000 restricted shares on April 5, 2005. Of
those
shares 40,000 shares were given registration rights pursuant to an
S-8
filing entitling Mr. Quinn to sell such shares for tax purposes.
The
balance of the shares were subject to certain terms pursuant to an
award
agreement. The value of shares held by Mr. Quinn at December 31,
2005 was
$590,000.
|
| (6) |
Does
not include amounts issued in respect of the Company’s 2005 Long-Term
Incentive Plan. (Please see discussion of awards made under the Company’s
LTIP under the Long-term
Incentive Plans - Awards in Last Fiscal Year
section below.
|
14
Stock
Options
Options/SARs
Grants During Last Fiscal Year
The
Company did not grant any stock options or SARs during the last fiscal
year.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
|
Number
of
|
||||||||
|
Shares
|
Securities
|
Value
of
|
||||||
|
Acquired
|
Underlying
|
Unexercised
|
||||||
|
On
|
Value
|
Unexercised
|
In-the-money
|
|||||
|
Name
|
Exercise
|
Realized
|
Options
|
Options
|
||||
|
Karl
F. Arleth
|
--
|
--
|
710,338
|
$
1,683,018
|
||||
|
Howard
Cooper
|
--
|
--
|
1,003,289
|
$
2,379,959
|
Long-term
Incentive Plans - Awards in Last Fiscal Year
The
following table provides information related to long-term incentive plan awards
granted to our named executive officers during the fiscal year ended December
31, 2005 under the Teton Energy Corporation 2005 Long-term Incentive Plan (the
“2005 LTIP”). The 2005 LTIP is administered by our Compensation Committee using
an administration plan and award agreements. Each year, the Compensation
Committee creates new criteria based on milestones and objectives that it deems
to be in the Company’s and shareholders’ best interests, which criteria are
incorporated into a new plan administration document that establishes 1, 2,
and
3 year performance milestones.
The
terms
of the 2005 awards provide that awards will be made in shares of common stock
of
the Company based on the achievement of either threshold, target, or stretch
objectives, or some interpolation thereof. Initial awards are made in
performance share units, which units entitle a participant to a corresponding
number of shares if objectives are met. The terms of all 2005 awards provide
that vesting will occur based on the achievement of 1, 2, and 3-year performance
milestones based on the following criteria:
| 1. |
The
achievement of certain levels of annual production of crude oil and/or
natural gas, as measured in thousand cubic feet or
mcf.
|
| 2. |
Management’s
efficiency and effectiveness in operating the
Company.
|
| 3. |
The
achievement of a certain level of reserves of crude oil and/or natural
gas
reserves, as measured in billion cubic feet or
bcf.
|
| 4. |
The
Company’s ability to find and develop such reserves at a cost that is
competitive within the industry.
|
| 5. |
Increases
in the price of the Company’s common stock.
|
The
Performance Measures are consolidated into a composite measure based on the
relative weighting of each component as a percentage of 100% as determined
by
the Company’s Compensation Committee. Consistent with the Plan, the Performance
Measures have been established in order to provide for the attainment of one,
two, and three year objectives. In the event the employment of a participant
is
terminated by reason of death, disability, or retirement during the Performance
Period, the participant or the participant’s beneficiary or estate shall be
entitled to receive a prorated payment of the Performance Share Units.
Subject to the terms of the LTIP, in the event that a participant terminates
employment with the Company for any other reason, or in the event that the
Company terminates the employment of the participant with or without cause,
all
Performance Share Units awarded to the participant under the Award Agreement,
if
not previously paid out, shall be forfeited; provided, however, that in the
event of a termination of the employment of the participant by the Company
without cause, the Compensation Committee, in its sole discretion, may waive
such automatic forfeiture provision and authorize a pay out to the participant
on a pro
rata
basis.
15
Long-Term
Incentive Plans — Awards in Last Fiscal Year
|
|
Estimated
Future Payouts
Under Non-Stock Price-Based Plans |
|
||||||||||||||
|
Name
|
Number
of Shares, Units or Other Rights
|
Performance
or
Other
Period Until
Maturation
or
Payout
|
Threshold
|
Target
|
Maximum
|
|||||||||||
|
Karl
F. Arleth
|
30,000
|
(1)
|
2005
|
15,000
|
30,000
|
60,000
|
||||||||||
| 45,000 | (1) | 2005-2006 | 22,500 | 45,000 | 90,000 | |||||||||||
|
75,000
|
(1) |
2005-2007
|
37,500
|
75,000
|
150,000
|
|||||||||||
|
Patrick
A. Quinn
|
15,000
|
(1)
|
2005
|
7,500
|
15,000
|
30,000
|
||||||||||
| 22,500 | (1) | 2005-2006 | 11,250 | 22,500 | 45,000 | |||||||||||
|
37,500
|
(1)
|
2005-2007
|
18,750
|
37,500
|
75,000
|
|||||||||||
|
H.
Howard Cooper(2)
|
4,000
|
(1)
|
2005
|
2,000
|
4,000
|
8,000
|
||||||||||
| 6,000 | (1) | 2005-2006 | 3,000 | 6,000 | 12,000 | |||||||||||
|
10,000
|
(1)
|
2005-2007
|
5,000
|
10,000
|
20,000
|
|||||||||||
| (1) |
Amounts
set forth in the table represent the potential payout of awards under
the
2005 LTIP based on achievement of target composite measurement in
each of
2005, 2006, and 2007. The Award Agreements provide that payment of
any
earned Performance Share Units following the close of the Performance
Period shall be made 100% in shares of the common stock of the Company
(the “Shares”). Participants will receive one Share for each earned
Performance Share Unit. The base composite measures for 2005, 2006,
and 2007 are 100.00, 271.31, and 453.06, respectively. The Performance
Measures are consolidated into a composite measure based on the relative
weighting of each component as a percentage of 100% as determined
by the
Company’s Compensation Committee.
|
| (2) |
Although
Mr. Cooper was initially given an award of performance share units
under
the Company’s Long Term Incentive Plan, those units were forfeited upon
his resignation from the Company’s
board.
|
Retirement
Plan
The
Company offers its employees the right to participate in a simple IRA plan.
The
plan provides for the Company to match employee contributions up to 3% of gross
wages. All employees, including named executives (excluding executives
performing services on a contract basis) are entitled to participate in the
plan. For the year ended December 31, 2005, Company contributed $3,467 to such
plan.
16
Equity
Compensation Plan Information
The
following table sets forth information about our equity compensation plans
at
December 31, 2005:
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options,
warrants
and rights
|
Weighted
average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance
|
|||
|
Equity
compensation plans approved by security holders:
|
||||||
|
2005
Long-term Incentive Plan(1)
|
800,000(3)
|
(4)
|
(1)
|
|||
|
2004
Non-Employee Stock Compensation Plan(2)
|
287,500
|
(4)
|
--
|
|||
|
2003
Employee Stock Compensation Plan(2)
|
2,875,334
|
$3.54
|
--
|
| (1) |
The
Company’s Long-Term Incentive Plan, as approved by our Shareholders,
provides for the issuance of a maximum number of shares of common
stock
equal to
20% of the total number of shares of Common Stock outstanding as
of the
effective date for the plan’s first year and for each subsequent plan
year, (i) that number of shares equal to 10% of the total number
of shares
of Common Stock outstanding as of the first day of each respective
plan
year, plus (ii) that number of shares of Common Stock reserved and
available for issuance but unissued during any prior plan year during
the
Term of the Plan; provided, however, in no event shall the number
of
shares of Common Stock available for issuance under the Plan as of
the
beginning of any Plan Year plus the number of shares of Common Stock
reserved for outstanding awards under the Plan exceed 35% percent
of the
total number of shares of Common Stock outstanding at that time,
based on
a three-year period of grants
|
| (2) |
The
2004 Non-Employee Stock Compensation Plan and the 2003 Employee Stock
Compensation Plan were terminated upon the adoption of the 2005 Long-term
Incentive Plan.
|
| (3) |
Includes
800,000 performance share units awarded in July 2005. A performance
share unit
is
equal in value to one share of the Company’s common stock and subject to
vesting on the basis of the achievement of specified performance
targets
as specified in the applicable administration document or award agreement.
Upon vesting, performance share Units will be settled by delivery
of
shares to the Participant equal to the number of vested performance
share
units. In
January 2006, the Compensation Committee determined that the 2005
performance targets had not been met. As a result, 160,000
performance share units from the original grant of 800,000 will not
vest
under the 2005 Grant.
|
| (4) |
Not
applicable.
|
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the 1934 Act requires that the Company’s Directors and certain of its
officers file reports of ownership and changes of ownership of the Company
common stock with the SEC and AMEX. Based solely on copies of such reports
provided to the Company, the Company believes that all Directors and officers
filed on a timely basis all such reports required of them with respect to stock
ownership and changes in ownership during 2005 except that Messrs. Conroy,
Connor, and Woodcock were late in reporting the grant of stock in partial
compensation for services as directors and Mr. White was late in reporting
his
initial holdings upon becoming a director of the Company.
Executive
Employment Agreements
Mr.
Arleth, President and Chief Executive Officer, signed an employment agreement
on
May 1, 2003. The agreement is for a three-year term, with an initial salary
of
$10,000 per month. Mr. Arleth’s salary has been raised each year since the
initial agreement and, effective, January 1, 2006, his salary under his
employment agreement is paid at $20,833 per month. Under the terms of the
agreement, Mr. Arleth is entitled to 24 months severance pay in the event of
a
change of position or control of the Company.
17
Mr.
Howard Cooper, a former Director and Executive Chairman, signed a consulting
agreement with the Company dated March 1, 2005. The consulting agreement was
for
an initial term of one year and will continue for additional one year terms
unless 60 days prior to the anniversary date either party gives notice of
termination. The consulting agreement entitled Mr. Cooper to receive two
payments per month of $8,333 each. On October 6, 2005, the Company replaced
Mr.
Cooper’s consulting agreement with a severance agreement. The severance
agreement entitles Mr. Cooper to a maximum benefit of $200,000 over the course
of one year, which payments are to be made monthly. The Company may terminate
the severance payments prior to September 30, 2006, in the event that Mr. Cooper
accepts reasonably equivalent employment with another company during the
severance period, or in the event Mr. Cooper is in material breach with the
terms of the severance agreement, or in the event that the Company’s board
unanimously adopts a resolution that he is in material breach of this agreement.
The severance agreement also grants Mr. Cooper certain rights with respect
to
the registration of shares underlying certain options or warrants held by Mr.
Cooper pursuant to various compensation programs. The severance agreement also
contains certain restrictions on Mr. Cooper’s ability to sell shares held by him
in order to protect the price of the Company’s stock.
18
COMPENSATION
COMMITTEE REPORT
The
Report of the Compensation Committee (the “Compensation Report”) does not
constitute soliciting material and should not be deemed filed or incorporated
by
reference into any other Company filing under the Securities Act of 1933 or
the
1934 Act, except to the extent the Company specifically incorporates this
Compensation Report by reference therein.
The
Company’s executive compensation program is designed to attract, retain and
motivate executive officers capable of leading the Company to meet its business
objectives, to align the interests of executive management with those of the
stockholders, and to provide incentives and reward both short and long term
performance based on the success of the Company in meeting its development
milestones and business objectives. The Compensation Committee places a
particular emphasis on variable, performance based components, such as the
bonus
potential and stock-based awards, the value of which could increase or decrease
to reflect changes in corporate and individual performance.
Components
of Compensation
Each
full-time executive officer’s compensation package is generally comprised of the
following elements: (1) a base salary which is established at levels considered
appropriate for the duties and scope of responsibilities of each officer’s
position; (2) a performance-based annual bonus; and (3) periodic grants of
stock-based and/or stock equivalent incentive compensation to strengthen the
mutuality of interests between the executive officers and the Company’s
stockholders. Executive officers are also eligible to participate in
compensation and employee benefits generally available to all employees of
the
Company.
The
Compensation Committee believes that this approach best serves the interests
of
the Company and its stockholders. It enables the Company to meet the
requirements of the highly competitive environment in which the Company operates
while ensuring that executive officers are compensated in a way that advances
both the short and long term interests of stockholders. Under this approach,
compensation for these officers involves a high proportion of pay that is “at
risk,” namely, the annual bonus and stock-based compensation. The annual bonus
is also based, in significant part, on Company performance. Stock-based
compensation relates a significant portion of long-term remuneration directly
to
the achievement of certain milestones, including, among other things, relative
stock price appreciation realized by all of the Company’s
stockholders.
Base
Salary
Base
salaries for executive officers are set at levels believed by the Committee
to
be sufficient to attract and retain qualified executive officers based on the
stage of development of the Company, the salary levels in effect for comparable
positions in similarly situated companies within relevant industries, and
internal comparability considerations. Base salaries for the Company’s executive
officers other than the Chief Executive Officer, as well as changes in such
salaries, are based upon recommendations by the Chief Executive Officer, taking
into account such factors as competitive industry salaries, a subjective
assessment of the nature of the position and the contribution and experience
of
the officer and the length of the officer’s service. All such recommendations
are subject to approval or disapproval by the Compensation Committee in its
sole
discretion. Other than provisions provided for in employment agreements, changes
in base salaries of executives are based on an evaluation of the personal
performance of the executive, prevailing market practices, and the performance
of the Company as a whole. In determining base salaries, the Committee not
only
considers the short term performance of the Company, but also the success of
the
executive officers in developing and executing the Company’s strategic plans,
developing management employees and exercising leadership in the development
of
the Company.
Cash-Based
Incentive Bonus
The
Committee believes that a portion of the total cash compensation for executive
officers should be based on the Company’s success in meeting certain objectives,
including its annual or its short-term performance objectives and contributions
by the executive officers that enable the Company to meet its long-term
objectives, and has structured the executive compensation program to reflect
this philosophy. This approach creates a direct incentive for executive officers
to achieve desired short-term corporate goals that also further the long-term
objectives of the Company, and places a significant portion of each executive
officer’s annual compensation at risk.
19
Stock-based
Incentive Compensation
The
Compensation Committee believes that equity participation is a key component
of
the Company’s executive compensation program. Stock options were historically
awarded by the Committee to executive officers primarily based on potential
contributions to the Company’s growth and development and marketplace practices.
In 2005, the Company’s shareholders approved the 2005 Long-term Incentive Plan
(“LTIP”). Subsequently, the Compensation Committee instituted certain procedures
and measurement metrics designed to implement the LTIP’s performance share unit
program. Grants under the LTIP are intended to promote the Company’s desire to
assure that executives and employees focus on the achievement of 1, 2, and
3-year objectives designed to promote the longer-term value creation for
shareholders. These awards are tailored to retain executive officers and to
motivate them to enhance stockholder value by aligning the financial interests
of executive officers with those of stockholders. LTIP awards provide an
effective incentive for management to create stockholder value over the long
term because the vesting and full benefits of performance share units into
stock
cannot be realized unless specific milestones are achieved over 1, 2, and 3-year
periods.
CEO
Compensation
With
the
framework described above, the Committee determines the salary and bonus of
the
Chief Executive Officer based on his leadership, the execution of business
plans, and strategic results. The complexity of the business and his experience
are also key factors. The Committee has used the following metrics to determine
the CEO’s compensation: the historical complexity of the Company’s international
operations, the CEO’s success in transforming the Company from a Russian Oil
concern to a domestic resources company, the experience that the CEO brings
to
the Company and its business, the CEO’s ability to continuously improve the
Company’s results, and the CEO’s ability to evaluate and execute on acquisitions
that will enable the Company to grow its asset base. The Committee meets
annually to establish operational and financial goals and objectives for the
CEO
and throughout the year regularly meets in executive sessions and with the
CEO
to review performance against those objectives. A final meeting of the
Compensation Committee as well as with the entire Board is held at the end
of
each fiscal year to measure results of the prior year as well as to set
objectives and establish compensation benchmarks for the subsequent year.
Beginning in 2005, annual performance reviews are held during the first quarter
of the year following the close of the previous calendar year.
James
J.
Woodcock, Chairman
Thomas
F.
Conroy
William
K. White
20
AUDIT
COMMITTEE REPORT
The
following Report of the Audit Committee (the “Audit Report”) does not constitute
soliciting material and should not be deemed filed or incorporated by reference
into any other Company filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates
this Audit Report by reference therein.
Role
of the Audit Committee
The
Audit
Committee’s primary responsibilities fall into three broad categories:
First,
the Committee is charged with monitoring the preparation of quarterly and annual
financial reports by the Company’s management, including discussions with
management and the Company’s outside auditors about draft annual financial
statements and key accounting and reporting matters;
Second,
the Committee is responsible for matters concerning the relationship between
the
Company and its outside auditors, including recommending their appointment
or
removal; reviewing the scope of their audit services and related fees, as well
as any other services being provided to the Company; and determining whether
the
outside auditors are independent (based in part on the annual letter provided
to
the Company pursuant to Independence
Standards Board Standard No. 1);
and
Third,
the Committee reviews financial reporting, policies, procedures, and internal
controls of the Company.
The
Committee has implemented procedures to ensure that during the course of each
fiscal year it devotes the attention that it deems necessary or appropriate
to
each of the matters assigned to it under the Committee’s charter. In overseeing
the preparation of the Company’s financial statements, the Committee met with
management and the Company’s outside auditors, including meetings with the
Company’s outside auditors without management present, to review and discuss all
financial statements prior to their issuance and to discuss significant
accounting issues. Management advised the Committee that all financial
statements were prepared in accordance with generally accepted accounting
principles, and the Committee discussed the statements with both management
and
the outside auditors. The Committee’s review included discussion with the
outside auditors of matters required to be discussed pursuant to Statement
on Auditing Standards No. 61 (Communication With Audit
Committees).
With
respect to the Company’s outside auditors, the Committee, among other things,
discussed with Ehrhardt Keefe Steiner & Hottman PC matters relating to its
independence, including the disclosures made to the Committee as required by
the
Independence
Standards Board Standard No. 1 (Independence Discussions with Audit
Committees).
Recommendations
of the Audit Committee.
In
reliance on the reviews and discussions referred to above, the Committee
recommended to the Board that the Board approve the inclusion of the Company’s
audited financial statements in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, for filing with the SEC.
John
T.
Connor, Jr., Chairman
Thomas
F.
Conroy
William
K. White
21
Audit
and Non-Audit Fees
Aggregate
fees for professional services rendered to the Company by Ehrhardt Keefe Steiner
& Hottman PC as of or for the two fiscal years ended December 31, 2005 and
2004 are set forth below:
|
2005
|
2004
|
||||||
|
Audit
Fees
|
$
|
101,111
|
$
|
74,053
|
|||
|
Audit-Related
Fees
|
16,034
|
40,508
|
|||||
|
Tax
Fees
|
9,975
|
8,550
|
|||||
|
Total
|
$
|
126,920
|
$
|
123,111
|
|||
Audit
Fees.
Aggregate fees for professional services rendered by Ehrhardt Keefe Steiner
& Hottman PC in connection with its audit of our consolidated financial
statements included in Forms 10-K and 10-KSB, respectively and the quarterly
reviews of our financial statements included in Forms 10-Q and 10-QSB,
respectively for the fiscal years 2005 and 2004.
Audit-Related
Fees.
These
were primarily related to S-3, S-8, SB-2,and SB-2/A filings for the registration
of our stock, review of our 2004 proxy statement, and tax consequences of our
employee stock grants.
Tax
Fees. These
were related to tax compliance and related tax services.
Ehrhardt
Keefe Steiner & Hottman PC rendered no professional services to us in
connection with the design and implementation of financial information systems
in fiscal year 2005 or 2004.
22
STOCK PERFORMANCE GRAPH
The
following performance graph reflects the share price performance of Teton Energy
Corporation since its shares commenced trading in the United States on the
OTC
Bulletin Board in November 2001. (Teton shares have been traded on the American
Stock Exchange since May 2003). The total return of Teton’s shares is compared
to 1) the Russell 2000® Index, an index measuring the performance of 2,000
companies with small market capitalizations, and to 2) a peer group of 26
companies with SIC code 1311 (Crude Oil and Natural Gas Producers) with market
capitalizations of less than $100 million. All cumulative returns are calculated
on a fiscal year basis ending on December 31 of each year and have been weighted
by market capitalization.
The
Companies included in the peer group are:
|
Abraxas
Pete Corp
Arena
Resources Inc
Beta
Oil & Gas Inc
Blue
Dolphin Energy Co
Castle
Energy Corp
Chaparral
Res Inc
Contango
Oil & Gas Co
Daugherty
Res Inc
Double
Eagle Petroleum Co
|
Equity
Oil Co
Exploration
Co
Georesources
Inc
Gmx
Res Inc
Gulfwest
Energy Inc New
Isramco
Inc
Kestrel
Energy Inc
Magellan
Pete Corp
Mexco
Energy Corp
|
Parallel
Petroleum Corp
Primeenergy
Corp
Pyr
Energy Corp
Quest
Resource Corp
Tengasco
Inc
Toreador
Res Corp
Tri
Vy Corp
Vaalco
Energy Inc
|
23
AVAILABLE INFORMATION
The
Company is subject to the informational requirements of the Exchange Act, and
in
accordance therewith files reports, proxy statements, and other information
with
the SEC. Such reports, proxy statements and other information may be inspected
without charge at the principal office of the SEC, 100 F Street, N.E.,
Washington, D.C. 20549, and at the regional offices of the SEC located at 3
World Financial Center, New York, New York 10281 and 175 W. Jackson Blvd.,
Suite
900, Chicago, Illinois 60604, and copies of all or any part thereof may be
obtained at prescribed rates from the SEC’s Public Reference Section at such
addresses. Also, the SEC maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements
and
other information regarding registrants that file electronically with the SEC.
Such reports, proxy and information statements and other information also can
be
inspected at the office of the American Stock Exchange, Inc., 86 Trinity Place
New York, NY 10006.
The
Company’s Annual Report to Stockholders for the fiscal year ended December 31,
2005 (which is not part of the Company’s proxy soliciting materials) has been
mailed to the Company’s stockholders with or prior to this proxy statement. A
copy of the Company’s Annual Report on Form 10-K, without exhibits, will be
furnished without charge to stockholders upon request to:
Ms.
Gillian Kane
Tel.
(303) 565-4600
Teton
Energy Corporation
410
17th
Street, Suite 1850
Denver,
Colorado 80202
gkane@teton-energy.com
24
RATIFICATION
OF APPOINTMENT OF INDEPENDENT AUDITORS
PROPOSAL
NO. 2
Ehrhardt
Keefe Steiner & Hottman PC has served as the Company’s independent auditors
since December 1999 and has been appointed by the Audit Committee to continue
as
the Company’s independent auditors for the fiscal year ending December 31, 2006.
In the event that ratification of this selection of auditors is not approved
by
a majority of the shares of Common Stock voting at the Annual Meeting in person
or by proxy, the Board will reconsider its selection of auditors. Ehrhardt
Keefe
Steiner & Hottman PC has no interest, financial or otherwise, in the
Company.
A
representative of Ehrhardt Keefe Steiner & Hottman PC is expected to be
present at the Annual Meeting. The auditors will have the opportunity to make
a
statement if they desire to do so and are expected to be available to respond
to
appropriate questions.
The
proxy
holders intend to vote the shares represented by proxies to ratify the Board’s
selection of Ehrhardt Keefe Steiner & Hottman PC as the Company’s
independent auditors for the fiscal year ending December 31, 2006.
Policy
on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
of
Independent Auditors
The
Audit
Committee pre-approves all audit and non-audit services provided by the
independent auditors prior to the engagement of the independent auditors with
respect to such services. The Chairman of the Audit Committee has been delegated
the authority by the Committee to pre-approve interim services by the
independent auditors other than the annual audit. The Chairman must report
all
such pre-approvals to the entire Audit Committee at the next Committee
meeting.
Approval
of this proposal requires the affirmative vote of the majority of the shares
present in person or represented by proxy and entitled to vote at the Annual
Meeting.
THE
BOARD
RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT OF EHRHARDT KEEFE STEINER
& HOTTMAN PC AS THE COMPANY’S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2006.
25
ADDITIONAL
INFORMATION
Other
Business
The
Board
is not aware of any other business that will come before the Annual Meeting,
but
if any such matters are properly presented, the proxies solicited hereby will
be
voted in accordance with the best judgment of the persons holding the proxies.
All shares represented by duly executed proxies will be voted at the Annual
Meeting.
Stockholder
Proposals
In
order
for stockholders proposals to be included in Teton’s proxy statement for the
2007 Annual Meeting, they must be received by Teton at its principal executive
office, 410 17th Street, Suite 1850, Denver, Colorado 80202 by January 19,
2007.
All other stockholder proposals, including nominations for Directors, must
be
received by Teton not less than 60 days or more than 90 days prior to such
Meeting, which is tentatively scheduled for April 19, 2007.
Availability
of Certain Documents Referred to Herein
This
Proxy Statement refers to certain documents of the Company that are not
presented herein or delivered herewith. Such documents are available to any
person, including any beneficial owner, to whom this Proxy Statement is
delivered, upon oral or written request, without charge, directed to Gillian
Kane, Investor Relations, Teton Energy Corporation, 410 17th
Street,
Suite 1850, Denver, Colorado 80202, telephone number (303)
565-4600.
It
is
important that the proxies be returned promptly and that your shares be
represented. Stockholders are urged to mark, date, execute, and promptly return
the accompanying proxy card in the enclosed envelope.
| By Order of the Board of Directors, | ||
| |
|
|
| By: | /s/ James J. Woodcock | |
|
James J. Woodcock, Chairman |
||
|
Denver,
Colorado
March
10, 2006
|
||
26
| PROXY |
PROXY
|
TETON
ENERGY CORPORATION
PROXY
FOR ANNUAL MEETING TO BE HELD ON APRIL 13, 2006
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned hereby appoints Karl F. Arleth, as proxy, with the power to appoint
his substitute, to represent and to vote all the shares of Common Stock of
Teton
Energy Corporation (the “Company”), which the undersigned would be entitled to
vote, at the Company’s Annual Meeting of Stockholders to be held on April 13,
2006 and at any adjournments thereof, subject to the directions indicated on
the
reverse side hereof.
In
their
discretion, the proxy is authorized to vote upon any other matter that may
properly come before the meeting or any adjournments thereof.
THIS
PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE, BUT IF NO
CHOICES ARE INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
AND FOR THE PROPOSALS LISTED ON THE REVERSE SIDE.
IMPORTANT--This
proxy must be signed and dated on the reverse side.
1
THIS
IS YOUR PROXY
YOUR
VOTE IS IMPORTANT!
Dear
Stockholder:
We
cordially invite you to attend the Annual Meeting of Stockholders of Teton
Energy Corporation to be held at Marriott City Center, 1701 California Street,
Denver, Colorado 80202 on April 13, 2006, at 9:30 AM (local time).
Please
read the Proxy Statement which describes the proposals and presents other
important information, and complete, sign and return your proxy promptly in
the
enclosed envelope.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL PROPOSALS
1.
Election of Directors
|
For
|
Withhold
|
|
|
Nominees:
|
o
|
o
|
|
Karl
F. Arleth
|
o
|
o
|
|
John
T. Connor, Jr.
|
o
|
o
|
|
Thomas
F. Conroy
|
o
|
o
|
|
William
K White
|
o
|
o
|
|
James
F. Woodcock
|
o
|
o
|
(Except
nominee(s) written above)
|
For
|
Against
|
Abstain
|
|||
|
2.
To consider and act upon a proposal to ratify the Board’s selection of
Ehrhardt Keefe Steiner & Hottman PC as the Company’s independent
auditors for the fiscal year ending December 31, 2006
|
o
|
o
|
o
|
||
Dated:
March 10, 2006
Signature
____________________________________________________________________________________
Name
(printed)
________________________________________________________________________________
Title
________________________________________________________________________________________
Important:
Please sign exactly as name appears on this proxy. When signing as attorney,
executor, trustee, guardian, corporate officer, etc., please indicate full
title.
-----------------------------------------------------------------------------------------------
FOLD
AND
DETACH HERE
2
VOTE
BY TELEPHONE OR INTERNET
QUICK
*** EASY *** IMMEDIATE
TETON
ENERGY CORPORATION
| · |
You
can now vote your shares electronically through the Internet or the
telephone.
|
| · |
This
eliminates the need to return the proxy
card.
|
| · |
Your
electronic vote authorizes the named proxy to vote your shares in
the same
manner as if you marked, signed, dated and returned the proxy
card.
|
TO
VOTE YOUR PROXY BY INTERNET
www.computershare.com/expressvote
Have
your
proxy card in hand when you access the above website. You will be prompted
to
enter the company number, proxy number and account number to create an
electronic ballot. Follow the prompts to vote your shares.
TO
VOTE YOUR PROXY BY MAIL
Mark,
sign and date your proxy card above, detach it and return it in the postage-paid
envelope provided.
TO
VOTE YOUR PROXY BY PHONE
1-800-652-8683
(8683=“VOTE”)
Use
any
touch-tone telephone to vote your proxy. Have your proxy card in hand when
you
call. You will be prompted to enter the company number, proxy number and account
number. Follow the voting instructions to vote your shares.
PLEASE
DO NOT RETURN THE ABOVE CARD IF VOTING ELECTRONICALLY
3