UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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EVOLUTION PETROLEUM CORPORATION
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EVOLUTION PETROLEUM CORPORATION
820 Gessner, Suite 1340
Houston, Texas 77024
Dear Stockholder:
You are cordially invited to attend the 2006 Annual Meeting of
Stockholders of Evolution Petroleum Corporation (formerly known as Natural Gas
Systems, Inc.) (the "Company"). The meeting will be held at the Company's
offices at 820 Gessner, Suite 1340, Houston, Texas 70024 at 2:00 p.m., local
time, on Wednesday, December 6, 2006.
The Notice of Meeting and the Proxy Statement on the following pages
cover the formal business of the meeting, which includes two items to be voted
on by our stockholders. At the Meeting, I will also report on the Company's
current operations and will be available to respond to questions from
stockholders. Recording devices will not be permitted in the meeting.
Whether or not you plan to attend the meeting, it is important that
your shares be represented and voted at the meeting. You are urged, therefore,
to complete, sign, date and return the enclosed proxy card (or use telephone or
internet voting procedures, if offered by your broker), even if you plan to
attend the meeting.
I hope you will join us.
Sincerely,
/s/ Robert S. Herlin
-------------------------------------
Robert S. Herlin, President and Chief
Executive Officer and Director
EVOLUTION PETROLEUM CORPORATION
820 Gessner, Suite 1340
Houston, Texas 77024
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
to be held on December 6, 2006
Notice is hereby given to the holders of common stock, $.001 par value
per share, of Evolution Petroleum Corporation (formerly known as Natural Gas
Systems, Inc.) (the "Company") that the Annual Meeting of Stockholders will be
held at the Company's offices at 820 Gessner, Suite 1340, Houston, Texas 77024,
on Wednesday, December 6, 2006, at 2:00 p.m., local time, for the following
purposes:
(1) To elect five directors to serve until the 2007 Annual Meeting
of Stockholders;
(2) To ratify the appointment by the Audit Committee of the Board
of Directors of the Company's independent auditors for the
fiscal year ending June 30, 2007; and
(3) To transact such other business as may properly come before
the Annual Meeting or any postponement or adjournment thereof.
Only those stockholders of record at the close of business on October
27, 2006 are entitled to notice of and to vote at the Annual Meeting or any
postponement or adjournment thereof. A complete list of stockholders entitled to
vote at the Annual Meeting will be available at the Annual Meeting.
By Order of the Board of Directors
Houston, Texas /s/ Laird Q. Cagan
November 6, 2006 ---------------------------------------
Laird Q. Cagan, Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING YOU MAY, IF YOU WISH,
REVOKE YOUR PROXY AND VOTE IN PERSON.
EVOLUTION PETROLEUM CORPORATION
820 Gessner, Suite 1340
Houston, Texas 77024
ANNUAL MEETING OF STOCKHOLDERS
to be held on December 6, 2006
PROXY STATEMENT
This Proxy Statement is furnished to holders of common stock, $.001 par
value per share, of Evolution Petroleum Corporation, a Nevada corporation
(formerly known as Natural Gas Systems, Inc.), in connection with the
solicitation of proxies by our Board of Directors for use at our 2006 Annual
Meeting of Stockholders to be held at 2:00 p.m., local time, at our Company's
offices at 820 Gessner, Suite 1340, Houston, Texas 77024, on Wednesday, December
6, 2006, and at any postponement or adjournment thereof.
This Proxy Statement and the accompanying proxy card are first being
mailed to our stockholders on or about November 6, 2006.
What is the purpose of the Annual Meeting?
At the Annual Meeting, stockholders will act upon the matters outlined
in the attached Notice of Meeting and described in detail in this Proxy
Statement, which is the election of directors and the ratification of the
appointment of our independent auditors. In addition, management will report on
our performance during the fiscal year ended June 30, 2006, which we refer to as
fiscal 2006, and respond to questions from stockholders.
Who is entitled to vote at the Annual Meeting?
Only stockholders of record at the close of business on October 27,
2006 will be entitled to notice of, and to vote at, the Annual Meeting or any
adjournment or postponement thereof.
What are the voting rights of the holders of our common stock?
Holders of our common stock are entitled to one vote per share with
respect to each of the matters to be presented at the Annual Meeting. With
regard to the election of directors, the five nominees receiving the greatest
number of votes cast will be elected provided a quorum is present. On each other
matter to be presented, the affirmative vote of a majority of the shares
represented at the Annual Meeting and entitled to vote will be necessary to
approve the matter.
Abstentions will be counted towards the tabulation of votes cast on
matters properly presented to the stockholders (except the election of
directors) and will have the same effect as negative votes. Broker non-votes
will not be counted as votes cast and, therefore, will have no effect on the
outcome of the matters presented at the Annual Meeting.
What constitutes a quorum?
Our Bylaws provide that the presence, in person or by proxy, of the
holders of a majority of outstanding shares of our common stock at our Annual
Meeting shall constitute a quorum.
For the purpose of determining the presence of a quorum, proxies marked
"withhold authority" or "abstain" will be counted as present. Shares represented
by proxies that include broker non-votes will also be counted as shares present
for purposes of establishing a quorum. On October 27, 2006, the record date,
there were 26,652,005 shares of our common stock issued and outstanding and such
shares are the only shares entitled to vote at the Annual Meeting.
1
What are the Board's recommendations?
Unless you give other instructions on your proxy card, the persons
named as proxy holders on the proxy card will vote in accordance with the
recommendations of the Board of Directors. The Board's recommendations are set
forth together with the description of the Proposals in this Proxy Statement. In
summary, the Board recommends a vote FOR election of the directors named in this
Proxy Statement (see Proposal I), and FOR the ratification of the appointment of
Hein & Associates LLP as our independent auditors (See Proposal II).
The proxy holders will vote in their discretion with respect to any
other matter that properly comes before the Annual Meeting.
Proxies
If the enclosed proxy card is executed, returned in time and not
revoked, the shares represented thereby will be voted at the Annual Meeting and
at any postponement or adjournment thereof in accordance with the instructions
indicated on the proxy and IF NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE
VOTED (1) "FOR" THE PROPOSALS DESCRIBED IN THIS PROXY STATEMENT AND (2) AS TO
ANY OTHER MATTERS PROPERLY BROUGHT BEFORE THE ANNUAL MEETING OR ANY POSTPONEMENT
OR ADJOURNMENT THEREOF, IN THE SOLE DISCRETION OF THE PROXIES.
A stockholder who has returned a proxy card may revoke it at any time
prior to its exercise at the Annual Meeting by (i) giving written notice of
revocation to our Corporate Secretary, (ii) properly submitting to Evolution
Petroleum Corporation a duly executed proxy bearing a later date, or (iii)
appearing at the Annual Meeting and voting in person. All written notices of
revocation of proxies should be addressed as follows: Evolution Petroleum
Corporation, 820 Gessner, Suite 1340, Houston, Texas 77024, Attention: Sterling
H. McDonald.
PROPOSAL I
ELECTION OF DIRECTORS
The Bylaws of our company provide that the Board of Directors shall
consist of a minimum of one member. The size of the Board of Directors is
currently set at five members. Each director shall be selected for a term of one
year and until his successor is elected and qualified.
The following is information concerning the nominees for election.
Nominees
Name Age Principal Occupation
Laird Q. Cagan 48 Mr. Cagan has served as our Chairman of the
Board and Secretary since May 2004. Mr. Cagan is
a co-founder, and, since 2001, has been Managing
Director, of Cagan McAfee Capital Partners, LLC,
a technology-focused private equity firm in
Cupertino, California. He also serves as
President of Cagan Capital, LLC, a merchant bank
he formed in 1990. From 1999 to 2001, he served
as Chairman and Chief Executive Officer of
BarterNet Corporation, a worldwide Internet B2B
exchange. Mr. Cagan attended M.I.T. and received
a BS and an MS degree in engineering, and an
MBA, from Stanford University. He is a member of
the Young Presidents Organization. Please also
see "Certain Relationships and Related
Transactions."
2
Robert S. Herlin 51 Mr. Herlin has been President, Chief Executive
Officer and a Director of our company since May
2004. Prior to the merger of Natural Gas
Systems, Inc. ("Old NGS") into our company, Mr.
Herlin served as President, Chief Executive
Officer and Director of Old NGS. He is
responsible for all of our operations,
development of our business model, identifying
acquisitions of applicable oil and gas
properties, developing our operating team and
creating, establishing and maintaining industry
partnerships. Mr. Herlin has 23 years of
experience in energy transactions, operations
and finance with small independents, larger
independents and major integrated oil companies.
Since 2003, Mr. Herlin has also served as a
Partner with Tatum CFO, a financial advisory
firm that provides executive officers on a
part-time or full-time basis to clients. From
2001 to 2003, Mr. Herlin served as Senior Vice
President and Chief Financial Officer of
Intercontinental Towers Corporation, an
international wireless infrastructure company.
From 1997 to 2001, he was employed at Benz
Energy, Inc., an oil and gas company, most
recently as President. Mr. Herlin also serves on
the board of directors of Boots and Coots Group,
an oil field services company. Mr. Herlin
graduated with honors from Rice University with
B.S. and M.E. degrees in chemical engineering
and has an MBA from Harvard University.
William Dozier 54 Mr. Dozier has served as a director of our
company since December 2005. Mr. Dozier is an
independent consultant based in Tulsa and
Houston since 2005. From 1992 to 2005, Mr.
Dozier served as Vice President of Operations,
and most recently as Senior Vice President for
Business Development, for Vintage Petroleum, a
large publicly traded independent oil and gas
company recently acquired by Occidental
Petroleum. From 1983 to 1992, he was Manager of
Operations Engineering for Santa Fe Minerals.
Mr. Dozier began his career with Amoco
Production in 1975, working in all phases of
production, reservoir evaluations, drilling and
completions in the Mid-Continent and Gulf Coast
areas. He is a licensed petroleum engineer with
a B.S. Degree in Petroleum Engineering from the
University of Texas. Mr. Dozier serves as
Chairman of our Compensation Committee.
Gene Stoever 68 Mr. Stoever has served as a director of our
company since May 2004. In 1993, Mr. Stoever
retired from KPMG Peat Marwick after 32 years of
service, including 24 years as a partner. Since
1994, he has acted as an independent consultant.
From 1999 to 2004, he served as a trustee of the
Sterling Diagnostic Imaging and SDI Liquidating
Trust, and from 2001 to 2005 he served as a
Director of Exopack, LLC, a flexible packaging
company. He also serves as a director and
Chairman of the Audit Committee of Propex
Fabrics, Inc., a global provider of woven and
non-woven polypropylene products. Mr. Stoever
earned his B.B.A. degree in accounting with
honors from the University of Texas at Austin,
is a Certified Public Accountant in the State of
Texas and is a current member of the Texas
Society of Public Accountants. Mr. Stoever
serves as Chairman of our Audit Committee.
3
E. J. DiPaolo 53 Mr. DiPaolo has served as a director of our
company since May 2004. Mr. DiPaolo has served
as an Energy Advisor to Growth Capital Partners,
L.P., an investment banking company, since 2003.
From 2002 to the present, Mr. DiPaolo has served
as an independent energy producer. From 1976 to
2002, Mr. DiPaolo was with Halliburton Company,
most recently as Group Senior Vice President of
Global Business Development, where he was
responsible for the management of overall
customer relationships with the companies within
Halliburton's upstream businesses, including
Halliburton Energy Services, Brown and Root
Energy Services, and Landmark Graphics and
Wellstream. Previously, Mr. DiPaolo was the
North American Regional Vice President and Far
East Regional Vice President for Halliburton,
accountable for the overall operation of
Halliburton Energy Services in those regions.
Mr. DiPaolo also serves on the Board of
Directors of Boots and Coots Group, an oil field
services company, and Edgen Corporation, a pipe
distribution company. He received his
undergraduate degree in agricultural engineering
from West Virginia University in 1976 where he
currently serves on the Advisory Board of the
College of Engineering. DiPaolo serves as
Chairman of our Nominating Committee.
We believe that the nominees will be available and able to serve as
directors. In the event that a nominee is unable to serve, the proxy holders
will vote the proxies for such other nominee as they may determine.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
NOMINEES FOR ELECTION AS DIRECTORS.
Meetings of the Board of Directors and Committees
Board of Directors.
The property, affairs and business of our company are under the general
management of our Board of Directors as provided by the laws of Nevada and our
Bylaws. We have standing Audit, Compensation and Nominating Committees of the
Board of Directors. The Board of Directors held six meetings during fiscal 2006.
Each director attended at least 75% of the aggregate of the total meetings of
the Board and the total number of meetings held by all committees of the Board
on which he served during fiscal 2006.
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Audit Committee.
The Board of Directors has instructed the Audit Committee to meet
periodically with our management and independent auditors to, among other
things, review the results of the annual audit and quarterly reviews and discuss
our financial statements, recommend to our board the independent auditors to
be retained, and receive and consider the auditors' comments as to controls,
adequacy of staff and management performance and procedures in connection with
audit and financial controls. The Audit Committee is also authorized to review
related party transactions for potential conflicts of interest. A copy of the
written charter adopted by the Board of Directors for the Audit Committee and as
currently in effect is included on our website, www.evolutionpetroleum.com. The
Audit Committee is composed of Mr. Gene Stoever, Chairman, and Messrs. E.J.
DiPaolo and William Dozier. Each member of the Audit Committee is "independent,"
as such term is defined in the listing standards for companies listed on the
American Stock Exchange. Each member of the Audit Committee also satisfies the
Securities and Exchange Commission's additional independence requirements for
members of audit committees. The Board has determined that Mr. Stoever is an
"audit committee financial expert" as defined under Item 401(e)(2) of Regulation
SB of the Securities Act of 1933. The Audit Committee met four times during
fiscal 2006.
Compensation Committee.
The Compensation Committee is authorized to review annual salaries and
bonuses of our officers and has the authority to determine the recipients of
options, the time or times at which options shall be granted, the exercise price
of each option, and the number of shares to be issuable upon the exercise of
each option under our stock option plan. In addition, the Compensation Committee
recommends to the full Board the compensation of our Chief Executive Officer.
The members of the Compensation Committee consist of Mr. Dozier, Chairman, and
Messrs. Stoever and DiPaolo. A copy of the written charter adopted by the Board
of Directors for the Compensation Committee and as currently in effect is
included on our website, www.evolutionpetroleum.com. Each member of the
Compensation Committee is "independent," as such term is defined in the listing
standards for companies listed on the American Stock Exchange. The Compensation
Committee met four times during fiscal year 2006.
Nomination of Directors.
The Nominating Committee, the members of which are currently Mr.
DiPaolo, who serves as Chairman and Messrs. Stoever and Dozier, is responsible
for identifying, screening, and recommending qualified candidates to serve on
our Board of Directors. A copy of the written charter adopted by the Board of
Directors for the Nominating Committee and as currently in effect is included on
our website, www.evolutionpetroleum.com. Pursuant to its charter, the Nominating
Committee is directed, among other things, to: develop and recommend to the
Board specific guidelines and criteria for selecting nominees to the Board;
formulate a process to identify and evaluate candidates to be recommended;
review periodically compensation programs for non-employee directors and make
recommendations for changes when appropriate; and evaluate the performance of
incumbent members of the Board to determine whether to recommend such persons
for re-election. Each member of the Nominating Committee is "independent," as
defined in the listing standards for companies listed on the American Stock
Exchange. Because the Nominating Committee was only recently formed, it has not
yet held any meetings, although all of the members approved the appointment of
the director nominees.
It is our policy that the Nominating Committee consider recommendations
for the nomination of directors submitted by our significant, long-term
stockholders (generally, stockholders that have beneficially owned more than 5%
of our outstanding shares for at least two years). The Nominating Committee will
give consideration to such recommendations that have been submitted in
accordance with procedural requirements adopted by the Nominating Committee. All
such stockholder nominating recommendations must be in writing, addressed to the
Nominating Committee, care of the Secretary at Evolution Petroleum Corporation,
820 Gessner, Suite 1340, Houston, Texas 77024. Submissions must be made by mail,
courier or personal delivery. E-mailed submissions will not be considered.
Stockholders wishing to recommend nominees for election as directors at an
annual meeting should submit such recommendation, together with any relevant
information that they wish the Nominating Committee to consider, no later than
120 days prior to such annual meeting of stockholders.
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In addition to the foregoing, stockholders may nominate directors for
election without consideration by the Nominating Committee so long as we are
provided with proper notice of such nomination, which notice includes all the
information required pursuant to Regulation 14A under the Securities Exchange
Act of 1943, as amended, including the consent to serve as a director.
Code of Ethics.
We have adopted a formal code of conduct that applies to all of our
employees, officers and directors. You can access the latest copy of our Code of
Business Conduct and Ethics on our website, www.evolutionpetroleum.com.
Stockholder Communications with the Board.
Any stockholder can communicate with all directors or with specified
directors by sending a letter to our Secretary at the address set forth under
"Stockholder Proposals," below. All such letters will be forwarded to the entire
Board or to the directors specified by the stockholder.
Compensation of Directors
Our non-employee directors are paid $25,000 per fiscal year. We also
reimburse our non-employee directors for any direct expenses they incur in their
capacity as directors.
On October 22, 2004, our board approved the grant of options to
purchase up to 100,000 shares of common stock at an exercise price of $1.27 per
share, 85% of the closing market price of our common stock as of the grant date
of such options, to each of two of our non-employee board members, Messrs. Gene
Stoever and Jed DiPaolo. On December 12, 2005, the foregoing options were
cancelled and new, fully vested options were issued to such directors with an
exercise price of $1.27 per share, a price that exceeded the closing market
price of our common stock as of the grant date of such options. On December 12,
2005, our board approved the grant of options to purchase up to 100,000 shares
of common stock with an exercise price of $1.21 per share, the closing market
price of our common stock as of the grant date of such options, to our other
non-employee board member, William Dozier. These options vest annually over a
two-year period beginning December 12, 2005, the date of Mr. Dozier's election
to our board. On August 22, 2005, we granted options to purchase up to 28,000
shares of our common stock at an exercise price of $1.10 per share, the closing
market price of our common stock as of the grant date of such options, to each
of Messrs. DiPaolo and Stoever. These options vested in full on August 22, 2006.
On May 10, 2006, our board approved the grant of options to purchase up to
50,000, 50,000, and 25,000 shares of common stock with an exercise price of
$3.03 per share, the closing market price of our common stock as of the grant
date of such options, to Messrs Stoever, DiPaolo and Dozier, respectively. These
options vest annually over a two year period from the date of grant.
Laird Q. Cagan, chairman of our board, also earns compensation from our
company through his relationship with our financial advisor, Cagan McAfee
Capital Partners, LLC ("CMCP") and placement agent (Chadbourn Securities, Inc.).
In addition, we reimburse CMCP for the costs of legal services performed by
staff members of CMCP under the direction of our general counsel. Mr. Cagan is
also reimbursed by us for documented travel expenses he incurs from time to time
directly on our behalf. Please see "Certain Relationships and Related
Transactions."
6
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers, and persons who own more than 10% of the
shares of our common stock (collectively, "Reporting Persons") to file reports
of ownership and changes in ownership with the SEC. Reporting Persons are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
they file.
Based solely on our review of the copies of such forms received or
written representations from the Reporting Persons, we believe that with respect
to the fiscal year ended June 30, 2006, all the Reporting Persons complied with
all applicable Section 16 filing requirements.
Beneficial Owners of More Than Five Percent of Our Company's Common
Stock; Shares Held by Directors and Executive Officers
Based solely upon information made available to us, the following table
sets forth information with respect to the beneficial ownership of our common
stock as of September 30, 2006 by (1) each person who is known by us to
beneficially own more than five percent of our common stock; (2) each director
and nominee for director; (3) each of the named executive officers listed in the
Summary Compensation Table below under the caption "Executive Compensation"; and
(4) all executive officers and directors as a group. Shares of common stock that
are subject to outstanding options and warrants that are presently exercisable
or exercisable December 31, 2006 are deemed to be outstanding for purposes of
computing the percentage ownership of the holder of the options and warrants,
but not for any other person. Except as otherwise indicated, the holders listed
below have sole voting and investment power with respect to all shares of common
stock beneficially owned by them, subject to community property laws where
applicable.
Amount and Nature
of Beneficial Percentage of
Name and Address of Beneficial Owner Ownership Class (1)
- ------------------------------------------------------ -------------------------------------
Robert Herlin (2)(3) 1,875,000 6.8%
Sterling McDonald (2)(4) 456,250 1.7%
Laird Q. Cagan (5)(6) 7,701,808 28.6%
E.J. DiPaolo (2)(7) 128,000 *
Gene Stoever (2)(7) 128,000 *
William Dozier (2)(8) 50,000 *
Daryl Mazzanti (2)(9) 250,000 *
Eric A. McAfee, P2 Capital LLC, Park Capital 5,907,500 22.1%
III and McAfee Capital LLC (5)(10)
Rubicon Master Fund (11) 1,360,000 5.1%
All executive officers and directors as a group 10,589,058 36.8%
(seven persons) (3)(4)(6)(7)(8)(9)
- ------------------------------------------------------
* Less than 1%
(1) Based on 26,652,005 shares outstanding on September 30, 2006.
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(2) Address: c/o Evolution Petroleum Corporation, 820 Gessner,
Suite 1340, Houston, Texas 77024.
(3) Includes (i) 1,000,000 shares directly held by Mr. Herlin; (ii)
up to 390,625 shares of our common stock issuable upon exercise
of options currently exercisable (or exercisable by December
31, 2006); and (iii) up to 484,375 shares of our common stock
issuable upon exercise of warrants currently exercisable (or
exercisable by December 31, 2006). Does not include (i) up to
359,375 shares of our common stock issuable upon the exercise
of options and (ii) up to 203,125 shares of our common stock
issuable upon the exercise of warrants, in each case not
exercisable by December 31, 2006.
(4) Represents (i) up to 428,125 shares of our common stock
issuable upon the exercise of stock options currently
exercisable (or exercisable by December 31, 2006) and (ii) up
to 28,125 shares of our common stock issuable upon exercise of
warrants currently exercisable (or exercisable by December 31,
2006). Does not include up to 443,750 shares of our common
stock issuable upon the exercise of options and warrants not
exercisable by December 31, 2006.
(5) Address: c/o Cagan McAfee, 10600 N. De Anza Blvd., Suite 250,
Cupertino, California 95014.
(6) Includes (i) 6,448,000 shares directly held by Mr. Cagan; (ii)
1,000,000 shares held in trust by Mr. Cagan's two daughters;
(iii) currently exercisable warrants to acquire up to 171,308
shares of our common stock held by Mr. Cagan issued in
connection with services rendered through Chadbourn Securities
as our placement agent; and (iv) currently exercisable warrants
to purchase up to 82,500 shares owned by Cagan McAfee Capital
Partners, LLC ("CMCP"), out of a total of warrants to purchase
up to 165,000 shares owned by CMCP, an entity in which Mr.
Cagan owns a 50% interest and shares voting and dispositive
power.
(7) Represents 128,000 shares of our common stock issuable upon
exercise of options currently exercisable (or exercisable by
December 31, 2006). Excludes up to 50,000 shares of our common
stock issuable upon exercise of options not exercisable by
December 31, 2006.
(8) Represents up to 50,000 shares of our common stock issuable
upon exercise of options currently exercisable (or exercisable
by December 31, 2006). Excludes up to 75,000 shares of our
common stock issuable upon exercise of options not exercisable
by December 31, 2006.
(9) Includes up to 225,000 shares of our common stock issuable upon
the exercise of options and warrants exercisable by December
31, 2006. Excludes up to 125,000 shares of our common stock
issuable upon exercise of warrants and up to 350,000 shares of
our common stock issuable upon exercise of options, in each
case not exercisable by December 31, 2006.
(10) Includes (i) 1,000,000 shares directly held by Mr. McAfee, (ii)
2,000,000 shares held by P2 Capital LLC, an entity owned 50% by
Marguerite McAfee (Mr. McAfee's spouse) and 25% by each of Mr.
and Mrs. McAfee's minor children (over which shares Mrs. McAfee
holds sole dispositive and voting power), (iii) 2,700,000
shares held by McAfee Capital, LLC, an entity owned 50% by each
of Mr. and Mrs. McAfee (over which shares Mr. and Mrs. McAfee
share voting and dispositive power); (iv) 125,000 shares owned
by Berg McAfee Companies, LLC (out of total of 250,000 shares
owned by Berg McAfee Companies, LLC), an entity in which Mr.
McAfee owns a 50% interest and shares voting and dispositive
power; and (v) currently exercisable warrants to purchase
82,500 shares owned by Cagan McAfee Capital Partners, LLC
("CMCP"), out of a total of warrants to purchase 165,000 shares
owned by CMCP, an entity in which Mr. McAfee owns a 50%
interest and shares voting and dispositive power. Mr. McAfee
disclaims beneficial ownership over all of the shares held by
P2 Capital LLC and 50% of the shares held by Berg McAfee.
McAfee Capital LLC disclaims beneficial ownership over all of
the shares held by P2 Capital LLC.
8
(11) Pursuant to investment agreements, each of Rubicon Fund
Management Ltd., a company organized under the laws of the
Cayman Islands, which we refer to in this prospectus as Rubicon
Fund Management Ltd, and Rubicon Fund Management LLP, a limited
liability partnership organized under the laws of the United
Kingdom, which we refer to in this prospectus as Rubicon Fund
Management LLP, Mr. Paul Anthony Brewer, Mr. Jeffrey Eugene
Brummette, Mr. William Francis Callanan, Mr. Vilas Gadkari, Mr.
Robert Michael Greenshields and Mr. Horace Joseph Leitch III
share all investment and voting power with respect to the
securities held by Rubicon Master Fund. Mr. Brewer, Mr.
Brummette, Mr. Callanan, Mr. Gadkari, Mr. Greenshields and Mr.
Leitch control both Rubicon Fund Management Ltd and Rubicon
Fund Management LLP. Each of Rubicon Fund Management Ltd,
Rubicon Fund Management LLP, Mr. Brewer, Mr. Brummette, Mr.
Callanan, Mr. Gadkari, Mr. Greenshields and Mr. Leitch disclaim
beneficial ownership of these securities.
Certain Relationships and Related Transactions
Laird Q. Cagan, the Chairman of our Board of Directors, is a Managing
Director of CMCP. CMCP performs financial advisory services for us pursuant to a
written agreement and is paid a monthly retainer. In addition, Mr. Cagan is a
registered representative of Chadbourn Securities, Inc. ("Chadbourn"), our
non-exclusive placement agent for private financings. Pursuant to the agreement
between Mr. Cagan, Chadbourn and us, we pay Chadbourn a placement fee based on
the amount of securities placed by Chadbourn. Effective as of December 1, 2005,
we renegotiated our agreement with CMCP to reduce the monthly retainer fee from
$15,000 per month to $5,000 per month and to change the placement fee from 8% of
the gross equity proceeds and warrants equal to 8% of the shares placed by
Chadbourn, to a cash fee of 8% for the first $1.0 million of gross proceeds,
declining by 1% for each subsequent $1.0 million of gross proceeds raised (to a
minimum fee of 4%), and warrants equal to 4% of the shares placed by Chadbourn.
The retainer includes payment for the services of Mr. Cagan as Chairman of our
Board of Directors.
In connection with the founding of our company, 18,000,000 shares of
Old NGS common stock were directly and indirectly purchased by various parties
as founder's shares, including, 1,000,000 shares by Robert S. Herlin as an
incentive to act as our President and CEO; 1,000,000 shares by Liviakis
Financial Communications, Inc., our investor relations firm; 7,500,000 shares by
Mr. Cagan; and 5,700,000 by Eric M. McAfee, a Managing Director of CMCP.
During fiscal 2006, we expensed and paid CMCP $95,000 for monthly
retainers, issued warrants to purchase up to 14,054 shares of our common stock
to Mr. Cagan and Chadbourn and paid a $63,240 cash commission to Chadbourn in
connection with capital raising services (a substantial portion of which fees
accrued to the benefit of Mr. Cagan). In March 2006 Mr. Cagan loaned us
$250,000, pursuant to a secured promissory note bearing interest at 10% per
annum, for general working capital purposes. On June 13, 2006, we repaid the
loan and accrued interest thereon, in full.
During the fiscal year ended June 30, 2005, we issued warrants to
purchase up to 91,359 and 5,427 shares of common stock to Mr. Cagan and
Chadbourn, respectively, in connection with capital raising services. During the
same period, we paid total cash commissions of $257,890 to Mr. Cagan and
Chadbourn, in connection with capital raising activities. During the fiscal year
ended June 30, 2005, we expensed and paid CMCP $180,000 for monthly retainers
earned in fiscal 2005, and paid $60,000 for monthly retainers earned, but
unpaid, during fiscal 2004.
From August through December, 2004, Mr. Cagan loaned us, through a
series of advances, $920,000, pursuant to a secured promissory note bearing
interest at 10% per annum and a 5% origination fee, earmarked for our purchase
of working interests in the Tullos Urania Field in Louisiana, working capital
and certain costs related to the closing of our loan facility with a third
party. On February 15, 2005, we repaid this note, totaling $953,589 with accrued
interest, in full.
9
Executive Officers of the Company
Set forth below is information regarding our executive officers
including their ages, positions with our company and principal occupations and
employers for at least the last five years. For information concerning executive
officers' ownership of our common stock, see "Beneficial Owners of More Than
Five Percent of our Company's Common Stock; Shares Held by Directors and
Executive Officers."
For information regarding Robert S. Herlin, our President and Chief
Executive Officer, see "Proposal I - Election of Directors."
Sterling H. McDonald (57). Mr. McDonald joined Old NGS as Chief
Financial Officer in 2003 and has served as our Chief Financial Officer since
the merger of Old NGS into our company in May 2004. Since joining us, Mr.
McDonald has also been responsible for our administrative functions. From 1999
to 2003, Mr. McDonald acted as an independent consultant and interim Chief
Financial Officer to various companies. From 1997 to 1999, he served as Chief
Financial Officer for PetroAmerican Services, a subsidiary of an integrated
NYSE-traded oil and gas company. Previously, he served as Chief Financial
Officer of PetroStar Energy, an exploration and production company, and
Treasurer of Reading and Bates Corporation, a NYSE-traded international offshore
drilling services, exploration and production company. Mr. McDonald holds an
MBA, with highest academic achievement, from the University of Tulsa.
Daryl V. Mazzanti (44). Mr. Mazzanti joined our company as our Vice
President of Operations in July 2005, to lead all of our oil and gas operations.
From 1985 to 2005, Mr. Mazzanti was employed by Union Pacific Resources (UPR)
and Anadarko Petroleum (the successor to UPR), where he managed operational,
engineering and geotechnical teams responsible for oil and gas fields in Texas,
Oklahoma, Louisiana, the Rockies and offshsore Gulf of Mexico. His duties
included overseeing up to 1,200 horizontal wells, optimizing artificial lift
methods for a 750 well program and supervising multi-rig drilling and service
programs. Mr. Mazzanti began his career in 1985 as a Development Engineer with
Champlin Oil (the predecessor to UPR), where he was responsible for drilling,
completion, workover, recompletion, reservoir analysis and surface facility
optimization across Texas and offshore Gulf of Mexico Mr. Mazzanti holds a
Bachelor of Science in Petroleum Engineering, with distinction, from the
University of Oklahoma at Norman.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to our company for the fiscal years ended June 30, 2006, June 30,
2005 and June 30, 2004, for our Chief Executive Officer (Robert S. Herlin),
Sterling H. McDonald and Daryl V. Mazzanti (the "Named Executives"). We had no
other executive officers during fiscal 2006.
10
SUMMARY COMPENSATION TABLE
Long Term
Annual Compensation Compensation Awards
-------------------------------------------------------------- --------------------
Other Securities
Fiscal Annual Underlying Options/
Name and Principal Position Year Salary Bonus Compensation SARS (#)(1)
- -------------------------------- -------------------------------------------------------------- --------------------
Robert S. Herlin 2006 $187,375 $105,000 -0- 400,000
President and CEO (2) (3) 2005 $180,000 -0- -0- 787,500
2004 $138,750 -0- -0- 250,000
Sterling H. McDonald
Treasurer and CFO (2) 2006 $154,167 $60,000 -0- 300,000
2005 $135,000 $50,000 -0- 350,000
2004 $ 77,000 -0- -0- 250,000
Daryl V. Mazzanti
Vice President-Operations 2006 $155,000 $126,250 $40,250 (4) 700,000
(1) Represents the number of options and warrants to acquire common
stock granted during the applicable fiscal year.
(2) Mr. Herlin and Mr. McDonald have served as President and CEO,
and Treasurer and CFO, respectively, of our company from May
24, 2004. During all periods indicated prior to May 24, 2004,
they served in the same capacities at Old NGS (the private
entity that merged with the publicly traded entity).
(3) We previously entered in a Resources Agreement with Tatum CFO
Partners, LLC in connection with the employment of Mr. Herlin.
This agreement is detailed under "Employment Agreements" below.
Mr. Herlin does not directly share in compensatory benefits
paid to Tatum CFO Partners, LLC.
(4) Represents the value of 25,000 shares of common stock granted
to Mr. Mazzanti under the Company's 2004 Stock Plan, based on a
value of $1.61 per share (the closing market price of our
common stock as of the grant date of such shares).
OPTION GRANTS AND EXERCISES IN LAST FISCAL YEAR
The following table sets forth certain information with respect to
stock options granted to the Named Executives during the fiscal year ended June
30, 2006, and the value of unexercised stock options at that year's end. No
options were exercised by any of the Named Executives during fiscal 2006.
11
Number of % of Total
Securities Options/SARs
Underlying Granted to
Options/SARs Employees in Exercise or Base
Name Granted (#) Period(1) Price ($/sh) Expiration Date
- ---------------------------- -------------------- -------------------- -------------------- ----------------------
Robert S. Herlin 400,000 26% $1.41 February 15, 2016
Sterling H. McDonald 300,000 19% $1.41 February 15, 2016
Daryl V. Mazzanti 550,000 36% $1.61 June 23, 2015
Daryl V. Mazzanti 150,000 10% $2.55 May 5, 2016
(1) Calculated on the basis of 800,000 stock options granted under
our 2004 Stock Plan and 750,000 warrants granted to employees
during fiscal 2006.
EMPLOYMENT AGREEMENTS; CHANGE IN CONTROL AGREEMENTS
Executive Employment Agreement: Robert S. Herlin
On September 23, 2003, Natural Gas Systems, Inc., a Delaware
corporation ("Old NGS"), a subsidiary of Natural Gas Systems, Inc., a Nevada
corporation (the "Company"), entered into an Executive Employment Contract (the
"Original Herlin Employment Contract") with Robert S. Herlin for Mr. Herlin to
serve as President and Chief Executive Officer. Pursuant to the Original Herlin
Employment Contract, Mr. Herlin was granted a stock option to purchase 250,000
shares of Old NGS common stock with an exercise price equal to $0.001 per share
vesting over four years, that was to be cancelled when the Company granted
warrants to Tatum CFO Partners, LLP, a provider of contract CFO's and other
executive level executives ("Tatum"), in connection with Mr. Herlin's status as
a partner of Tatum and certain other services to be provided by Tatum. In
addition, under the Original Herlin Employment Contract Mr. Herlin received an
annual salary of $180,000, an annual discretionary bonus of up to $180,000 and a
six month severance package, and purchased 1,000,000 shares of common stock of
Old NGS, with Old NGS having a repurchase right under a reverse vesting
arrangement over 27 months (the "Stock Purchase Agreement"). The Original Herlin
Employment Contract and Stock Purchase Agreement were assumed by us when our
subsidiary merged with Old NGS in May 2004. In addition, the stock options were
exchanged in the merger for stock options exercisable for shares of our common
stock.
On April 4, 2005, we entered into an Executive Employment Contract (the
"New Herlin Employment Contract") with Mr. Herlin. The New Herlin Employment
Contract supersedes the Original Herlin Employment Contract. Pursuant to the New
Herlin Employment Contract, Mr. Herlin continues to serve as our President and
Chief Executive Officer, receiving an annual salary of $180,000, which increased
to $210,000 in April 2006, and a one year severance package. Mr. Herlin is also
eligible to receive a discretionary bonus equal to 100% of his annual salary. As
a bonus for fiscal 2005, Mr. Herlin was allowed to retain the 250,000 stock
options granted to him under the Original Employment Agreement after the grant
of warrants to Tatum. We also entered into a new agreement with Tatum, which
supersedes the original agreement with Tatum and provides for us to grant Tatum
a warrant to purchase up to 262,500 shares of our common stock, exercisable at
$0.001 per share over a five-year period. We refer you to "Amended and Restated
Agreement with Tatum Partners."
On April 4, 2005, Mr. Herlin was granted a stock option to purchase up
to 500,000 shares of our common stock, with an exercise price equal to $1.80 per
share that vests over four years, as well as a warrant to purchase up to 287,500
shares of our common stock, with an exercise price equal to $1.80 per share that
vests over eighteen months, both of which have with certain acceleration
provisions based on involuntary termination and change of control.
12
On February 15, 2006, Mr. Herlin was granted a warrant to purchase up
to 400,000 shares of our common stock, with an exercise price of $1.41 per
share. In lieu of a cash bonus, that portion of the option to purchase 150,000
shares was fully vested as of its grant date, with the remaining portion of the
option vesting over a four-year period..
Amended and Restated Agreement with Tatum Partners.
In September 2003, Old NGS entered into a Resources Agreement with
Tatum (the "Original Tatum Contract"). The Original Tatum Contract provided for
Tatum to make available to Old NGS the services of its partner, Mr. Herlin, and
provide access to various Tatum resources in exchange for sharing of Mr.
Herlin's compensation from Old NGS. The Original Tatum Contract was assumed by
us when our subsidiary merged with Old NGS in May 2004.
On April 4, 2005, we executed an Amended and Restated Resources
Agreement (the "Amended and Restated Tatum Contract") with Tatum. Pursuant to
the Amended and Restated Tatum Contract, Tatum will receive $12,000 per year in
exchange for our access to its services. In addition, we granted Tatum a warrant
to purchase up to 262,500 shares of our common stock, exercisable at $0.001 per
share over a period of five years.
Executive Employment Agreement: Sterling H. McDonald
On November 10, 2003, Old NGS entered into an Executive Employment
Contract with Sterling H. McDonald for Mr. McDonald to serve as Chief Financial
Officer (the "Original McDonald Employment Contract"). The Original McDonald
Employment Contract provided for a grant of a stock option to purchase up to
250,000 shares of common stock of Old NGS, with an exercise price of $0.25 per
share that vests over 48 months. In addition, under the Original McDonald
Employment Contract Mr. McDonald received an annual salary of $120,000, an
annual discretionary bonus, and a maximum six-month severance package. The
Original McDonald Employment Contract was assumed by us when our subsidiary
merged with Old NGS in May 2004. In addition, the stock options were exchanged
in the merger for stock options exercisable for shares of our common stock.
On April 4, 2005, we entered into an Executive Employment Contract (the
"New McDonald Employment Contract") with Mr. McDonald. The New McDonald
Employment Contract supersedes the Original McDonald Employment Contract, with
the exception that Mr. McDonald retained the stock options under the terms
previously granted. Pursuant to the New McDonald Employment Contract, Mr.
McDonald continues to serve as our Chief Financial Officer at an annual salary
of $150,000. Mr. McDonald is also eligible to receive an annual discretionary
bonus equal to 75% of his annual salary, and a six-month severance package,
which may be increased to one year under conditions related to a change of
control.
On April 4, 2005, Mr. McDonald was granted a stock option to purchase
up to 350,000 shares of our common stock at an exercise price of $1.80 per
share, vesting over four years, with certain acceleration provisions based on
involuntary termination and change of control.
On February 15, 2006, Mr. McDonald was granted a stock option to
purchase up to 150,000 shares of our common stock at an exercise price of $1.41
per share. In lieu of a cash bonus, that portion of the option to purchase
100,000 shares was fully vested as of its grant date, with the remaining portion
of the option vesting over a four-year period. On February 15, 2006, Mr.
McDonald was also granted a warrant to purchase up to 150,000 shares of our
common stock at an exercise price of $1.41 per share vesting over a four-year
period. The compensation committee increased Mr. McDonald's base pay from
$150,000 to $160,000 annually effective February 1, 2006.
13
Executive Employment Agreement: Daryl V. Mazzanti
On June 23, 2005, we entered into an Executive Employment Contract with
Mr. Daryl V. Mazzanti for Mr. Mazzanti to serve as Vice President of Operations
of our company (the "Employment Contract"). Under the Employment Contract, Mr.
Mazzanti receives an annual salary of $155,000, a discretionary bonus of up to
75% of his annual salary, and a six month severance package. The Employment
Contract provided for a grant of up to 350,000 stock options under our 2004
Stock Plan, exercisable at $1.61 per share and vesting quarterly over four years
("Stock Option Agreement"). Further, Mr. Mazzanti received a sign on bonus of a
grant of 25,000 shares of our common stock under the 2004 Stock Plan and a cash
payment of $10,000. In addition, we granted Mr. Mazzanti a warrant to purchase
up to 200,000 shares of our common stock at an exercise price of $1.61 per
share, vesting over four years. On May 5, 2006, Mr. Mazzanti was granted an
option to purchase up to 150,000 shares of our common stock at an exercise price
of $2.55 per share, vesting over four years.
Report of the Audit Committee
Notwithstanding anything to the contrary set forth in any of our
previous or future filings under the Securities Act or the Exchange Act that
might incorporate by reference previous or future filings, including this Proxy
Statement, in whole or in part, the following report shall not be incorporated
by reference into any of such filings.
The responsibilities of the Audit Committee include providing oversight
to Evolution Petroleum Corporation's financial reporting process through
periodic meetings with Evolution Petroleum Corporation's independent auditors
and management to review accounting, auditing, internal controls, and financial
reporting matters. The management of Evolution Petroleum Corporation is
responsible for the preparation and integrity of the financial reporting
information and related systems of internal controls. The Audit Committee, in
carrying out its role, relies on our senior management, including senior
financial management, and its independent auditors.
We have reviewed and discussed with senior management Evolution
Petroleum Corporation's audited financial statements included in the fiscal 2006
Annual Report on Form 10-KSB. Management has confirmed to us that such financial
statements (i) have been prepared with integrity and objectivity and are the
responsibility of management and (ii) have been prepared in conformity with
accounting principles generally accepted in the United States.
We have discussed with Hein & Associates LLP, our independent auditors,
the matters required to be discussed by SAS 61 (Communications with Audit
Committee). SAS 61 requires our independent auditors to provide us with
additional information regarding the scope and results of their audit of
Evolution Petroleum Corporation's financial statements with respect to (i) their
responsibility under auditing standards generally accepted in the United States,
(ii) significant accounting policies, (iii) management judgments and estimates,
(iv) any significant audit adjustments, (v) any disagreements with management,
and (vi) any difficulties encountered in performing the audit.
We have received from Hein & Associates LLP a letter providing the
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) with respect to any
relationships between Hein & Associates LLP and Evolution Petroleum Corporation
that in its professional judgment may reasonably be thought to bear on
independence. Hein & Associates LLP has discussed its independence with us. Hein
& Associates LLP confirmed in its letter, in its professional judgment, it is
independent of Evolution Petroleum Corporation within the meaning of the federal
securities laws.
Based on the review and discussions described above with respect to
Evolution Petroleum Corporation's audited financial statements included in
Evolution Petroleum Corporation's fiscal 2006 Annual Report on Form 10-KSB, we
have recommended to the Board of Directors that such financial statements be
included in Evolution Petroleum Corporation's Annual Report on Form 10-KSB.
14
It is not the duty of the Audit Committee to plan or conduct audits or
to determine that Evolution Petroleum Corporation's financial statements are
complete and accurate and in accordance with accounting principles generally
accepted in the United States. That is the responsibility of management and our
independent auditors. In giving our recommendation to the Board of Directors, we
have relied on (i) management's representation that such financial statements
have been prepared with integrity and objectivity and in conformity with
accounting principles generally accepted in the United States and (ii) the
report of our independent auditors with respect to such financial statements.
Respectfully submitted,
Audit Committee
Gene Stoever
E. J. DiPaolo
William Dozier
Independent Public Auditors
Aggregate fees billed to us for professional services by Hein &
Associates LLP during the fiscal years ended June 30, 2006 and June 30, 2005
were as follows:
Twelve Months Ended Twelve Months Ended
June 30, 2006 June 30, 2005
----------------------------- ------------------------------
Audit Fees $74,703 $95,313
Audit-Related Fees 0 0
Tax Fees $64,409 $29,736
All Other Fees $27,328 $17,710
In the above table, in accordance with the SEC's definitions and rules,
"audit fees" are fees we paid Hein & Associates LLP for professional services
for the audit of our consolidated financial statements included in our Form
10-KSB, and the review of financial statements included in our Form 10-QSBs, and
for services that are normally provided by the auditors in connection with
statutory and regulatory filings or engagements; "audit-related fees" are fees
for assurance and related services that are reasonably related to the
performance of the audit or review of our financial statements; and "tax fees"
are fees for tax compliance, tax advice and tax planning. "All other fees"
primarily relate to fees for the review of our registration statement on file
with the Securities and Exchange Commission.
All of the audit related services and tax fees were pre-approved by our
Audit Committee.
The Audit Committee has considered the compatibility of the non-audit
services provided by Hein & Associates LLP to Hein & Associates LLP's continued
independence and has concluded that the independence of Hein & Associates LLP is
not compromised by the performance of such services.
Pre-Approval of Services by External Auditor
The Audit Committee has adopted policies and procedures for the
pre-approval of the audit and non-audit services performed by the independent
auditors in order to ensure that the provision of such services does not impair
the auditors' independence. The Audit Committee approves all audit fees and
terms for all services provided by the independent auditors, and considers
whether these services are compatible with the auditors' independence. The
Chairman of the Audit Committee may approve additional proposed services that
arise between Committee meetings provided that the decision to approve the
service is presented at the next scheduled Committee meeting. All non-audit
services provided by the independent auditors must be pre-approved by the Audit
Committee Chairman prior to the engagement. The Audit Committee pre-approved all
audit and permitted non-audit services by Hein & Associates LLP in fiscal 2006.
15
PROPOSAL II
PROPOSAL TO RATIFY APPOINTMENT OF
HEIN & ASSOCIATES LLP AS OUR COMPANY'S AUDITORS
The Audit Committee of our Board of Directors has approved Hein &
Associates LLP as our company's independent auditors to audit our consolidated
financial statements for the fiscal year ending June 30, 2007. From June 30,
2004 through June 30, 2006, Hein & Associates LLP served as our independent
auditors and also provided certain tax consulting and other accounting services.
We are not required to seek stockholder approval for the appointment of our
independent auditors; however, the Audit Committee and the full Board of
Directors believe it to be sound corporate practice to seek such approval. If
the appointment is not ratified, the Audit Committee will investigate the
reasons for stockholder rejection and will re-consider the appointment. Even if
the selection is ratified, the Audit Committee in its discretion may direct the
appointment of different independent auditors at any time during the year if it
determines that such a change would be in the best interests of our company and
our stockholders.
The Board of Directors recommends that the stockholders vote FOR the
ratification of the appointment of Hein & Associates LLP as our independent
auditors.
Representatives of Hein & Associates LLP will be present at the Annual
Meeting and will have an opportunity to make a statement, if they so desire, and
will be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present in accordance with
Rule 14a-8 of the Securities Exchange Act of 1934 (the "Exchange Act") at our
next annual meeting of stockholders to be held in 2007 must be received by
Evolution Petroleum Corporation on or before June 30, 2007. Only proper
proposals under Rule 14a-8 of the Exchange Act that are timely received will be
included in the Proxy Statement and Proxy in 2007. Any such proposal should be
directed to the secretary of our company at the principal executive offices of
Evolution Petroleum Corporation located at 820 Gessner, Suite 1340, Houston,
Texas 77024.
OTHER MATTERS
Expenses of Solicitation
The cost of soliciting proxies in the accompanying form will be borne
by Evolution Petroleum Corporation. In addition to the use of the mails, proxies
may be solicited by directors, officers or other employees of Evolution
Petroleum Corporation, personally or by telephone, facsimile or email.
Miscellaneous
Our management does not intend to present any other items of business
and is not aware of any matters other than those set forth in this Proxy
Statement that will be presented for action at the Annual Meeting. However, if
any other matters properly come before the Annual Meeting, the persons named in
the enclosed proxy intend to vote the shares of our common stock that they
represent in accordance with their best judgment.
16
Annual Report
A copy of the Company's Annual Report on Form 10-KSB without exhibits,
for the fiscal year ended June 30, 2006 filed with the Securities and Exchange
Commission accompanies this Proxy Statement. Copies of the Form 10-KSB exhibits
are available without charge. Stockholders who would like such copies should
direct their requests in writing to: Evolution Petroleum Corporation, Inc., 820
Gessner, Suite 1340, Houston, Texas 77024, Attention: Sterling H. McDonald.
By Order of the Board of Directors
/s/ Laird Q. Cagan
---------------------------------------
Laird Q. Cagan, Secretary
17
P R O X Y
EVOLUTION PETROLEUM CORPORATION,
a Nevada Corporation
ANNUAL MEETING OF STOCKHOLDERS
December 6, 2006
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Robert S. Herlin and Sterling H.
McDonald, or either of them, as proxies, each with the power to appoint his or
her substitutes, and hereby authorizes them to represent and vote, as designated
below, all of the shares of Common Stock of Evolution Petroleum Corporation,
Inc. held of record by the undersigned on October 27, 2006 at the Annual Meeting
of Stockholders to be held at the Company's offices at 820 Gessner Street, Suite
1340, Houston Texas 77024 on Wednesday, December 6, 2006, at 2:00 p.m. (local
time), or any adjournments or postponement thereof, with all powers which the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
1. For the election as directors of the nominees listed below, except
to the extent that authority is specifically withheld.
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees
contrary below) listed below
Nominees: Robert S. Herlin, Laird Q. Cagan, Gene Stoever,
E. J. DiPaolo and William Dozier
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. Proposal to ratify appointment of Hein & Associates, LLP, as
independent auditors.
|_| For |_| Against |_| Abstain
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
18
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted for Proposals 1 and 2. I understand that I may revoke this
Proxy only by written instructions to that effect, signed and dated by me, which
must be actually received by the Company prior to the commencement of the Annual
Meeting.
Dated:__________________________
________________________________
Signature
________________________________
Signature if Held Jointly
________________________________
Number of Shares
Please sign exactly as your name appears on your stock certificate. When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If the
shares are owned by a corporation, sign in the full corporate name by the
President or other authorized officer. If the shares are owned by a Partnership,
sign in the name of the Partnership name by an authorized person. Please mark,
sign, date and return the Proxy promptly using the enclosed envelope.
19