Edgar Filing: AER ENERGY RESOURCES INC /GA

1
SCHEDULE 14A
(RULE 14A-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

AER ENERGY RESOURCES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:
2

(AER LOGO)

March 28, 2001

Dear Shareholder:

You are cordially invited to attend the 2001 Annual Meeting of
Shareholders of AER Energy Resources, Inc. (the "Company") on Thursday, April
26, 2001, at 11:00 a.m., local time, at the Lenox Inn - Buckhead, 3387 Lenox
Road, NE, Atlanta, Georgia 30326.

The business to be acted on during the meeting includes the election of
six directors and the approval of an amendment to the Company's 1992 Stock
Option Plan to increase from 1,500,000 to 2,000,000 the total number of shares
that may be issued pursuant to options granted under this plan. The accompanying
proxy statement contains details on these items. We will also review the major
developments of 2000.

Your participation in the affairs of the Company is important,
regardless of the number of shares you hold. To ensure your representation at
the meeting whether or not you are able to be present, please complete and
return the enclosed proxy card as soon as possible. If you do attend the
meeting, you may revoke your proxy and vote in person if you so desire.

I look forward to seeing you on April 26. Thank you for your continuing
interest in the Company.

Sincerely yours,

/s/ David W. Dorheim

David W. Dorheim
President and Chief Executive Officer
AER Energy Resources, Inc.

AER ENERGY RESOURCES, INC.
4600 HIGHLANDS PARKWAY, SUITE G
SMYRNA, GEORGIA 30082

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON APRIL 26, 2001

To the Shareholders of AER Energy Resources, Inc.:

The Annual Meeting of Shareholders of AER Energy Resources, Inc., a
Georgia corporation (the "Company"), will be held at the Lenox Inn - Buckhead,
3387 Lenox Road, NE, Atlanta, Georgia 30326, on Thursday, April 26, 2001, at
11:00 a.m., local time, for the following purposes:

1. To elect six directors.

2. To consider and act upon a proposal to approve an amendment to
the 1992 Stock Option Plan, as amended, to increase the total
number of shares that may be issued pursuant to options
granted thereunder from 1,500,000 to 2,000,000.

3. To transact such other business as may properly come before
the meeting.

February 19, 2001 is the record date for the determination of
shareholders entitled to notice of and to vote at such meeting or any
adjournment thereof.

Whether or not you expect to be present in person at the meeting,
please sign and date the accompanying proxy and return it promptly to our
transfer agent in the enclosed postage-paid reply envelope. This will assist us
in preparing for the meeting.

By Order of the Board of Directors

/s/ J. T. Moore

J. T. Moore
Vice President - Chief Financial Officer,
Secretary and Treasurer

March 28, 2001

SHAREHOLDERS ARE URGED TO DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED
PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED WITHIN
THE UNITED STATES. IF A SHAREHOLDER RECEIVES MORE THAN ONE PROXY BECAUSE HE OR
SHE OWNS SHARES REGISTERED IN DIFFERENT NAMES OR ADDRESSES, EACH PROXY SHOULD BE
COMPLETED AND RETURNED. YOUR PROXY WILL BE VOTED WITH RESPECT TO THE MATTERS
IDENTIFIED THEREON IN ACCORDANCE WITH ANY SPECIFICATIONS ON THE PROXY. YOUR
COOPERATION IS APPRECIATED.

AER ENERGY RESOURCES, INC.
4600 HIGHLANDS PARKWAY, SUITE G
SMYRNA, GEORGIA 30082

PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 26, 2001

This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of AER Energy Resources, Inc., a Georgia
corporation (the "Company"), to be used at the Annual Meeting of Shareholders
(the "Annual Meeting") of the Company to be held at the Lenox Inn - Buckhead,
3387 Lenox Road, NE, Atlanta, Georgia 30326, at 11:00 a.m., local time, on April
26, 2001, and any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. A copy of the Company's
Annual Report to Shareholders for the fiscal year ended December 31, 2000 is
enclosed. This Proxy Statement and accompanying form of proxy and the Company's
2000 Annual Report to Shareholders were first sent or given to shareholders on
or about March 28, 2001.

SOLICITATION OF PROXIES

This proxy solicitation will be conducted principally by mail, and the
cost will be paid by the Company. Proxies may also be solicited by officers and
regular employees of the Company personally or by telephone, but such persons
will not be specifically compensated for such services. Banks, brokers,
nominees, and other custodians and fiduciaries will be requested to forward
proxy solicitation material to their principals and customers where appropriate,
and the Company will reimburse such banks, brokers, nominees, custodians and
fiduciaries for their reasonable out-of-pocket expenses in sending the proxy
material to beneficial owners of the shares.

ACTIONS TO BE TAKEN UNDER THE PROXY

In voting on the election of directors (Proposal 1), shareholders may
vote in favor of all nominees or withhold their votes as to some or all
nominees. In voting on the approval of the amendment to the 1992 Stock Option
Plan, as amended (the "Stock Option Plan") (Proposal 2), shareholders may vote
FOR, AGAINST or ABSTAIN with respect to the proposal. Unless other instructions
are indicated on the proxy card, all properly executed proxies received by the
Company will be voted FOR Proposal 1, the election of all the nominees for
director set forth below under "Election of Directors," and FOR Proposal 2, the
approval of the amendment to the Stock Option Plan. Some proxies may be broker
non-votes (marked to indicate that the shares are not being voted).

The presence, in person or by proxy, of at least a majority of the
total number of outstanding shares is necessary to constitute a quorum at the
Annual Meeting. Any proxy authorized to be voted at the Annual Meeting on any
matter (including on routine matters pursuant to the discretionary authority
granted in management's proxy), whether or not the proxy is marked to withhold
authority or abstain or to effect a broker non-vote on any proposal, will be
counted in establishing a quorum.

The election of directors will require the affirmative vote of a
plurality of the shares voted at the Annual Meeting in person or by proxy. Votes
withheld and broker non-votes will not be included in vote totals for director
nominees and will have no effect on the outcome of the vote. Proposal 2 will be
approved if the number of votes cast in favor of the proposal exceeds the number
of votes cast opposing the proposal. Abstentions and broker non-votes will have
no effect on the outcome of the vote on Proposal 2. None of the actions to be
voted upon at the Annual Meeting shall create dissenters' rights under the
Georgia Business Corporation Code.

Any shareholder giving a proxy may revoke it at any time before it is
exercised by giving written notice of revocation, or a duly executed proxy
bearing a later date, to the Secretary of the Company. In order to be effective,
such notice or later dated proxy must be received by the Company prior to the
exercise of the earlier proxy. A shareholder may attend the Annual Meeting,
revoke his proxy, and vote in person.

VOTING SECURITIES

Only holders of record as of the close of business on February 19, 2001
of the Company's common stock, no par value ("AER Common Stock"), are entitled
to vote at the Annual Meeting. On that date, there were 24,850,263 shares of AER
Common Stock outstanding, each entitled to one vote. Shareholders of the Company
do not have any right to cumulate their votes for the election of directors.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership of Certain Beneficial Owners

The following table sets forth, as of February 27, 2001, certain
information with respect to persons known by the Company to be the beneficial
owners, as determined pursuant to Rule 13d-3 ("Rule 13d-3") promulgated by the
Securities and Exchange Commission ("SEC"), of more than 5% of each of the
outstanding AER Common Stock, the Company's Series A Convertible Preferred
stock, no par value (the "Series A Preferred Stock"), and the Series B
Convertible Preferred Stock, no par value (the "Series B Preferred Stock").
Except as otherwise indicated, the holders listed below have sole voting and
investment power with respect to all shares beneficially owned by them. The
following table is based in part upon information from SEC Schedule 13Ds and
13Gs furnished to the Company.

NAME AND ADDRESS OF AMOUNT OF BENEFICIAL PERCENT OF BENEFICIAL
BENEFICIAL OWNER TITLE OF CLASS OWNERSHIP OF CLASS OWNERSHIP OF CLASS
-------------------------- ------------------------- -------------------- ---------------------

Jon A. Lindseth Common Stock 12,487,397(1)(2)(4) 40.6%
12651 Elmwood Avenue Series A Preferred Stock 202,250(2)(3) 50.0%
Cleveland, OH 44111 Series B Preferred Stock 102,250(2)(3) 100.0%

Jon A. Lindseth, Trustee under
Jon A. Lindseth Trust Agreement
dated April 25, 1986 Common Stock 12,244,403(2)(4) 39.8%
12651 Elmwood Avenue Series A Preferred Stock 202,250(2)(3) 50.0%
Cleveland, OH 44111 Series B Preferred Stock 102,250(2)(3) 100.0%

AER Partners
12651 Elmwood Avenue
Cleveland, OH 44111 Common Stock 3,189,915 12.8%

Elmwood Partners II Common Stock 8,933,258(4) 29.2%
12651 Elmwood Avenue Series A Preferred Stock 202,250 50.0%
Cleveland, OH 44111 Series B Preferred Stock 102,250 100.0%

J. Taylor Crandall
201 Main Street, Suite 3100 Common Stock 5,544,774(5)(6)(7) 19.2%
Fort Worth, TX 76102 Series A Preferred Stock 202,250 50.0%

FW AER Partners, L.P.
201 Main Street, Suite 3100
Fort Worth, TX 76102 Common Stock 2,419,158(6) 9.4%

FW AER II, L.P.
201 Main Street, Suite 3100 Common Stock 3,125,616(7) 11.2%
Fort Worth, TX 76102 Series A Preferred Stock 202,250 50.0%

(1) Includes (i) 12,176,700 shares of AER Common Stock deemed to be
beneficially owned by Jon A. Lindseth, as trustee under Jon A. Lindseth
Trust Agreement, dated April 25, 1986, as modified (the "Trust"), (ii)
212,994 shares beneficially owned by The Kindt-Collins Company
("Kindt-Collins"), an Ohio corporation that Mr. Lindseth controls (such
amount includes 112,994 shares of AER Common Stock underlying warrants
held by Kindt-Collins) and (iii) 30,000 shares beneficially owned
directly by Mr. Lindseth.

persons. Based on the foregoing, Mr. Lindseth may be deemed to control
each of these partnerships. The shares of AER Common Stock deemed to be
beneficially owned by the Trust include (i) 3,189,915 shares
beneficially owned by AER Partners, (ii) 8,933,258 shares beneficially
owned by Elmwood Partners II and (iii) 121,230 shares beneficially
owned by Battery Partners.

(3) Includes 202,250 shares of Series A Preferred Stock and 102,250 shares
of Series B Preferred Stock beneficially owned by Elmwood Partners II.

(4) Includes (i) 2,542,587 shares of AER Common Stock underlying 202,250
shares of Series A Preferred Stock (as of February 27, 2001), (ii)
1,985,437 shares of AER Common Stock underlying 102,250 shares of
Series B Preferred Stock (as of February 27, 2001) and (iii) 1,246,734
shares of AER Common Stock underlying immediately exercisable warrants.

(5) Mr. Crandall is the President of Group 31, Inc., the general partner of
FW AER Partners, L.P. ("FW AER Partners"), and the President of Group
31, L.L.C., the general partner of FW AER II, L.P. ("FW AER II"). Mr.
Crandall may be deemed to beneficially own shares of AER Common Stock
owned by FW AER Partners and FW AER II.

(6) Includes 835,000 shares of AER Common Stock underlying certain
immediately exercisable warrants.

(7) Includes (i) 583,029 shares of AER Common Stock underlying immediately
exercisable warrants and (ii) 2,542,587 shares of AER Common Stock
underlying 202,250 shares of Series A Preferred Stock (as of February
27, 2001).

Security Ownership of Directors and Management

The following table sets forth, as of February 27, 2001, certain
information concerning the beneficial ownership, as defined in Rule 13d-3, of
shares of AER Common Stock by the directors, the Named Executive Officers (as
defined in the Executive Compensation section below), and all executive officers
and directors as a group. Except as otherwise indicated, the persons listed
below have sole voting and investment power with respect to all shares
beneficially owned by them.

AMOUNT OF PERCENT OF
BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP
NAME OF BENEFICIAL OWNER POSITION TITLE OF CLASS OF CLASS OF CLASS
------------------------ -------------------- ------------------------ ----------- ----------

Jon A. Lindseth Chairman of the Common Stock 12,487,397(1)(2)(4) 40.6%
Board Series A Preferred Stock 202,250(2)(3) 50.0%
Series B Preferred Stock 102,250(2)(3) 100.0%
David W. Dorheim Director, President
and Chief Executive
Officer Common Stock 212,360(5) *

David G. Brown Director Common Stock 92,250(6) *

James W. Dixon Director Common Stock 29,250 *

William L. Jackson Director Common Stock 35,250 *

John L. Wilkes Director Common Stock 42,250 *

R. Dennis Bentz Vice President -
Product and Process
Development Common Stock 133,010(5) *

Frank M. Harris Vice President -
Marketing and
Licensing Common Stock 112,460(5) *

J. T. Moore Vice President -
Chief Financial
Office, Secretary and
Treasurer Common Stock -0- -0-

Lawrence A. Tinker Vice President -
Advanced
Technology Common Stock 123,747(5) *

All executive officers and Common Stock 13,267,974(1)(2)(4)(5)(6) 42.6%
directors as a group Series A Preferred Stock 202,250(2)(3) 50.0%
(10 persons) Series B Preferred Stock 102,250(2)(3) 100.0%

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(1) Includes (i) 12,244,403 shares of AER Common Stock deemed to be
beneficially owned by Jon A. Lindseth, as trustee under Jon A. Lindseth
Trust Agreement, dated April 25, 1986, as modified, (ii) 212,994 shares
beneficially owned by Kindt-Collins (such amount includes 112,994
shares of AER Common Stock underlying warrants held by Kindt-Collins)
and (iii) 30,000 shares beneficially owned directly by Mr. Lindseth.

(2) The Trust is a revocable trust created to manage and invest certain
assets for the benefit of Mr. Lindseth. The Trust's beneficial
ownership of AER Common Stock is held through its ownership of three
investment partnerships: AER Partners and Elmwood Partners II (each of
which the Trust owns 50%), and Battery Partners (of which the Trust
owns 30%). Elmwood Partners II and AER Partners have substantially the
same partners. Mr. Lindseth's adult children and their spouses together
hold approximately a 15% interest in each of AER Partners, Elmwood
Partners II, Kindt-Collins and Battery Partners; however, Mr. Lindseth
hereby disclaims beneficial ownership of any AER Common Stock that may
be beneficially owned by such persons. Based on the foregoing, Mr.
Lindseth may be deemed to control each of these partnerships. The
shares of AER Common Stock deemed to be beneficially owned by the Trust
include (i) 3,189,915 shares beneficially owned by AER Partners, (ii)
8,933,258 shares beneficially owned by Elmwood Partners II, and (iii)
121,230 shares beneficially owned by Battery Partners.

(3) Includes 202,250 shares of Series A Preferred Stock and 102,250 shares
of Series B Preferred Stock owned by Elmwood Partners II.

(5) Includes 160,000, 80,000, 80,000 and 100,000 shares underlying options
held by Messrs. Dorheim, Bentz, Harris and Tinker, respectively, that
are immediately exercisable.

(6) Includes 77,500 shares beneficially owned jointly with Mr. Brown's
spouse.

PROPOSAL 1

ELECTION OF DIRECTORS

Pursuant to the Bylaws of the Company, six directors will be elected to
serve for a term of one year and until their successors are elected and
qualified. It is the intention of the persons named in the accompanying proxy to
vote for the election of the nominees identified below. Should any nominee be
unable or fail to accept nomination or election, which is not anticipated, it is
the intention of the persons named in the proxy, unless otherwise instructed in
the proxy, to vote for the election in his stead of such other person as
management may recommend.

The following table sets forth certain information concerning persons
nominated as directors.

POSITION WITH COMPANY DIRECTOR OF
NAME AGE AND PRINCIPAL OCCUPATION COMPANY SINCE
---- --- ------------------------------------------------- -------------

Jon A. Lindseth 66 Chairman of the Board. Chairman of Kindt-Collins 1989
(foundry supply company)

David W. Dorheim 51 Director, President and Chief Executive Officer 1989

David G. Brown 44 Director. Managing partner of Oak Hill Venture 1996
Partners; Vice President of Keystone, Inc.;
limited partner of FW Partners; principal of
Arbor Investors, LLC (all are investment
companies). Mr. Brown also serves on the Board
of Directors of Bell & Howell Company.

James W. Dixon 53 Director. Chief Executive Officer of Broadreach 1997
Consulting, Inc. (formerly The Reohr Group)
(internet professional services company).
Mr. Dixon also serves on the Board of Directors
of US Data, Inc.

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8

William L. Jackson 73 Director. Retired Chairman of Tupperware, Inc. 1993
(consumer product manufacturer)

John L. Wilkes 75 Director. Retired Senior Vice President of 1993
Technology Worldwide of Duracell Battery Company
(battery manufacturer)

Each nominee for director has been principally employed in his present
capacity or a similar capacity with the same organization for at least the last
five years except as follows: from 1988 to 1996, Mr. Dixon served as Chairman
and Chief Executive Officer of CompuCom Systems, Inc., a national computer
reseller and services company.

Each of the Company's directors serves for a one-year term and until
his successor is elected and qualified or until his earlier death, resignation
or removal.

MEETINGS OF THE BOARD OF DIRECTORS

The Board of Directors met seven times during 2000 and each director
attended at least 75% of such meetings. During 2000, each director serving on a
committee of the Board attended at least 75% of the meetings of each committee
on which such director served.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has standing Audit and Compensation Committees.
The Board of Directors does not have a nominating committee.

The Audit Committee met one time in 2000. A motion was passed at the
April 12, 2000 Board of Directors meeting indicating that all members of the AER
Energy Board of Directors (except Mr. Dorheim) would serve as members of the
Audit Committee for 2000. The functions of the Audit Committee are to recommend
to the Board each year the accounting firm to be retained as the Company's
independent auditors, consider the fee arrangement and scope of the audit,
review the financial statements and the independent auditors' report and the
accompanying management letter, and consult with the independent auditors with
regard to the adequacy of the Company's overall accounting and financial
controls. Each of the members of the Audit Committee is independent as defined
under the standard of Rule 4200(a)(14) of the Marketplace Rules of the Nasdaq
Stock Market, Inc., although such rules are not applicable to the Company. The
Audit Committee operates under a written charter adopted by the Board of
Directors, a copy of which is included in this proxy statement as Appendix A.

Report of the Audit Committee

The information contained in this report shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except to the extent that the Company specifically incorporates
it by reference into such filing.

The Audit Committee has reviewed and discussed with management the
audited financial statements for the fiscal year ended December 31, 2000. In
addition, the Audit Committee has discussed with the Company's independent
auditors, Ernst & Young LLP ("Ernst & Young"), the matters required by Statement
on Auditing Standards No. 61, Communication with Audit Committees, which
includes, among other things, matters related to the conduct of the audit of the
Company's financial statements. The Audit Committee also has received the
written disclosures and the letter from Ernst & Young required by Independence
Standards Board Standard No. 1, Independence Discussions with Audit Committees,
and has discussed with Ernst & Young its independence from the Company. The
Audit Committee has discussed with management of the Company and with the
Company's independent accountants such other matters and received such
assurances from them as the Audit Committee deemed appropriate.

Based on the foregoing reviews and discussions and in reliance
thereupon, the Audit Committee has recommended to the Company's Board of
Directors the inclusion of the audited financial statements in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2000.

Submitted by the Audit Committee of the Board of Directors

DAVID G. BROWN
JON A. LINDSETH
JAMES W. DIXON
WILLIAM L. JACKSON
JOHN L. WILKES

The Compensation Committee, composed of Messrs. Lindseth, Brown and
Jackson, met one time in 2000. The purpose of the Compensation Committee is to
approve compensation policies and programs for the Company's employees and
executive officers and to grant options to employees and executive officers and
otherwise administer the Stock Option Plan and other incentive plans.

SHAREHOLDER VOTE

The election of the six nominees named above will require the
affirmative vote of the holders of a plurality of the shares of AER Common Stock
voted at the Annual Meeting, assuming a quorum is present. THE BOARD OF
DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF THE SIX NOMINEES NAMED
ABOVE.

EXECUTIVE COMPENSATION

REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS

The Compensation Committee of the Board of Directors of the Company is
composed of directors who are not employees of the Company. The Board of
Directors has delegated to the Compensation Committee the authority:

1. To determine the compensation of David W. Dorheim, President
and Chief Executive Officer of the Company.

2. To approve, upon recommendation by Mr. Dorheim, the
compensation arrangements of executive officers of the
Company, other than Mr. Dorheim, including the executive
officers named in the below.

3. To grant options to employees of the Company under the Stock
Option Plan and to carry out the duties and responsibilities
of the Board of Directors with respect to the Company's
incentive plans.

Compensation Policies

The Company's compensation policies for executive officers are designed
to provide competitive levels of compensation allowing the Company to attract
and retain highly qualified executive officers whose contributions are essential
to the success of the Company. The Compensation Committee approves salary
increases of executive officers. The Company's compensation policies for
executive officers have two principal components: (1) a significant portion of
an individual executive officer's compensation depends on the performance of the
individual, and (2) compensation in the form of stock options is contingent upon
continued employment of the executive officer over a specified period of time
because options typically do not fully vest for five years. The Compensation
Committee believes that ownership of the Company's stock by its executive
officers is important, and the Company's compensation policies and plans are
designed to encourage such stock ownership. Specific information concerning the
implementation of these policies in connection with the compensation of Mr.
Dorheim and the other executive officers is provided below.

6
10

Annual Salaries

The annual salaries of executive officers are fixed initially at
amounts that are deemed sufficient to induce them to accept employment with the
Company. Salaries of executive officers are reviewed annually, and increases, if
any, are made based on the individual's and the Company's performance. To the
extent any salary increases have been granted, they have been based on a
subjective evaluation of the performance of the recipient.

The Company currently intends that all compensation paid to executive
officers shall qualify for deductibility under Section 162(m) of the Internal
Revenue Code (the "Code"), which provides that compensation paid to certain
executive officers of public corporations in excess of $1,000,000 per year is
not deductible for federal income tax purposes.

Payment of Bonuses

No bonuses were paid in 2000 to the executive officers, except to Mr.
Dorheim as described below.

Compensation of Chief Executive Officer

Using the criteria discussed above and in recognition of his continued
efforts in implementing a new corporate strategy, Mr. Dorheim's salary was
$216,562 for 2000, an increase of $9,522 (4.6%) over the prior year. Pursuant to
an understanding between the Company and Mr. Dorheim when he was hired in 1989,
Mr. Dorheim receives a $6,000 per year automobile allowance. In addition, Mr.
Dorheim received a $33,000 bonus payment in 2000.

Stock Options

At present, a maximum of 1,500,000 shares of AER Common Stock may be
subject to outstanding awards under the Stock Option Plan; however, this maximum
amount will increase to 2,000,000 if Proposal 2 is approved by the Company's
shareholders at the Annual Meeting. Under the Stock Option Plan, in 1993, 1994
and 1995, the Compensation Committee awarded to executive officers options to
purchase AER Common Stock. These options became exercisable at 20% per year
following the date of grant, expire in ten years, and were originally priced at
100% of the fair market value of the AER Common Stock at the date of each grant.
These options were repriced effective March 22, 1996 to the closing market price
on that date. In connection with the repricing, each option holder agreed that
each of the repriced options could not be exercised for a period of one year. In
1999, under the Stock Option Plan, the Compensation Committee awarded to
executive officers and all other employees, options to purchase AER Common
Stock. These options become exercisable in 2001 if certain performance goals are
met by the Company; if the goals are not met, the options will fully vest five
years from the date of grant. All of the options granted by the Company
encourage executive officers and employees to remain employed by the Company,
and the value of the options depends on increases in the market value of AER
Common Stock. As of December 31, 2000, 1,169,500 options were outstanding under
the Stock Option Plan.

Submitted by the Compensation Committee of the Board of Directors

JON A. LINDSETH
DAVID G. BROWN
WILLIAM L. JACKSON

EXECUTIVE COMPENSATION

Compensation Summary. The following table shows, for the last three
fiscal years of the Company, annual compensation paid, earned or awarded by the
Company to the President and Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company (collectively, the
"Named Executive Officers").

SUMMARY COMPENSATION TABLE(1)

LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------- NUMBER OF SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(2)
--------------------------- ---- ---------- --------- --------------- ----------------------

David W. Dorheim 2000 216,562 33,000 6,000(3) --
President and Chief 1999 207,040 33,000 6,000(3) 75,000
Executive Officer 1998 198,846 33,000 24,568(3) (4) --

R. Dennis Bentz 2000 163,149 -- -- --
Vice President - Product 1999 156,874 -- -- 60,000
and Process Development 1998 150,840 -- 18,568(4) --

Frank M. Harris 2000 163,419 -- -- --
Vice President - 1999 156,874 -- -- 60,000
Marketing and Licensing 1998 150,840 -- 18,568(4) --

J. T. Moore 2000 116,270 -- -- --
Vice President - 1999 110,917 -- -- 60,000
Chief Financial Officer, 1998 35,397(5) -- -- --
Secretary and Treasurer

Lawrence A. Tinker 2000 157,648 -- -- --
Vice President - 1999 149,221 -- -- 60,000
Advanced Technology 1998 133,452 -- 16,917(6) --

----------------
(1) The Company does not maintain a "long-term incentive plan," as defined
by the rules of the SEC, and has not made any awards of stock
appreciation rights.
(2) Consists of options issued pursuant to the Stock Option Plan.
(3) Automobile allowance.
(4) Includes the forgiveness of notes receivable and related interest and
the reimbursement of related income taxes in the aggregate amount of
$18,568.
(5) Mr. Moore was hired in September 1998. His annual salary in 1998 was
$110,000.
(6) Includes the forgiveness of notes receivable and related interest and
the reimbursement of related income taxes in the aggregate amount of
$16,917.

OPTION GRANTS IN 2000

There were no options granted to the Named Executive Officers during
2000.

EXERCISES OF OPTIONS IN 2000 AND AGGREGATE YEAR-END OPTION VALUES

Shown below is information with respect to the year-end values of all
options held by the Named Executive Officers. No Named Executive Officer
exercised any options in 2000.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES

NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END (#) AT FY-END ($)(1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------------- -------------------------

David W. Dorheim 160,000/75,000 0/0
R. Dennis Bentz 80,000/60,000 0/0
Frank M. Harris 80,000/60,000 0/0
J. T. Moore 0/60,000 0/0
Lawrence A. Tinker 100,000/60,000 0/0

----------------
(1) Equal to the net value of the option as of December 31, 2000, i.e., the
closing market price of $0.2344 per share of AER Common Stock on
December 31, 2000, less the applicable per share exercise price of the
option, multiplied by the number of shares subject to the option.

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12

DIRECTOR COMPENSATION

The Company historically has paid no cash compensation to its directors,
except reimbursement for reasonable expenses. In 1993, the Board of Directors
adopted the Company's 1993 Non-Employee Directors' Restricted Stock Award Plan
(the "Restricted Stock Plan"), pursuant to which non-employee directors are
granted restricted stock awards. The Restricted Stock Plan was approved by the
Company's shareholders at the Company's 1994 Annual Meeting of Shareholders.
Under the Restricted Stock Plan, every five years each non-employee director
receives a restricted stock award of 15,000 shares of AER Common Stock.
Restrictions on such shares lapse 20% per year for each year the non-employee
director serves on the Board of Directors. Awards are pro-rated for non-employee
directors selected between annual meetings of the shareholders. As of February
19, 2001, 155,750 shares of restricted stock had been awarded pursuant to the
Restricted Stock Plan.

PERFORMANCE MEASUREMENT COMPARISON

The following chart shows total shareholder returns for the periods
indicated for each of (i) AER Common Stock, (ii) the J.P Morgan Hambrecht &
Quist Growth Index (a subset of the J.P. Morgan Hambrecht & Quist Technology
Index), and (iii) the Nasdaq Stock Market-U.S. Index. The chart assumes that the
value of the investment in AER Common Stock and each index was $100 at December
31, 1995 and that all dividends paid through such period were reinvested. The
comparisons in the graph below are based upon historical data and are not
indicative of, nor intended to forecast performance of the AER Common Stock.

COMPARISON OF SIXTY MONTH CUMULATIVE TOTAL RETURN ON INVESTMENT AMONG
AER ENERGY RESOURCES, INC., THE J.P. MORGAN HAMBRECHT & QUIST
GROWTH INDEX AND THE NASDAQ STOCK MARKET-U.S. INDEX

[GRAPH]

12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------

AER Emergu Respirces $100.00 $ 76.09 $ 39.13 $ 26.09 $ 9.24 $ 8.15
JP Morgan H&Q Growth 100.00 104.66 107.50 155.93 436.81 294.86
Nasdaq Stock Market-U.S 100.00 123.04 150.69 212.51 394.92 237.62

9
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Effective May 7, 1993, the Board of Directors established a
Compensation Committee of which no executive officers or former executive
officers are or have been members. Prior to May 1993, the Board of Directors as
a whole, including Mr. Dorheim, participated in determining executive officer
compensation.

Mr. Lindseth is Chairman of the Board of Directors. In September 2000,
Elmwood Partners II, an entity controlled by Mr. Lindseth, purchased from the
Company 202,250 shares of Series A Preferred Stock and a warrant to purchase
470,035 shares of AER Common Stock, for an aggregate purchase price of
$2,000,000 in cash and promissory notes previously issued by the Company to the
purchaser. In February 2001, an entity controlled by Mr. Lindseth purchased from
the Company 102,250 shares of Series B Preferred Stock and a warrant to purchase
776,699 shares of AER Common Stock, for an aggregate purchase price of
$1,000,000 in cash.

CERTAIN TRANSACTIONS

The Company is party to a 1989 License Agreement (the "DEMI License")
with Dreisbach Electromotive, Inc. ("DEMI") and Mike Cheiky, a founder of DEMI,
its former principal inventor and a former director of DEMI. During 1999, 1998
and 1997, respectively, the Company recorded total royalty expense of $0.05
million, $0.10 million, and $0.10 million related to the DEMI License. During
1999, all minimum royalty payments under this agreement were completed and paid
in full. DEMI has also agreed to the terms of a proposed original equipment
manufacturer ("OEM") air manager license agreement to be entered into by the
Company and any OEMs licensing the air manager system. The DEMI License
basically provides for royalties of 4% payable to DEMI on net sales of zinc-air
batteries incorporating DEMI's technology made by the Company or its
sublicensees. The OEM air manager license basically provides that 4% of the
royalties the Company receives from sublicensing the air manager system will be
payable to DEMI.

Mr. Dorheim is a director of DEMI. At the time the DEMI License was
executed, all of the shareholders of DEMI were shareholders in the Company. The
Company is unable to determine how many DEMI shareholders (other than the
Lindseth Entities) currently own AER Common Stock. As of December 31, 2000, the
Lindseth Entities owned approximately 13% of the stock of DEMI.

In September 2000, the Company sold in a private placement a total of
202,250 shares of Series A Preferred Stock and a warrant to purchase 470,035
shares of AER Common Stock to each of (i) Elmwood Partners II, an entity
controlled by Mr. Lindseth, the Chairman of the Board of Directors and a
beneficial owner (prior to such purchase) of approximately 25.2% of the
outstanding AER Common Stock, and (ii) FW AER II, an entity that prior thereto
beneficially owned less than 1% of the outstanding AER Common Stock. Elmwood
Partners II and FW AER II each paid $2,000,000 for such securities, consisting
of $1,000,000 in cash and $1,000,000 in convertible promissory notes previously
issued by the Company. The Series A Preferred Stock is convertible into AER
Common Stock and the warrant may be exercised at a price of $0.886 per share,
subject to adjustment as provided in the warrant. As a result of this
investment, Mr. Lindseth beneficially owned, as of September 2000, approximately
33.6% of the outstanding AER Common Stock and FW AER II beneficially owned
approximately 10.6% of the outstanding AER Common Stock.

In February 2001, the Company sold in a private placement a total of
102,250 shares of Series B Preferred Stock and a warrant to purchase 776,699
shares of AER Common Stock to Elmwood Partners II, an entity controlled by Mr.
Lindseth, the Chairman of the Board of Directors and a beneficial owner (prior
to such purchase) of approximately 33.6% of the outstanding AER Common Stock.
Elmwood Partners II paid $1,000,000 in cash for such securities. The Series B
Preferred Stock is convertible into AER Common Stock and the warrant may be
exercised at a price of $0.5376 per share, subject to adjustment as provided in
the warrant. As a result of this investment, Mr. Lindseth beneficially owned
approximately 40.6% of the outstanding AER Common Stock.

10
14

PROPOSAL 2

APPROVAL OF AMENDMENT TO 1992 STOCK OPTION PLAN

The shareholders are being asked to consider and vote upon a proposal
to approve an amendment to the Stock Option Plan to increase the number of
shares of AER Common Stock available for issuance under the Stock Option Plan
from 1,500,000 to 2,000,000 shares. The Stock Option Plan, which was adopted by
the Company's Board of Directors and approved by the shareholders in 1992, is
designed to aid the Company in attracting and retaining highly qualified
executives and other key employees by providing them with stock options. In May
1996, the shareholders approved an amendment to the Stock Option Plan increasing
the number of shares of AER Common Stock available for issuance pursuant to the
Stock Option Plan from 1,000,000 to 1,500,000 shares. In May 1997, the
shareholders approved certain other amendments to the Stock Option Plan to
comply with certain provisions of the Code.

In February 2001, the Board of Directors approved an amendment to the
Stock Option Plan to increase the number of shares of AER Common Stock available
for issuance under the Stock Option Plan from 1,500,000 to 2,000,000. The
purpose of this amendment, which did not otherwise materially change the terms
of the Stock Option Plan, is to ensure that the Company will be able to issue a
sufficient number of stock options to allow the Company to continue to attract
and retain highly qualified executives and other key employees.

SUMMARY OF TERMS OF THE STOCK OPTION PLAN

The summary of the principal terms of the Stock Option Plan that
follows is subject to and is qualified in its entirety by reference to the
specific provisions of the Stock Option Plan, as amended, a copy of which is
attached as Appendix B hereto.

Amount and Class of Securities. At present, the Stock Option Plan
permits the granting of options to purchase in the aggregate up to 1,500,000
shares of AER Common Stock. This amount will be increased to 2,000,000 upon the
approval of Proposal 2 by the shareholders of the Company at the Annual Meeting.

Eligibility for Participation. Only employees of the Company and its
future parent or subsidiaries, if any, are eligible to participate in the Stock
Option Plan. The Compensation Committee of the Board of Directors, which
administers the Stock Option Plan, or the Board of Directors has full
responsibility for determining the employees to whom stock options will be
granted. In making such determinations, the Compensation Committee will take
into account the nature of the services rendered by the respective employees,
their present and potential contributions to the Company and any other factors
it deems relevant. Approximately 35 persons are currently eligible to
participate in the Stock Option Plan.

Granting of Options. The Compensation Committee or the Board of
Directors has full authority in its discretion to determine the prices,
expiration dates, consideration to be received and other material conditions
upon which options under the Stock Option Plan may be granted.

FEDERAL INCOME TAX CONSEQUENCES

The Stock Option Plan is not qualified under Section 401(a) of the
Code, which applies only to certain qualified pension, profit-sharing and stock
bonus plans. Under present law, the following is a brief summary of the primary
federal income tax consequences generally arising with respect to stock options
granted under the Stock Option Plan.

Non-Qualified Stock Options. An optionee will not recognize taxable
income when a non-qualified stock option is granted. In addition, the Company
will not be entitled to a tax deduction at the time of the grant. When a
non-qualified stock option is exercised, an optionee will generally recognize
ordinary income for federal income tax purposes in an amount equal to the
difference between the fair market value of the stock on the date of exercise
and the aggregate exercise price. Subject to Section 162(m) of the Code, the
Company will generally be entitled to a tax deduction for the amount of ordinary
income the optionee recognizes. When an optionee sells stock acquired by
exercising a non-qualified stock option, the optionee will recognize capital
gain or loss based on the difference

11
15

between the sales price of the optionee's stock and his or her tax basis. The
tax basis is equal to the fair market value of the stock on the date the
optionee exercised his or her option. The gain or loss will be treated as
long-term or short-term capital gain or loss depending upon whether the stock
has been held for more than one year after the date the optionee exercised the
option and acquired the stock.

Incentive Stock Options. An optionee will not recognize taxable income
when an incentive stock option is granted. In addition, the Company will not be
entitled to a tax deduction at the time of the grant. For regular federal income
tax purposes, an optionee will generally not recognize taxable income upon the
exercise of an incentive stock option. However, the excess of the fair market
value of the stock on the date of exercise over the aggregate exercise price
will be included in calculating the optionee's "alternative minimum taxable
income" for purposes of the alternative minimum tax, which may apply in the year
an incentive stock option is exercised.

If an optionee disposes stock acquired pursuant to the exercise of an
incentive stock option, the optionee will, except as noted below, recognize
long-term capital gain or loss, assuming that the stock is a capital asset of
the optionee, equal to the difference between the amount realized upon the sale
and the total exercise price. Under these circumstances, the Company will not be
entitled to any federal income tax deduction in connection with either the
exercise of the incentive stock option or the sale of the underlying stock.

If an optionee disposes stock acquired pursuant to the exercise of an
incentive stock option prior to the expiration of two years from the date of
grant of the incentive stock option or within one year from the date the stock
is transferred to the optionee upon exercise, such a disposition would be a
"disqualifying disposition." If a disqualifying disposition is made, any gain
realized by the optionee will generally be taxable at the time of the
disqualifying disposition as follows:

- The gain will be taxed at ordinary income rates to the extent
of the difference between the total exercise price and the
lesser of the fair market value of the stock on the date the
incentive stock option is exercised and the amount realized on
the disqualifying disposition.

- If the stock is a capital asset of the optionee, the gain will
be taxed as short-term or long-term capital gain to the extent
of any excess of the amount realized on the disqualifying
disposition over the fair market value of the stock on the
date which governs the determination of ordinary income.

The Company may claim a federal income tax deduction at the time of a
disqualifying disposition equal to the amount taxable to the optionee as
ordinary income. Any capital gain recognized by an optionee will be long-term
capital gain if the optionee's holding period for the stock at the time of
disposition is more than one year; otherwise, it will be short-term capital
gain.

OTHER PROVISIONS

Upon an issuance or transfer of shares of AER Common Stock pursuant to
the exercise of a stock option, the Company has the right to require the
recipient to remit to the Company, prior to the delivery of any certificates,
any withholding tax requirements for such shares. The recipient of a
non-qualified stock option may elect to surrender or authorize the Company to
withhold shares of AER Common Stock in satisfaction of his estimated withholding
tax obligations, subject to certain procedures and conditions.

Any option issued pursuant to the Stock Option Plan in connection with
certain acquisitions in substitution for an option previously issued by the
acquired entity may contain an exercise price and such other terms and
conditions as the Compensation Committee may prescribe to cause the substitute
option to contain terms and conditions comparable to those contained in the
previously issued option being replaced.

In the event of any change in the capitalization of the Company by
reason of a dividend, stock split or combination or any similar change or a
merger, consolidation, recapitalization, reclassification of shares or similar
reorganization, the Stock Option Plan provides that the Compensation Committee
can make certain adjustments in the number and type of shares with respect to
which any current or future stock options may be exercised. In the

12
16

event of a dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation, each option
shall terminate except to the extent another corporation assumes the option or
substitutes another option for it.

The Board of Directors or the shareholders may amend, modify or
terminate the Stock Option Plan at any time; provided, that any such amendment,
modification or termination without shareholder approval (a) shall not adversely
affect the rights of a stock option holder without his or her consent (except
that the Compensation Committee may terminate an option if the holder is
terminated for cause) and (b) shall not be effective if shareholder approval is
required in order for the Stock Option Plan to continue to meet the requirements
of SEC Rule 16b-3 or any successor rule, if applicable, or any other legal or
regulatory requirements, unless such shareholder approval is received.

The following table sets forth the approximate dollar value and number
of shares underlying awards of options that have been granted under the Stock
Option Plan to certain specified individuals since its adoption. It cannot be
determined at this time what future grants, if any, will be made to any person
or group of persons under the Stock Option Plan.

PLAN BENEFITS

1992 STOCK OPTION PLAN
---------------------------------
DOLLAR NUMBER
NAME AND POSITION VALUE ($)(1) OF UNITS(2)
----------------- ------------ -----------

David W. Dorheim............................................................ -0- 235,000
Director, President and Chief Executive Officer
R. Dennis Bentz............................................................. -0- 140,000
Vice President - Product and Process Development
Frank M. Harris............................................................. -0- 140,000
Vice President - Marketing and Licensing
J. T. Moore................................................................. -0- 60,000
Vice President - Chief Financial Officer, Secretary and Treasurer
Lawrence A. Tinker.......................................................... -0- 160,000
Vice President - Engineering
All Executive Officers as a group........................................... -0- 735,000
All Non-Executive Officer Directors as a group.............................. -0- 0
All Employees (except Executive Officers) as a group........................ -0- 430,000

--------------------
(1) Equal to the net value of the option as of December 31, 2000, i.e., the
closing market price of 0.2344 per share of AER Common Stock on
December 31, 2000, less the applicable per share exercise price of the
option, multiplied by the number of shares subject to the option.

(2) Number of shares of AER Common Stock underlying all awards of options
granted since the adoption of the Stock Option Plan.

Except as otherwise provided elsewhere herein, no director nominee or
associate of any director nominee or executive officer has received any options
under the Stock Option Plan and no person has received 5% or more of the options
granted under the Stock Option Plan.

At March 8, 2001, the closing market price of AER Common Stock on the
Over-the-Counter Bulletin Board System was $0.27 per share.

The amendment to the Stock Option Plan will be approved if the number
of votes cast in favor of the proposal exceed those cast opposing the proposal,
assuming a quorum is present. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE STOCK OPTION PLAN.

13
17

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of the outstanding AER Common Stock, to file reports of ownership and changes of
ownership with the SEC. Officers, directors and greater than 10% shareholders
are also required to furnish the Company with copies of all Section 16(a) forms
they file. Based solely on the Company's review of copies of such forms
furnished to the Company, or written representations that no Form 5s were
required, the Company believes that during 2000 its officers, directors and
greater than 10% shareholders complied with all applicable Section 16(a) filing
requirements.

RELATIONSHIP WITH INDEPENDENT PUBLIC AUDITORS

The Board of Directors, upon recommendation of the Audit Committee, has
selected Ernst & Young as independent auditors of the Company for 2001. Ernst &
Young have been the independent public auditors for the Company since 1989.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do so
and will be able to respond to appropriate questions.

AUDIT FEES

The aggregate fees billed by Ernst & Young for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2000 and the reviews of the financial statements
included in the Company's Forms 10-Q for such fiscal year were approximately
$54,000. Audit related services totaled $6,000.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

No fees were billed in fiscal year 2000 by Ernst & Young for professional
services related to financial information systems design and implementation, as
such services are defined in the accounting rules of the SEC.

ALL OTHER FEES

Other fees to Ernst & Young for the fiscal year ended December 31, 2000 were
$9,165. The Audit Committee has considered whether the provision of the services
described above (other than the audit and review services described in "Audit
Fees" above) is compatible with maintaining the independence of Ernst & Young as
the Company's independent auditors.

SHAREHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING

Shareholders who intend to submit proposals to the Company's shareholders at
the 2002 Annual Meeting of Shareholders within the processes provided by Rule
14a-8 promulgated under the Exchange Act must submit such proposals to the
Company no later than November 29, 2001. Such proposals must comply with Rule
14a-8 and all other applicable proxy rules relating to shareholder proposals in
order to be included in the Company' s proxy materials.

Shareholders who wish to submit a proposal for consideration at the
Company's 2002 Annual Meeting of Shareholders, but who do not wish to submit the
proposal for inclusion in the Company's Proxy Statement pursuant to Rule 14a-8,
must submit their proposal to the Company in accordance with the procedures set
forth in the Bylaws of the Company no later than November 29, 2001. Shareholders
who intend to nominate persons for election to the Board of Directors at the
2002 Annual Meeting of Shareholders must submit such nominations to the Company,
in accordance with the procedures set forth in the Bylaws of the Company, no
later than November 29, 2001.

Shareholder nominations for election of directors and other proposals
should be submitted to J. T. Moore, Vice President - Chief Financial Officer,
Secretary and Treasurer, AER Energy Resources, Inc., 4600 Highlands Parkway,
Suite G, Smyrna, Georgia 30082.

14
18

OTHER MATTERS

Management of the Company is not aware of any other matters to be
presented for action at the Annual Meeting other than those mentioned herein. If
any other matters come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote on such matters in accordance with their
judgment.

By Order of the Board of Directors

/s/ J. T. Moore

J. T. Moore
Vice President - Chief Financial Officer,
Secretary and Treasurer

15
19

APPENDIX A

AER ENERGY RESOURCES, INC. AUDIT COMMITTEE CHARTER

ORGANIZATION

This charter governs the operations of the audit committee. The committee shall
review and reassess the charter at least annually and obtain the approval of the
board of directors. The committee shall be appointed by the board of directors
and shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if they have no relationship that may interfere with the exercise of
their independence from management and the Company. All committee members shall
be financially literate, and at least one member shall have accounting or
related financial management expertise.

Statement of Policy

The audit committee shall provide assistance to the board of directors in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the annual independent audit of the
Company's financial statements, and the legal compliance and ethics programs as
established by management and the board. In so doing, it is the responsibility
of the committee to maintain free and open communication between the committee,
independent auditors, and management of the Company. In discharging its
oversight role, the committee is empowered to investigate any matter brought to
its attention with full access to all books, records, facilities, and personnel
of the Company and the power to retain outside counsel, or other experts for
this purpose.

Responsibilities and Processes

The primary responsibility of the audit committee is to oversee the Company's
financial reporting process on behalf of the board and report the results of
their activities to the board. Management is responsible for preparing the
Company's financial statements, and the independent auditors are responsible for
auditing those financial statements. The committee in carrying out its
responsibilities believes its policies and procedures should remain flexible, in
order to best react to changing conditions and circumstances. The committee
should take the appropriate actions to set the overall corporate "tone" for
quality financial reporting, sound business risk practices, and ethical
behavior.

The following shall be the principal recurring processes of the audit committee
in carrying out its oversight responsibilities. The processes are set forth as a
guide with the understanding that the committee may supplement them as
appropriate.

- The committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the board and the audit committee, as representatives of
the Company's shareholders. The committee shall have the ultimate
authority and responsibility to evaluate and, where appropriate,
replace the independent auditors. The committee shall discuss with the
auditors their independence from management and the Company and the
matters included in the written disclosures required by the
Independence Standards Board. Annually, the committee shall review and
recommend to the board the selection of the Company's independent
auditors.

- The committee shall discuss with the independent auditors the overall
scope and plans for their audit. Also, the committee shall discuss with
management and the independent auditors the adequacy and effectiveness
of the accounting and financial controls, including the Company's
system to monitor and manage business risk, and legal and ethical
compliance programs. Further, the committee shall meet separately with
the independent auditors, with and without management present, to
discuss the results of their examination.

- When the independent auditors have identified matters to be
communicated based on their review of the Company's quarterly report on
Form 10-Q, the committee shall perform the following: 1) discuss with
the independent auditors the results of their quarterly review and any
other matters required to be communicated to

A-1
20

the committee under generally accepted auditing standards, and 2)
review the interim financial statements with management and the
independent auditors prior to the filing of the Company's quarterly
report on Form 10-Q. The chair of the committee may represent the
entire committee for the purposes of this communication and review.

- The committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report
on Form 10-K, including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the committee shall discuss the results of
the annual audit and any other matters required to be communicated to
the committee by the independent auditors under generally accepted
auditing standards.

A-2
21

APPENDIX B

AER ENERGY RESOURCES, INC.
1992 STOCK OPTION PLAN, AS AMENDED
(AND AS PROPOSED TO BE AMENDED HEREBY)

1. The Purpose of the Plan. This stock option plan ("the Plan")
is intended to provide an opportunity for employees of AER Energy Resources,
Inc. (the "Corporation") and its present and future "subsidiary corporations,"
as "subsidiary corporation" is defined in section 424 of the Internal Revenue
Code of 1986, as amended (the "Code") (individually a "subsidiary" and
collectively "subsidiaries"), to acquire shares of the Corporation's stock. The
Plan provides for the grant of "incentive stock options," as defined in section
422 of the Code or any successor provision ("Incentive Stock Options"), and
stock options not qualifying as Incentive Stock Options ("Non-Qualified Stock
Options") providing an equity interest in the Corporation's business, as an
incentive to service or continued service with the Corporation and to aid the
Corporation in obtaining and retaining personnel of outstanding ability. As
used herein, "Stock Options" refers to Incentive Stock Options and
Non-Qualified Stock Options.

2. Stock Subject to the Plan. The maximum number of shares of the
common stock, no par value, of the Corporation (the "Stock") which may be issued
pursuant to Incentive Stock Options and Non-Qualified Stock Options granted
under the Plan (the "Options") shall be a total of 2,000,000 shares of Stock,
which may be either authorized and unissued Stock of Stock held in the treasury
of the Corporation, as shall be determined from time to time by the Board of
Directors or the committee of the Board of Directors described below. If an
Option expires or terminates for any reason without being exercised in full, the
unpurchased shares of Stock subject to such Option shall again be available for
purposes of the Plan.

3. Administration of the Plan. This Plan shall be administered by
a committee of the Board of Directors of the Corporation composed of not less
than two "disinterested persons" (as defined in Rule 16b-3 of the Securities and
Exchange Commission) or any successor rule, or such other Committee so
constituted as to permit the Plan to comply with Rule 16b-3 or any successor
rule (the "Committee"). The Committee shall have full authority in its
discretion to determine the employees of the Corporation and its subsidiaries to
whom Stock Options shall be granted, the number of shares of Stock covered
thereby and the terms and provisions of Stock Options, subject to the Plan. In
making such determinations, the Committee may take into account the nature of
the services rendered and to be rendered by the respective employees, their
present and potential contributions to the Corporation and its subsidiaries and
any other factors which the Committee deems relevant. Subject to the provisions
of the Plan, the Committee shall have full and conclusive authority to interpret
the Plan; to prescribe, amend and rescind rules and regulations relating to the
Plan; to determine the terms and provisions of the respective Stock Option
agreements; and to make all other determinations necessary or advisable for the
proper administration of the Plan. The Committee's determinations under the Plan
need not be uniform and may be made by it selectively among persons who receive,
or are eligible to receive, Stock Options under the Plan (whether or not such
persons are similarly situated). The Committee's decisions shall be final and
binding on all participants in the Plan.

4. Eligibility and Limits. Stock Options may be granted only to
employees of the Corporation and its present or future subsidiary corporations
(as defined in section 424 of the Code or any successor provision). Any
Incentive Stock Option granted to any person who, at the time such Option is
granted, owns (as defined in sections 422 and 424 of the Code or any successor
provisions) stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation or one of its parent (if any) or
subsidiary corporations shall comply with any applicable provisions of section
422 of the Code or any successor provision.

5. Incentive Stock Options and Non-Qualified Stock Options. At
the time any Option is granted under the Plan, the Committee shall determine
whether the Option is to be an Incentive Stock Option or a Non-Qualified Stock
Option, and the Option shall be clearly identified as to its status as an
Incentive Stock Option or a Non-Qualified Stock Option. The number of shares as
to which Incentive Stock Options and Non-Qualified Stock Options shall be
granted shall be determined by the Committee in its sole discretion, subject to
the provisions of section 2 as to the total number of shares available for Stock
Options granted under the Plan. At the time any Incentive Stock Option granted
under the Plan is exercised, the Corporation shall be entitled to legend the
certificates representing the

B-1
22

shares of Stock purchased pursuant to the Option to clearly identify them as
representing shares purchased upon exercise of an Incentive Stock Option.

5. Terms and Conditions of Options. Subject to the following
provisions, all Options shall be in such form and upon such terms and conditions
as the Committee in its discretion may from time to time determine.

(a) Option Price. Subject to section 8 and the other provisions of
this section 6(a), the option price per share of Stock purchasable under any
Option granted under the Plan shall be fixed by the Committee and set forth in
the applicable Stock Option agreement. With respect to each grant of an
Incentive Stock Option, the option price per share shall not be less than the
fair market value of a share of Stock (as determined in good faith by the
Committee) on the date such Option is granted. With respect to each grant of a
Non-Qualified Stock Option, the option price per share shall not be less than
50% of the fair market value of a share of Stock (as determined in good faith by
the Committee) on the date such Option is granted. The date an Option is granted
shall be the date on which the Committee has approved the terms and conditions
of a Stock Option agreement evidencing the Option and has determined the
recipient of the Option and the number of shares covered by the Option and has
taken all such other action as is necessary to complete the grant of the Option.
In the event that the Stock is listed on an established stock exchange or the
NASDAQ National Market System, its fair market value shall be deemed to be the
closing price of the Stock of such exchange or the NASDAQ National Market System
on the date the Option is granted, or, if no such sale of Stock shall have been
made on such date, its fair market value shall be deemed to be such price for
the next preceding date on which a sale shall have occurred.

(b) Option Term. A Stock Option shall have such term as the
Committee shall determine except that no Incentive Stock Option shall be
exercisable after the expiration of ten years from the date such Option is
granted.

(c) Payment. Payment for all shares purchased pursuant to exercise
of an Option shall be made in cash or, if the Stock Option agreement so
provides, by delivery of Stock of the Corporation valued at its fair market
value on the date of delivery. Subject to the provisions of section 6(g), such
payment shall be made at the time that the Option or any part thereof is
exercised, and no shares of Stock shall be issued or delivered until full
payment therefor has been made.

(d) Conditions to Exercise of an Option. Each Option granted under
the Plan shall be exercisable at such time or times, or upon the occurrence of
such event or events, including, without limitation, the surrender of another
stock option or stock award, and in such amounts, as the Committee shall specify
in the particular Stock Option agreement except that no Option when initially
granted shall provide that it may be exercisable to any extent within the first
six months following the date of grant. Notwithstanding the foregoing,
subsequent to the grant of an Option, the Committee, at any time before complete
termination of such Option, may accelerate the time or times at which such
Option may be exercised in whole or in part; provided, however, that if any
Option is exercised within the first six months following the date of grant, the
shares of Stock received upon such exercise may not be sold within the first six
months following the date of grant.

(e) Nontransferability of Options. An Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the holder's lifetime, only by the
holder.

(f) Termination of Employment or Death. Upon any termination of
employment of the holder for any reason other than death or disability, except
as otherwise provided in the particular Stock Option agreement, any Option held
at the date of such employment termination may, to the extent exercisable, be
exercised within three months after the date of such employment termination.
Upon any termination of employment of the holder by reason of disability, within
the meaning of section 22(e) (3) of the Code or any successor provision, except
as otherwise provided in the particular Stock Option agreement, any Option held
at the date of such employment termination may, to the extent exercisable, be
exercised within twelve months after the date of such employment termination. If
the holder of an Option dies, except as otherwise provided in the particular
Stock Option agreement, any Option held at the date of death may, to the extent
exercisable, be exercised by a legatee or legatees of the holder under the
holder's last will, or by the holder's personal representatives or distributees,
within twelve months after the holder's death. This section 6(f) shall not
extend the term of the Option specified pursuant to section 6(b). For purposes
of this section 6(f), employment of a holder shall not be deemed terminated so
long as the holder is employed by the

B-2
23

Corporation, by a subsidiary of the Corporation or by another corporation (or a
parent or subsidiary corporation of such other corporation) which has assumed
the Option of the holder in a transaction to which section 424(a) of the Code or
any successor provision is applicable. For purposes of this section 6(f), the
extent to which an Option is exercisable shall be determined as of the date of
termination of employment.

(g) Special Procedure for Certain Credit Assisted Transactions. To
the extent not inconsistent with the other terms and conditions of the
particular Option agreement or any other agreement between the Option holder and
the Corporation and to the extent not inconsistent with the provisions of
section 422 of the Code or any successor provision or the provisions of Rule
16b-3 or any successor rule, if applicable, any Option holder desiring to obtain
credit from a broker, dealer or other "creditor" as defined in Regulation T
issued by the Board of Governors of the Federal Reserve System (provided such
broker, dealer or creditor has been approved by the Committee) to assist in
exercising an Option may deliver to such creditor a written exercise notice
executed by such holder with respect to such Option, together with written
instructions to the Corporation to deliver the Stock issued upon such exercise
of the Option to the creditor for deposit into an account designated by the
Option holder. Upon receipt of such exercise notice and instructions in a form
acceptable to the Corporation, the Corporation shall confirm to the creditor
that it will deliver to the creditor on behalf of the Option holder the Stock
issued upon such exercise of the Option and covered by such instructions
promptly following receipt of the exercise price from the creditor. To the
extent not inconsistent with the provisions of section 422 of the Code or any
successor provision or the provisions of Rule 16b-3 or any successor rule, if
applicable, upon written request, the Corporation may in its discretion, but
shall not be obligated to, deliver to the creditor on behalf of the Option
holder shares of Stock resulting from such a credit assisted exercise prior to
receipt of the exercise price for such shares if the creditor has delivered to
the Corporation, in addition to the other documents contemplated by this section
6(g), the creditor's written agreement to pay the Corporation such exercise
price in cash within five days after delivery of such shares. The credit
assistance contemplated by this section 6(g) may include a margin loan by the
creditor secured by the Stock purchased upon exercise of an Option or an
immediate sale of some or all of such Stock by the creditor to obtain or recover
the exercise price which the creditor has committed to pay to the Corporation on
behalf of the Option holder.

(h) Special Provisions for Certain Substitute Options.
Notwithstanding anything to the contrary in this section 6, any Option issued by
the Corporation pursuant to the Plan in substitution for an option previously
issued by another entity, which substitution occurs in connection with a
transaction to which section 424(a) of the Code or any successor provision is
applicable, may provide for an exercise price computed in accordance with such
Code section and the regulations thereunder and may contain such other terms and
conditions as the Committee may prescribe to cause such substitute Option to
contain as nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.

7. Withholding. Whenever the Corporation is required to issue or
transfer shares of Stock under the Plan, the Corporation shall have the right to
require the recipient to remit to the Corporation an amount sufficient to
satisfy any federal, state and local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares. A recipient may
elect with respect to any Option (other than an Incentive Stock Option) to
surrender or authorize the Corporation to withhold shares of Stock (valued at
their fair market value on the date of surrender or withholding of such shares)
in satisfaction of all such withholding requirements (the "Stock Surrender
Withholding Election") in accordance with the following:

i) Any Stock Surrender Withholding Election shall be
made by written notice to the Corporation and thereafter shall be irrevocable by
the recipient.

ii) If a recipient is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Act"), or any successor law,
any Stock Surrender Withholding Election shall be subject to the consent or
disapproval of the Committee in accordance with rules established from time to
time by the Committee.

iii) Any Stock Surrender Withholding Election must be made
prior to the date on which the recipient recognizes taxable income with respect
to the receipt of such shares (the "Tax Date").

iv) If a recipient is subject to Section 16 of the Act,
or any successor law, such person must make any Stock Surrender Withholding
Election (A) more that six months after the date of grant of the award with
respect to

B-3
24

which such election is made (except whenever such election is made by a disabled
recipient or the estate or personal representative of a deceased recipient); and
(B) either a least six months prior to the Tax Date or during the period of ten
business days beginning on the third business day following the date of release
for publication of the Corporation's summary statement of sales and earnings for
a quarter or fiscal year.

v) When the Tax Date falls after the exercise of a Stock
Option and the recipient makes a Stock Surrender Withholding Election, the full
number of shares of Stock subject to the Stock Option being exercised will be
issued, but the recipient will be unconditionally obligated to deliver to the
Corporation on the Tax Date the number of shares of Stock having a value on the
Tax Date equal to the recipient's federal, state and local withholding tax
requirements.

vi) For purposes of this section 7, the Committee shall
have the discretion to provide (by general rule or a provision in the specific
Option agreement) that, at the election of the recipient, "federal, state, and
local withholding tax requirements" shall be deemed to be any amount designated
by the recipient which does not exceed his estimated federal, state and local
tax obligations associated with the transaction, including FICA taxes to the
extent applicable.

8. Changes in Capitalization; Merger; Liquidation. The number of
shares of Stock as to which Options may be granted, the number of shares covered
by each outstanding Option, and the price per share of each outstanding Option
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Stock resulting from a subdivision or combination of shares or
the payment of a stock dividend in shares of Stock to holders of outstanding
shares of Stock or any other increase or decrease in the number of such shares
effected without receipt of consideration by the Corporation. If the Corporation
shall be the surviving corporation in any merger or consolidation (other than as
a subsidiary of another corporation), recapitalization, reclassification of
shares or similar reorganization, the holder of each outstanding Option shall be
entitled to purchase, at the same times and upon the same terms and conditions
as are then provided in the Option, the number and class of shares of stock or
other securities to which a holder of the number of shares of Stock subject to
the Option at the time of such transaction would have been entitled to receive
as a result of such transaction. In the event of any such changes in
capitalization of the Corporation, the Committee may make such additional
adjustments in the number and class of shares of Stock or other securities with
respect to which outstanding Options are exercisable and with respect to which
further Stock Options may be granted as the Committee in its sole discretion
shall deem equitable or appropriate, subject to the provisions of section 13, to
prevent dilution or enlargement of rights. Any adjustment pursuant to this
section 8 may provide, in the Committee's discretion, for the elimination of any
fractional shares that might otherwise become subject to any Stock Option
without payment therefor. In the event of a dissolution or liquidation of the
Corporation, a sale of substantially all of the stock or substantially all of
the assets of the Corporation, a direct or indirect merger or consolidation in
which the Corporation is not the surviving corporation or survives only as a
subsidiary of another corporation, or any other transaction having a similar
result or effect, each outstanding Option shall terminate except to the extent
that another corporation assumes such Option or substitutes another option
therefor. In the event of a change of the Corporation's shares of Stock without
par value into the same number of shares with a par value, the shares resulting
from any such change shall be deemed to be the Stock within the meaning of the
Plan. Except as expressly provided in this section 8, the holder of an Option
shall have no rights by reason of any subdivision or combination of shares of
Stock of any class or the payment of any stock dividend or any other increase or
decrease in the number of shares of Stock of any class or by reason of any
dissolution, liquidation, merger or consolidation or distribution to the
Corporation's shareholders of assets or stock of another corporation. Except as
expressly provided herein, any issue by the Corporation of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Stock subject to any Stock Option. The
existence of the Plan and the Stock Options granted pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make or authorize
any adjustment, reclassification, reorganization or other change in its capital
or business structure, any merger or consolidation of the Corporation, any issue
of debt or equity securities having preferences or priorities as to the Stock or
the rights thereof, the dissolution or liquidation of the Corporation, any sale
or transfer of all or any part of its business or assets, or any other corporate
act or proceeding.

9. Compliance with Code; Compliance with Rule 16b-3. All
Incentive Stock Options granted hereunder are intended to comply with section
422 and, to the extent applicable, section 424 of the Code or any successor

B-4
25

provision, and all provisions of this Plan and all Incentive Stock Options
granted hereunder shall be construed in such manner as to effectuate that
intent. With respect to persons subject to Section 16 of the Act, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Act. To the extent any provision of the Plan
or action by the Committee fails to so comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Committee.

10. Right to Terminate Employment; No Rights as Stockholder.
Nothing in the Plan or in any Stock Option granted under the Plan shall confer
upon any holder thereof the right to continue as an employee of the Corporation
or any of its subsidiaries or affect the right of the Corporation or any of its
subsidiaries to terminate the holder's employment at any time. The holder of an
Option shall, as such, have none of the rights of a stockholder.

11. Leaves of Absence. Except as otherwise provided by law or
regulation with respect to Incentive Stock Options, the Committee may in its
discretion determine whether any leave of absence constitutes a termination of
employment for purposes of the Plan and the impact, if any, of such leave of
absence on Stock Options previously granted to a holder who takes a leave of
absence.

12. Restrictions on Delivery and Sale of Shares. Each Stock Option
granted under the Plan is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such Stock Option upon any securities
exchange or under any state or federal law is necessary or desirable as a
condition of or in connection with the granting of such Stock Option or the
purchase or delivery of shares thereunder, the delivery of any or all shares
pursuant to such Stock Option may be withheld unless and until such listing,
registration or qualification shall have been effected. If a registration
statement is not in effect under the Securities Act of 1933 or any applicable
state securities laws with respect to the shares of Stock purchasable or
otherwise deliverable under Stock Options then outstanding, the Committee may
require, as a condition of exercise of any Option, that the optionee or other
recipient of a Stock Option represent, in writing, that the shares received
pursuant to the Stock Option are being acquired for investment and not with a
view to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement, unless the Corporation shall
have received an opinion of counsel that such disposition is exempt from such
requirement under the Securities Act of 1933 and any applicable state securities
laws. The Corporation may endorse on certificates representing shares delivered
pursuant to a Stock Option such legends referring to the foregoing
representations or restrictions or any other applicable restrictions on resale
as the Corporation, in its discretion, shall deem appropriate.

13. Termination and Amendment of the Plan. The Plan may be
terminated, modified or amended by the shareholders or the Board of Directors of
the Corporation; provided, however, that:

(a) no such termination, modification or amendment
without the consent of the holder of a Stock Option shall adversely affect his
rights under such Stock Option, except the Committee may terminate a Stock
Option if the employment of the holder of the Stock Option is terminated for
cause; and

(b) any modification or amendment which would require
shareholder approval in order for the Plan to continue to meet the requirements
of Rule 16b-3 or any successor rule, if Rule 16b-3 or any successor rule is
applicable, or any other legal or regulatory requirements shall be effective
only if it is approved by the shareholders of the Corporation in the manner
required thereby.

B-5
26

[X] PLEASE MARK VOTE REVOCABLE PROXY
AS IN THIS EXAMPLE AER ENERGY RESOURCES, INC.

For All
For Withhold Except

ANNUAL MEETING OF SHAREHOLDERS 1. The election as directors [ ] [ ] [ ]
APRIL 26, 2001 of all nominees listed
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS below (except as marked
to the contrary):

The undersigned hereby appoints David W. Dorheim and Jon A. DAVID G. BROWN, JAMES W. DIXON, DAVID W. DORHEIM,
Lindseth, or either of them, each with full power of substitution, WILLIAM L. JACKSON, JON A. LINDSETH AND JOHN L. WILKES
acting jointly or by either one of them if only one be present and
acting, attorney and proxy to vote in the manner specified below
(according to the number of shares which the undersigned would be INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY NOMINEE(S), MARK
entitled to cast if then personally present) at the annual meeting "FOR ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME ON THE LINE
of shareholders of AER Energy Resources, Inc. to be held on BELOW.
April 26, 2001, including adjournments.

-----------------------------------------------------------

For All
For Withhold Except

2. To amend the Company's [ ] [ ] [ ]
1992 Stock Option Plan,
as amended, to increase
the total number of shares
that may be issued pursuant
to options granted thereunder
from 1,500,000 to 2,000,0000.

3. In their discretion, upon such other business as may
properly come before the meeting.

THIS PROXY SHALL BE VOTED AS DIRECTED. IF NO
DIRECTION TO THE CONTRARY IS INDICATED, IT WILL BE VOTED
"FOR" EACH OF THE PROPOSALS LISTED ABOVE, AS INDICATED IN
THE ENCLOSED PROXY STATEMENT. DISCRETIONARY AUTHORITY IS
HEREBY CONFERRED AS TO ALL OTHER MATTERS THAT MAY COME
BEFORE THE MEETING.

-------------------------
PLEASE BE SURE TO SIGN AND DATE THIS PROXY Date
IN THE BOX BELOW.
------------------------------------------------------------------------

----- Shareholder sign above -------- Co-holder (if any) sign above ----

-- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE-PAID ENVELOPE PROVIDED. --

AER ENERGY RESOURCES, INC.

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Please sign exactly as your name appears on this proxy card. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held jointly, each holder should sign.

PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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