<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
---------------- ----------------
Commission file number 0-4846-3
-----------------------------------------
CONSIL CORP.
-------------------------------------------------
(Exact name of registrant as specified in its charter)
Idaho 82-0288840
- ----------------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 500, 625 Howe Street
Vancouver, British Columbia, Canada V6C 2T6
- ----------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
604-331-0844
- -------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for at least the
past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding March 31, 1997
- ---------------------------------- --------------------------
Common stock, no par value 9,449,757 shares
<PAGE> 2
CONSIL CORP.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
I N D E X
---------
Page
----
PART I. - Financial Information
Item l - Consolidated Balance Sheets - March 31,
1997 and December 31, 1996 3
- Consolidated Statements of Operations and
Accumulated Deficit - Three Months Ended
March 31, 1997 and 1996 4
- Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. - Other Information
Item 1 - Legal Proceedings 12
Item 4 - Matters Voted on by Security Holders 12
Item 6 - Exhibits and Reports on Form 8-K 13
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
CONSIL CORP.
Consolidated Balance Sheets (Unaudited)
(U.S. Dollars)
----------
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 30,498 $ 120,216
Accounts receivable 825 4,185
Other receivables 59,862 66,446
Income tax refund receivable 201,382 210,816
Prepaid and deferred expenses 1,431 3,022
---------- ----------
Total current assets 293,998 404,685
---------- ----------
Equipment,
(net of accumulated depreciation of
$2,721 and $6,241) 17,189 38,603
Deferred stock offering costs 29,682 29,682
---------- ----------
Total assets $ 340,869 $ 472,970
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable - Hecla Mining Company $ 313,244 $ 362,802
Accounts payable - trade 22,184 2,683
Accrued liabilities 90,563 40,261
Accrued interest payable -
Hecla Mining Company 30,109 17,901
Note payable - Hecla Mining Company 500,000 500,000
---------- ----------
Total current liabilities 956,100 923,647
---------- ----------
Stockholders' deficit:
Preferred stock; $0.25 par value; authorized,
10,000,000 shares; issued and outstanding, none - - - -
Common stock; 1997 - no par value; 1996 - $0.10
par value; authorized: 1997 - 100,000,000 shares;
1996 - 20,000,000 shares; issued 9,455,689 shares 2,111,675 945,569
Discount on common stock - - (190,709)
Capital surplus - - 1,356,815
Accumulated deficit (2,723,445) (2,558,891)
Less: Common stock reacquired at cost;
1997 and 1996 - 5,932 shares (3,461) (3,461)
---------- ----------
Total stockholders' deficit (615,231) (450,677)
---------- ----------
Total liabilities and stockholders'
deficit $ 340,869 $ 472,970
========== ==========
The accompanying notes are an integral part
of the consolidated financial statements.
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Operations and Accumulated Deficit
(Unaudited) (U.S. Dollars)
Three Months Ended
---------------------------
March 31, March 31,
1997 1996
------------ ------------
Revenue:
Transfer fees $ - - $ 152
Interest 66 2,711
------------ ------------
66 2,863
------------ ------------
Expenses:
General and administrative 132,709 79,371
Exploration and acquisition 16,585 99,421
Depreciation 1,960 726
Interest 12,208 - -
Loss on sale of equipment 1,158 - -
------------ ------------
164,620 179,518
------------ ------------
Loss before income tax benefit (164,554) (176,655)
Income tax benefit - - (43,624)
------------ ------------
Net loss (164,554) (133,031)
Accumulated deficit at
beginning of period (2,558,891) (1,645,880)
------------ ------------
Accumulated deficit at
end of period $(2,723,445) $ (1,778,911)
============ ============
Net loss per share of common stock $ (0.02) $ (0.01)
============ ============
Cash dividends per share $ - - $ - -
============ ============
Weighted average number of
common shares outstanding 9,449,757 9,452,772
============ ============
The accompanying notes are an integral part
of the consolidated financial statements.
-4-
<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Consolidated Statements of Cash Flows (Unaudited)
(U.S. Dollars)
Three Months Ended
----------------------
March 31, March 31,
1997 1996
--------- ---------
Operating activities:
Net loss $(164,554) $(133,031)
Noncash elements included in net loss:
Depreciation 1,960 726
Deferred income tax benefit - - (8,351)
Loss on sale of equipment 1,158 - -
Change in:
Accounts and other receivables 9,944 (2,419)
Income tax refund receivable 9,434 (24,819)
Prepaid and deferred expenses 1,591 - -
Accounts payable and accrued
liabilities 20,245 (241,463)
Accrued interest payable 12,208 - -
--------- ---------
Net cash used by operating activities (108,014) (409,357)
--------- ---------
Investing activities:
Proceeds from sale of equipment 18,296 - -
Purchase of property,
plant and equipment - - (14,011)
--------- ---------
Net cash provided (used)
by investing activities 18,296 (14,011)
--------- ---------
Financing activities:
Deferred stock offering costs - - (10,306)
Acquisition of treasury stock - - (3,437)
--------- ---------
Net cash used by financing activities - - (13,743)
--------- ---------
Net decrease in cash
and cash equivalents (89,718) (437,111)
Cash and cash equivalents at
beginning of period 120,216 588,787
--------- ---------
Cash and cash equivalents at
end of period $ 30,498 $ 151,676
========= =========
The accompanying notes are an integral part of
the consolidated financial statements.
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the consolidated financial statements as of
December 31, 1996, as set forth in ConSil Corp.'s (the
Company or ConSil) 1996 Annual Report on Form 10-K,
substantially apply to these interim consolidated
financial statements and are not repeated here. All
amounts are in U.S. dollars unless otherwise indicated.
Note 2. The financial information given in the accompanying
unaudited interim financial statements reflects all
adjustments which are, in the opinion of management,
necessary to a fair statement of the results for the
interim periods reported. All such adjustments are of a
normal recurring nature. All financial statements
presented herein are unaudited. However, the balance
sheet as of December 31, 1996, was derived from the
audited consolidated balance sheet described in Note 1
above. Certain consolidated financial statement amounts
have been reclassified to conform to the 1997
presentation. These reclassifications have no effect on
the net loss or accumulated deficit as previously
reported.
Note 3. The components of the income tax benefit for the three
months ended March 31, 1997 and 1996 are as follows (in
thousands):
1997 1996
-------- --------
Current:
State income tax benefit $ - - $ (7,252)
Federal income tax benefit - - (28,021)
-------- --------
Total current benefit - - (35,273)
Deferred benefit - - (8,351)
-------- --------
Total $ - - $(43,624)
======== ========
Note 4. At March 31, 1997, the Company had 9,449,757 common
shares outstanding of which Hecla Mining Company (Hecla,
the majority stockholder of the Company) owned 7,418,300
shares or 78.503% of the outstanding shares.
Pursuant to an agreement between the Company's wholly
owned Mexican subsidiary, Minera ConSil, S.A de C.V.
-6-
<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
(Minera ConSil) and Hecla Mining Company's wholly owned
Mexican subsidiary, Minera Hecla, S.A. de C.V. (Minera
Hecla), the Company received a credit against exploration
expenses incurred in 1996 and the first quarter of 1997
of $57,364. Actual exploration expense in the first
quarter of 1997 in connection with services performed by
Minera Hecla under the direction of the management of
Minera ConSil was $13,469; expenses for the first quarter
of 1996 were $88,049.
Certain general and administrative expenses are incurred
by Hecla and reimbursed by the Company. These expenses
totaled $8,676 for the first quarter of 1997 compared to
$8,494 for the first quarter of 1996.
On June 28, 1996, ConSil and Hecla entered into a loan
agreement whereby Hecla agreed to make available to
ConSil a loan not to exceed $500,000, due in its entirety
on or before December 31, 1996. On February 19, 1997 the
Company and Hecla amended the Loan Agreement to increase
the amount available to $700,000 with a due date of
April 30, 1997. On April 16, 1997, the Loan Agreement -
Second Amendment extended the date of repayment to no
later than August 1, 1997. As of April 24, 1997,
$600,000 was payable to Hecla under the Loan Agreement.
On April 18, 1997, the Company and Hecla executed a Debt
Settlement Agreement which gives Hecla the option to
elect repayment of a portion of the loan by means of a 2%
net sales return royalty up to a maximum payment of
$500,000, or electing to have the Company issue to Hecla
common stock with a value of $500,000 (based on the
market price less a Vancouver Stock Exchange-approved
discount). The Company also agreed to assign its income
tax refund for the year ended December 31, 1995
(approximately $170,000) to Hecla and to repay all other
amounts outstanding in cash. (See Exhibit 10.2).
Note 5. The Company prepares its consolidated financial
statements in accordance with generally accepted
accounting principles ("GAAP") in the United States. The
Company also has regulatory reporting requirements in
Canada. There are no differences between U.S. GAAP and
Canadian GAAP with respect to stockholders' deficit or
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
net loss at March 31, 1997 and the three months then
ended. For the quarter ended March 31, 1996, income
would be reduced by $8,351 and stockholders' equity by
$107,351 under Canadian GAAP.
Note 6. During the first quarter 1997, the Company adopted the
Stock Option Plan and Incentive Stock Option Plan. The
Company is authorized to issue up to 10% of the issued
and outstanding shares under these plans. During 1997,
515,000 options were granted at $0.87 per share.
(Exhibits 10.3 and 10.4).
Item 2. Management's Discussion and Analysis of Financial
- ------ -------------------------------------------------
Condition and Results of Operations
-----------------------------------
INTRODUCTION
------------
Except for the historical information contained herein,
the matters discussed that are forward-looking statements
involve risks and uncertainties, including the timely
development of future projects, the impact of metals
prices, changing market conditions and regulatory
environment, and other risks detailed from time to time
in the Company's Form 10-K and Form 10-Qs filed with the
United States Securities and Exchange Commission. Actual
results may differ materially from those projected or
implied. Forward-looking statements included herein
represent the Company's judgment as of the date of this
filing. The Company disclaims, however, any intent or
obligation to update these forward-looking statements.
RESULTS OF OPERATIONS
---------------------
FIRST THREE MONTHS 1997 COMPARED TO FIRST THREE MONTHS
------------------------------------------------------
1996
----
The Company reported a net loss of $164,554 or $0.02 per
share, for the quarter ended March 31, 1997 compared to a
net loss of $133,031 ($0.01 per share) in the same period
in 1996. The increase in the net loss is due primarily
to an increase in general and administrative expenses of
$53,338, interest expense of $12,208, and a decrease in
the income tax benefit of $43,624. The
-8-
<PAGE> 9
PART 8 - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
increase in general and administrative expenses is
primarily due to increases in legal fees and investor
relations expenses associated with the Company's
reporting requirements to securities regulators and
stockholders. Interest expense in the 1997 period
relates to the note payable to Hecla which was not
outstanding during the 1996 period. Partially offsetting
these increases is the reduction in exploration and
acquisition expenses of $82,836, primarily due to a non-
recurring credit received from Minera Hecla in 1997 (see
Note 4 of Notes to Consolidated Financial Statements).
FINANCIAL CONDITION AND LIQUIDITY
---------------------------------
At March 31, 1997, assets totaled $340,869 and
stockholders' deficit totaled $615,231. Cash and cash
equivalents decreased by $89,718 to $30,498 at March 31,
1997 from $120,216 at December 31, 1996. Operating
activities used $108,014 of cash during the first three
months of 1997. The primary uses of cash for operating
activities were for administrative expenses and
acquisition expenses.
The Company's investing activities provided $18,296
during the first three months of 1997 from the sale of
office equipment.
Working capital decreased $143,140 during the first three
months of 1997, from a negative $518,962 at December 31,
1996 to a negative $662,102 at March 31, 1997. The
decrease in working capital is primarily the result of
funding operating losses associated with general and
administrative expenses and acquisition expenses.
On July 22, 1996, the Company entered into a Letter of
Intent with Minas La Colorada, S.A. de C.V. (MLC) which
was replaced by a Heads of Agreement dated December 19,
1996 for the acquisition of a 100% interest in the assets
of MLC. The Definitive Agreement is currently being
drafted by the parties and is expected to be signed
during the second quarter of 1997. Consideration for the
proposed acquisition currently includes Hecla Mining
Company, the Company's majority stockholder, delivering
from its holdings 4,000,000 shares of common stock of the
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
Company to ConSil who will then deliver 4,000,000 shares
of its common stock to the stockholders of MLC. ConSil
will also assume debt of up to $3,000,000 under the
proposed agreement. The proposed acquisition is also
contingent upon ConSil completing an equity financing
sufficient to complete the acquisition, expand production
at MLC's mines, and fund exploration of the MLC
properties.
On April 10, 1997, ConSil through its wholly owned
subsidiary Minera ConSil terminated its agreement with
Minera Portree regarding certain mineral properties
collectively referred to as "Ojo Caliente" on which
Minera ConSil had been doing exploration since 1995. The
agreement provides that Minera ConSil return all the
concessions to Minera Portree upon such termination.
ConSil currently has an extension on all provisions of
the agreement with Grupo Catorce on the Sombrerete
properties in Zacatecas, Mexico, including a suspension
of all required expenditures and payments to Grupo
Catorce. The current extension expires in May 1997 and
management will attempt to renegotiate the agreement.
Further exploration work, as well as the proposed
acquisition of Minas La Colorada, are contingent upon the
Company's ability to obtain financing. If other sources
of funds are unavailable, Hecla has committed to fund the
reasonable minimum financial requirements of the Company
through March 31, 1998. Existing cash and cash
equivalents are not sufficient to fully fund planned
expenditures. Management is currently investigating
raising additional capital via a common or preferred
stock offering. On April 21, 1997 the Company retained
IBK Capital Corp. of Toronto to act as its advisor in the
planned equity offering. There can be no assurance,
however, that the planned equity offering will be
successful.
-10-
<PAGE> 11
PART I - FINANCIAL INFORMATION (Continued)
CONSIL CORP.
NEW ACCOUNTING PRONOUNCEMENT
----------------------------
In February 1997, Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings per Share" was
issued. SFAS 128 establishes standards for computing and
presenting earnings per share (EPS) and simplifies the
existing standards. This standard replaces the
presentation of primary EPS with a presentation of basic
EPS. It also requires the dual presentation of basic and
diluted EPS on the face of the income statement for all
entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of
the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after
December 15, 1997, including interim periods and requires
restatement of all prior-period EPS data presented. The
Company does not believe the application of this standard
will have a material effect on the presentation of its
earning per share disclosures.
-11-
<PAGE> 12
PART II - OTHER INFORMATION
CONSIL CORP.
Item 1. Legal Proceedings
- ------ -----------------
There are no pending legal proceedings.
Item 4. Matters Voted on by Security Holders
- ------ ------------------------------------
The Company sent out a notice and Information Circular
dated February 14, 1997 to each of the Company's security
holders advising that the Company would hold its annual
meeting on March 17, 1997. At the meeting, Hecla Mining
Company, record and beneficial owner of 7,418,300 shares
(approximately 78.503%) of the outstanding Common Stock
of the Company, voted all its shares in favor of each of
the resolutions below. No other proxies were solicited
or obtained and each of the following items were thus
approved and adopted.
1. Five (5) members were elected to the Board of
Directors to serve for one-year terms or until their
respective successors are elected and qualified.
The directors so elected were Ralph R. Noyes,
Chairman, Michael B. White, Robert Stuart Angus,
William J. Weymark and Charles F. Asher.
2. Paragraph two of Article V of the Company's Restated
Articles of Incorporation was amended to increase
the number of issued and outstanding shares of the
Company's Common Stock from 20,000,000 shares, $.10
par value, to 100,000,000 shares, no par value.
3. The Board of Directors' adoption of the Company's
Stock Option Plan and Incentive Stock Option Plan
effective January 13, 1997, was approved and
confirmed.
4. Previous grants by the Company of stock options to
"insiders" of the Company, as defined under the
Securities Act (British Columbia), in accordance
with the policies of the Vancouver Stock Exchange
were approved and confirmed. Such grants, issued at
the rate of $0.87 per share, expiring on January 13,
2002, are set forth as follows: Incentive Stock
Options: Ralph Noyes, President, 175,000;
-12-
<PAGE> 13
PART II - OTHER INFORMATION (Continued)
CONSIL CORP.
Cheryl Maher, Vice President - Finance, 100,000; and
Michael White, Director, 60,000; Stock Options to
Directors: R. Stuart Angus, 60,000; William Weymark,
60,000; and Charles Asher, 60,000.
5. The Board of Directors of the Company was authorized
during the ensuing year to grant stock options,
pursuant to the rules and policies of the Vancouver
Stock Exchange and the Company's Stock Option Plan
and Incentive Stock Option Plan, to individuals who
are insiders of the Company as defined by the
Securities Act (British Columbia) and to make
amendments to existing stock options as may be
permitted under the rules and policies of the
Vancouver Stock Exchange and any one director or
officer was authorized to do all acts and things, to
deliver all documents and instruments, to give all
notices and to deliver and file with regulatory
authorities or otherwise or distribute all documents
which may be necessary or desirable to give effect
to or carry out the foregoing.
6. The selection of Coopers & Lybrand L.L.P. as the
Company's independent auditors for 1997 was
approved.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
(a) Exhibits
27 - Financial Data Schedule
10.1(c) - Loan Agreement - Second Amendment
10.2 - Debt Settlement Agreement
10.3 - Stock Option Plan(1)
10.4 - Incentive Stock Option Plan(1)
(b) Reports on Form 8-K
None.
Items 2, 3 and 5 of Part II are omitted from this report as inap-
plicable.
- --------------------------------
1. Indicates a management contract or compensatory plan or
arrangement.
-13-
<PAGE> 14
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CONSIL CORP.
-------------------------------------
(Registrant)
Date: April 30, 1997 By: /s/ Ralph R. Noyes
---------------------------------------
Ralph R. Noyes
President, Chairman of the Board
and Director
Date: April 30, 1997 By: /s/ Cheryl Maher
---------------------------------------
Cheryl Maher
Vice President - Finance and
Controller (principal accounting
and financial officer)
-14-
<PAGE> 15
CONSIL CORP.
Form 10Q - Period Ending March 31, 1997
EXHIBIT LIST
Exhibit No. Description
----------- -------------------------------
27 Financial Data Schedule
10.1(c) Loan Agreement - Second Amendment
10.2 Debt Settlement Agreement
10.3 Stock Option Plan
10.4 Incentive Stock Option Plan
-15-
</TABLE>
<PAGE> 1
EXHIBIT 10.1(c)
LOAN AGREEMENT - SECOND AMENDMENT
This Loan Agreement - Second Amendment (hereinafter referred
to as "Second Amendment") is made and effective this 16th day of
April, 1997, by and between Hecla Mining Company, a Delaware
corporation, whose address is 6500 Mineral Drive, Coeur d'Alene,
Idaho 83814-8788 (hereinafter referred to as "Hecla"), and ConSil
Corp., an Idaho corporation, which has an address at 500-625 Howe
Street, Vancouver, British Columbia, V6C 2T6 (hereinafter referred
to as "ConSil").
RECITALS AND DEFINITIONS
WHEREAS, Hecla and ConSil entered into that certain Loan
Agreement dated June 28, 1996, as amended February 19, 1997
(hereinafter referred to, as amended, as the "Agreement") pursuant
to which ConSil borrowed certain funds from Hecla, and Hecla loaned
certain funds to ConSil, all on the terms and conditions contained
in the Agreement;
WHEREAS, Hecla and ConSil wish to amend the Agreement with
this Second Amendment, on the terms and conditions specified
herein;
NOW, THEREFORE, in consideration of the foregoing and the
following mutual promises, covenants, considerations and
conditions, the parties, intending to be legally bound, do hereby
agree as follows:
AGREEMENT
1. AMENDMENT OF PRINCIPAL AMOUNT OF LOAN; INTEREST AND TERM:
Section 1 of the Agreement shall be deemed to read in its entirety
as follows:
Until further notice, and on the condition that ConSil
not be in default with respect to any of the terms of this
Loan Agreement, or with respect to any outstanding note
evidencing any advance made hereunder, Hecla shall make
available to ConSil a loan not to exceed SEVEN HUNDRED
THOUSAND DOLLARS ($700,000) (hereinafter referred to as the
"Principal Sum"), on which Principal Sum ConSil shall pay
interest thereon from the date of advancement of such funds,
at the prime rate of interest specified in the Wall Street
Journal, plus one and one-half percent (1.5%) per year until
paid, (hereinafter referred to as the "Loan"), which Loan
shall be repaid on demand by Hecla, but in no event later than
August 1, 1997.
2. EXECUTION OF REPLACEMENT NOTE, ASSIGNMENTS AND OTHER
CERTIFICATES. ConSil shall execute a replacement note
1
<PAGE> 2
substantially in the form attached hereto as Exhibit A, together
with a certificate of its corporate Secretary certifying that:
(i) the individuals executing this Second Amendment and all
documents delivered in accordance herewith were the duly
appointed officers of ConSil, authorized to execute and
deliver the same; and
(ii) all representations, warranties and conditions precedent
set forth in the Agreement are and remain true, accurate,
correct and fulfilled as of the date of the delivery of
this Second Amendment.
3. ENTIRE AGREEMENT. This Second Amendment and the Agreement
shall constitute the entire agreement between the parties with
respect to the transactions contemplated herein and therein, and
any prior understanding or representation of any kind preceding the
date of this Second Amendment shall not be binding on either party
except to the extent incorporated in this Second Amendment and the
Agreement.
4. CONSIDERATION. The consideration for this Second
Amendment shall be deemed to be the extension of additional credit
and additional time for repayment, all as specified in Section 1 of
this Second Amendment, the receipt and adequacy of which ConSil and
Hecla hereby expressly acknowledge.
5. LOAN AGREEMENT EFFECTIVE AND OTHERWISE UNAFFECTED. Hecla
and ConSil expressly acknowledge and agree that the Agreement is in
full force and effect, no default has occurred and except as
expressly amended by this Second Amendment, the Agreement shall
govern the terms and conditions of the transactions contemplated
herein and in the Agreement.
IN WITNESS WHEREOF duly authorized officers of the parties
have executed this Second Amendment on the date first above
written.
CONSIL CORP. HECLA MINING COMPANY
By /s/ Ralph R. Noyes By /s/ John P. Stilwell
------------------------ ---------------------------
Ralph R. Noyes John P. Stilwell
Chairman Vice President
ATTEST: ATTEST:
/s/ Nathaniel K. Adams /s/ Michael B. White
- --------------------------- ------------------------------
Nathaniel K. Adams Michael B. White
Secretary Secretary
2
<PAGE> 3
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this 16th day of April, in the year of 1997, before me, the
undersigned, a Notary Public in and for the State of Idaho,
personally appeared John P. Stilwell and Michael B. White, known or
identified to me to be the Vice President and the Secretary,
respectively, of HECLA MINING COMPANY, the officers who executed
the instrument on behalf of said corporation, and acknowledged to
me that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year in this certificate first above
written.
/s/ Narda Lee Anthony
-------------------------------------
Notary Public
Residing at Rathdrum, Idaho
My Commission Expires 8/5/2000
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this 16th day of April in the year of 1997, before me, the
undersigned, a Notary Public in and for the State of Idaho,
personally appeared Ralph R. Noyes and Nathaniel K. Adams, known or
identified to me to be the Chairman and the Secretary,
respectively, of ConSil Corp., the officers who executed the
instrument on behalf of said corporation, and acknowledged to me
that such corporation executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
notarial seal the day and year in this certificate first above
written.
/s/ Narda Lee Anthony
-------------------------------------
Notary Public
Residing at Rathdrum, Idaho
My Commission Expires 8/5/2000
3
<PAGE> 4
EXHIBIT A
PROMISSORY NOTE
$700,000 City of Coeur d'Alene
State of Idaho
On April 16, 1997, for value received, ConSil Corp., a
corporation duly organized and existing under the laws of the State
of Idaho, promises to pay to Hecla Mining Company, of 6500 Mineral
Drive, Coeur d'Alene, Idaho 83814-8788, at its offices, the
principal amount of seven hundred thousand dollars ($700,000), or
such other amount as may be outstanding pursuant to that certain
Loan Agreement dated June 28, 1996, as amended by the certain Loan
Agreement Amendment dated February 19, 1997 and further amended by
that certain Loan Agreement - Second Amendment of even date
herewith between ConSil Corp. and Hecla Mining Company, as
calculated and determined by Hecla Mining Company, with interest
thereon from the date of advancement of such funds, at the prime
rate of interest specified in the Wall Street Journal, plus one and
one-half percent (1.5%) per year until paid, payable upon the
demand of authorized representatives of Hecla Mining Company.
If default is made in the payment upon demand, then the entire
amount of principal, interest and any and all costs of collection
shall become immediately due and payable at the option of the
holder of this note, without notice.
This note shall be governed by and construed in accordance
with the laws of the State of Idaho.
IN WITNESS WHEREOF, ConSil Corp. has caused this note to be
executed by its duly authorized officers as of the date first
mentioned above.
ConSil Corp.
By /s/ Ralph R. Noyes
----------------------------
Ralph R. Noyes
Chairman
Attest:
/s/ Nathaniel K. Adams
------------------------------
Nathaniel K. Adams
Secretary
4
<PAGE> 1
EXHIBIT 10.2
DEBT SETTLEMENT AGREEMENT
THIS AGREEMENT is made as of the 18th day of April, 1997, by
and between ConSil Corp., an Idaho corporation with an office at
6500 Mineral Drive, Coeur d'Alene, Idaho 83814-8788 (hereinafter
referred to as "ConSil"), and Hecla Mining Company, a Delaware
corporation, whose address is 6500 Mineral Drive, Coeur d'Alene,
Idaho 83814-8788 (hereinafter referred to as "Hecla").
RECITALS AND DEFINITIONS
WHEREAS, Hecla and ConSil entered into that certain Loan
Agreement dated June 28, 1996, as amended February 19, 1997 and
further amended as of April 30, 1996 (hereinafter referred to, as
amended, as the "Loan Agreement"), pursuant to which Hecla loaned
to ConSil certain funds, more specifically described in this
Agreement, which funds ConSil acknowledges are due and owing;
WHEREAS, Minera Hecla, S.A. de C.V., a corporate entity
organized and existing pursuant to the laws of the Republic of
Mexico owned entirely by Hecla (hereinafter referred to as "Minera
Hecla") advanced certain moneys, including payment for trade goods
and services rendered on behalf of ConSil and its wholly owned
subsidiary, Minera ConSil, S.A. de C.V., a corporate entity
organized and existing pursuant to the laws of the Republic of
Mexico (hereinafter referred to as "Minera ConSil") pursuant to the
terms of that certain Technical Services Agreement dated December
22, 1995 (hereinafter referred to as "Technical Services
Agreement"), which moneys ConSil acknowledges are due and owing to
Minera Hecla; and
WHEREAS, ConSil and Minera ConSil wish to settle a portion of
those debts to Hecla and Minera Hecla under the Loan Agreement and
Technical Services Agreement, the amount of which is U.S. $500,000
(hereinafter referred to as the "Past Debt"), by repaying Hecla
with an option either to (i) have ConSil grant a royalty interest
in all proceeds from mineral production of ConSil, more
specifically described herein, or (ii) have ConSil issue to Hecla
authorized common stock of ConSil, the number of shares of which
shall be calculated in accordance with this Agreement. Either
option shall be deemed to be in full satisfaction of the Past Debt,
and Hecla and Minera Hecla are willing to accept such option as
consideration for and in full satisfaction of the Past Debt, all on
the terms and conditions set out herein; and
WHEREAS, ConSil and Minera ConSil shall settle the balance of
all debt in excess of the Past Debt incurred or to be incurred
pursuant to the Loan Agreement or the Technical Services Agreement,
in such amount as may be outstanding on the Closing Date (as
hereinbelow defined) (hereinafter referred to as the "Current
Debt") by the assignment of its United States Income Tax refund for
the tax year 1995, anticipated to be approximately $170,000
(hereinafter referred to as the "Tax Refund"), and payment of cash
or other currently available funds from the proceeds of certain
financing which ConSil is currently pursuing, all as more
specifically described herein;
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<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the
following mutual promises, benefits, covenants and agreements, the
adequacy of which is hereby acknowledged, the parties, intending to
be legally bound, do hereby agree as follows:
AGREEMENT
1. SETTLEMENT OPTIONS. With respect to the settlement of the
Past Debt, ConSil hereby grants Hecla the option to elect either:
(a) A two percent (2%) net sales returns royalty interest up
to a maximum payment of U.S. $500,000 in all proceeds actually
received by ConSil or its Affiliates (as defined in Section 19 of
this Agreement) from all mineral production of ConSil or its
Affiliates, from whatever source and wherever located, from any
smelter, refinery or other purchaser for the sale of the ores,
metals, including bullion, minerals, mineral substances or
concentrates produced from properties or pursuant to rights owned
wholly or in part by ConSil or its Affiliates, after deducting from
such proceeds the following charges to the extent that they are not
deducted by the purchaser in computing payment: Smelting and
refining charges; penalties; smelter assay costs and umpire assay
costs; costs of freight and handling ores, metals or concentrates
subsequent to mining and concentrating from local production
facilities to any smelter, refinery or other purchaser thereof; and
insurance costs on all such products; (hereinafter referred to as
the "Royalty"); provided, however, that the Royalty shall not be
payable from products of the Candaleria mine, located in the state
of Zacatecas, Republic of Mexico, currently owned by Minas La
Colorada, S.A. de C.V., a Mexican corporation, unless and until the
early of the following: (i) ConSil completes the expansion of the
milling capacity to at least 450 tons per day, which shall be
deemed to occur when the expanded mill is functioning at ninety
percent (90%) of design capacity for thirty (30) days of continuous
operation; or (ii) the second anniversary of this Agreement; or
(b) ConSil issuing to Hecla shares of ConSil's authorized,
fully paid and nonassessable common stock, par value ten cents
($0.10) per share (the "Shares"), the number of which shall be
calculated as follows: The value ascribed to each share of ConSil
common stock issued pursuant to this Agreement shall be, subject to
applicable regulatory and stock exchange approvals and all
conditions of this Agreement being met, the price of the stock on
the day before Hecla's election to accept shares pursuant to this
Section 1(b), less twenty percent (20%), or such other maximum
amount as is allowed in accordance with Policy 13 of the Vancouver
Stock Exchange Listed Companies Manual (the "Share Price"). The
number of Shares ConSil shall issue to Hecla shall be determined by
dividing U.S. $500,000 by the Share Price, the quotient of which
shall be the number of Shares ConSil shall issue to Hecla, with any
resulting fraction rounded down to the next whole number, thereby
obviating the need for issuance of any fractional shares.
2. METHOD OF ELECTION. Hecla may elect its option at any
time, but in any event on or before the close of business, Pacific
Time Zone, on August 1, 1997, by providing written notice of its
choice of settlement options to ConSil as defined in Section 1 of
this Agreement.
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<PAGE> 3
3. CONDITIONS PRECEDENT. The Agreement is subject to the
following conditions:
(a) That the approval of the Vancouver Stock Exchange is
granted or will be obtained for this transaction in a timely
fashion following the date hereof;
(b) That, if required, the approval of the Vancouver Stock
Exchange or any other regulatory body having jurisdiction has been
given or will be obtained for this transaction in a timely fashion
following the date hereof;
(c) That the Board of Directors of ConSil approve of this
transaction;
(d) That ConSil execute and deliver to Hecla all documents,
certificates and to take all such other steps as may be necessary
or desirable or convenient and proper to carry out the intent of
the transactions contemplated herein; and
(e) That ConSil obtains funds sufficient to pay the Past Debt
from the financing associated with that certain transaction whereby
ConSil acquires all or substantially all of the assets of Minas La
Colorada, S.A. de C.V., ("MLC") a Mexican corporate entity with
headquarters in Durango, State of Durango, Mexico, and mining
operations in the Chalchihuites Mining District of the State of
Zacatecas, Mexico, as contemplated in that certain Heads of
Agreement dated December 19, 1996, among ConSil, MLC and Ing. Jose
Jaime Gutierrez Nunez and Ing. Ramon Tomas Davila Flores
(hereinafter referred to as the "MLC Transaction").
(f) That the conditions precedent as set out in this section
must be satisfied on or before August 1, 1997.
(g) That ConSil deliver an United States Internal Revenue
Service Form 2848 Power of Attorney in favor of an officer of Hecla
Mining Company authorizing the delivery of ConSil's Tax Refund
directly to Hecla (hereinafter referred to as the "Power of
Attorney").
4. COVENANTS OF CONSIL. ConSil hereby covenants that:
(a) It shall use its best efforts to obtain the approval of
this transaction by its Board of Directors;
(b) It shall use its best efforts to obtain the approval of
the Vancouver Stock Exchange, and any other regulatory authorities
having jurisdiction over this transaction;
(c) It shall grant Hecla the rights enumerated in Schedule 1
attached hereto and incorporated herein by this reference with
respect to shares issued, if any, pursuant to Section 1(b) of this
Agreement;
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<PAGE> 4
(d) It shall use its best efforts to complete the financing
associated with the MLC Transaction.
(e) It shall execute and deliver the Power of Attorney for
the Tax Refund to Hecla;
(f) It shall execute and deliver to Hecla all documents,
certificates and to take all such other steps as may be necessary
or desirable or convenient and proper to carry out the intent of
the transactions contemplated herein.
5. COVENANTS OF HECLA. Hecla hereby covenants that:
(a) Neither it nor Minera Hecla has assigned any of the debt
owed to them by ConSil or Minera ConSil;
(b) All debts specified herein by Hecla and Minera Hecla are
valid obligations, accrued in respect of the Loan Agreement, the
Technical Services Agreement, and the interest thereon or which may
otherwise properly be charged to ConSil or Minera ConSil;
(c) In consideration of the covenants and agreements set out
in this Agreement, the obligations due and owing to Hecla and
Minera Hecla by ConSil and Minera ConSil will be fully and duly
discharged upon the satisfaction and performance of all the
conditions to this Agreement, and that Hecla and Minera Hecla
irrevocably agrees to release ConSil and Minera ConSil from its
obligations in respect of the Loan Agreement, the Technical
Services Agreement, interest thereon and otherwise properly
chargeable obligations of ConSil or Minera ConSil; and
(d) It shall direct its agents to pursue the Tax Refund on
ConSil's behalf.
6. CLOSING. Closing of the transactions contemplated by this
Agreement shall take place by ConSil's authorized representative
delivering to Hecla, (a) in accordance with Hecla's election
pursuant to paragraph 1 of this Agreement, either (i) a duly
executed certificate evidencing Hecla's ownership of the Shares or
(ii) an executed and acknowledged conveyance of the Royalty in
Spanish, suitable for registration and recording with all public
registries and jurisdiction necessary or convenient thereto, with
an English translation acceptable to Hecla in its reasonable
discretion, together with (b) payment to Hecla in currently
available funds of the entire amount of all Current Debt, less the
amount of the Tax Refund, in exchange for which Hecla's authorized
representative shall deliver to ConSil an acknowledgment of the
Release of all Past Debt and Current Debt, together with ConSil's
original promissory note forming a part to the Loan Agreement
marked "Paid in Full."
7. HECLA'S CERTIFICATION AND ACKNOWLEDGMENT. Hecla
acknowledges that it is aware that the Shares may contain a legend
denoting the restrictions on transfer imposed by the policies of
those stock exchanges where ConSil's capital stock is traded, the
securities commissions of any jurisdiction to which ConSil's stock
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<PAGE> 5
is subject, and the U.S. Securities Act of 1933, the U.S.
Securities Exchange Act of 1934, or any regulations promulgated
thereunder.
8. ACCELERATION OF DEBT; TIME OF THE ESSENCE. This Agreement
shall be null, void and unenforceable, and the entire amount of the
Past Debt and Current Debt shall be and become immediately due and
payable in accordance with the Loan Agreement if closing has not
occurred on or before August 1, 1997. Time is of the essence in
the performance of this Agreement.
9. INTERPRETATION. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Idaho.
10. EXECUTION & DELIVERY. This Agreement may be executed in
several parts in the same form and such parts as so executed shall
together form an original agreement, which shall be read together
as if all the signing parties hereto had executed one copy of this
Agreement.
11. ATTORNEYS FEES. The prevailing party in any dispute
arising pursuant to or under this Agreement shall be entitled to an
award of its reasonable attorneys' fees and costs.
12. BINDING EFFECT. This Agreement shall inure to the
benefit of, and shall be binding on, the respective successors and
permitted assigns of the parties.
13. Assignment. The rights of ConSil under this Agreement
are personal to ConSil, and ConSil may not assign or transfer any
of its rights or obligations under this Agreement without the
prior, express and written consent of Hecla, which consent shall be
in Hecla's sole and absolute discretion, and any purported
assignment or transfer shall be void.
14. ENTIRE AGREEMENT. This Agreement shall constitute the
entire agreement between the parties with respect to the
transactions contemplated herein, and any prior understanding or
representation of any kind preceding the date of this Agreement
shall not be binding on either party except to the extent
incorporated in this Agreement.
15. MODIFICATION OF AGREEMENT. Any modification of this
Agreement or additional obligation assumed by either party in
connection with this Agreement shall not be binding unless
evidenced in writing and signed by each party's duly authorized
representative.
16. PARAGRAPH HEADINGS. The titles to the paragraphs of this
Agreement are solely for the convenience of the parties and shall
not be used to explain, modify, simplify or aid in the
interpretation of the provisions of this Agreement.
17. SEVERABILITY. If any provision of this Agreement shall
be held invalid under any applicable laws, such invalidity shall
not affect any other provision of this Agreement which can be given
effect without the invalid provision, and, to this end, the
provisions of this Agreement are severable.
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<PAGE> 6
18. CURRENCY. All references to currency in this Agreement
shall be deemed to refer to legal tender of the United States of
America.
19. AFFILIATES. For purposes of this Agreement, an
"Affiliate" shall be deemed to mean any entity directly or
indirectly controlled by ConSil, which directly or indirectly
controls ConSil, or which is directly or indirectly controlled by
the same entity which directly or indirectly controls ConSil, other
than Hecla.
IN WITNESS WHEREOF, this Agreement has been executed by the
parties as of the date and year first written above.
ConSil CORP. HECLA MINING COMPANY
By: /s/ Ralph R. Noyes By: /s/ John P. Stilwell
---------------------------- -----------------------------
RALPH R. NOYES, Chairman JOHN P. STILWELL,
Vice-President
ATTEST: ATTEST:
/s/ Nathaniel K. Adams /s/ Michael B. White
- ----------------------------- --------------------------------
NATHANIEL K. ADAMS, Secretary MICHAEL B. WHITE, Secretary
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<PAGE> 7
SCHEDULE 1
TO
DEBT SETTLEMENT AGREEMENT
This Schedule 1 to the Debt Settlement Agreement (the
"Agreement") between ConSil Corp. ("ConSil) and Hecla Mining
Company ("Hecla") defines specific rights granted to Hecla by
ConSil pursuant to paragraph 4(c) of the Agreement.
REGISTRATION RIGHTS
-------------------
1. U.S. REGISTRATION.
-----------------
1.1. PIGGYBACK RIGHTS. Each time that ConSil proposes for any
reason to register any of its securities under the Securities Act
("Proposed Registration"), other than pursuant to a registration
statement on Form S-4 or Form S-8 or similar or successor forms,
ConSil shall promptly give written notice of such Proposed
Registration to Hecla (including whether such Proposed Registration
is an underwritten public offering) and shall offer Hecla the right
to request inclusion of any shares in the Proposed Registration.
Hecla shall have twenty (20) days from the receipt of such notice
to deliver to ConSil a written request specifying the number of
shares Hecla intends to sell and Hecla's intended method of
disposition (if not an underwritten public offering). Upon receipt
of such request, ConSil shall promptly use its reasonable best
efforts to cause all such shares to be registered under the
Securities Act in connection with such Proposed Registration. If
the Proposed Registration is an underwritten public offering,
ConSil shall cause the managing underwriter to include the shares
proposed to be included therein to be included on the same terms
and conditions as any similar securities, if any, of ConSil
included therein. Hecla shall enter into the same underwriting
agreement as shall ConSil and the other selling security holders,
if any, provided that such underwriting agreement
1.1.1. contains (a) representations, warranties and
agreements on the part of the selling security holders that
are not substantially different from those customarily made by
selling security holders in underwriting agreements with
respect to secondary distributions and (b) representations,
warranties and agreements on the part of ConSil and such other
terms and provisions as are customarily contained in
underwriting agreements with respect to secondary
distributions and
1.1.2. provides Hecla with an indemnification
substantially similar to the indemnification provided by
paragraph 1.6 hereinbelow.
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<PAGE> 8
Notwithstanding the foregoing, if the managing underwriter of
such underwritten public offering delivers a written opinion to
ConSil, with a copy to Hecla, that the inclusion of any or all
shares proposed to be included in the underwritten public offering,
together with any other issued and outstanding shares of Common
Stock proposed to be included therein by other stockholders of
ConSil (collectively, "Registrable Securities") would materially
and adversely affect the success of such offering, then ConSil
shall not be required to register the Registrable Securities in
excess of the amount, if any, of the Registrable Securities which
the managing underwriter of such underwritten offering shall
reasonably and in good faith agree in writing to include in such
offering in excess of any amount to be registered for ConSil;
provided, however, that if any Registrable Securities are not
included for this reason, no shares of any other stockholders of
ConSil will be included in such Proposed Registration until such
time as all shares which Hecla may request shall have been included
in such Proposed Registration.
1.2. REGISTRATION PROCEDURES. If and whenever ConSil is under
an obligation pursuant to the provision of this paragraph 1 to
effect the registration of any shares, ConSil shall:
1.2.1. prepare and file with the United States
Securities and Exchange Commission (the "Commission") a
registration statement with respect to the shares;
1.2.2. prepare and file with the Commission such
amendments and supplements to such registration statements and
the prospectus used in connection therewith as may be
necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect
to the sale or other disposition of all shares covered by such
registration statement;
1.2.3. furnish to Hecla such number of copies of any
summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of
the Securities Act, and such other documents as Hecla may
reasonably request in order to facilitate the public sale or
other disposition of the shares;
1.2.4. use its best efforts to register or qualify the
shares covered by such registration statement under the
securities or blue sky laws of such jurisdictions as Hecla
shall reasonably request and do any and all other acts or
things which may be necessary or advisable to enable Hecla to
consummate the public sale or other disposition in such
jurisdictions of such shares; provided that ConSil shall in no
event be required to qualify to do business as a foreign
corporation or as a dealer in any jurisdiction where it is not
so qualified or to change the composition of its assets at the
time to conform with the securities or blue sky laws of such
jurisdiction, to take any action that would subject it to
service of process in suits other than those arising out of
the offer and sale of the Registrable Securities covered by
the registration statement or to subject itself to taxation in
any jurisdiction where it has not theretofore done so;
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<PAGE> 9
1.2.5. if the Proposed Registration is a public
offering involving an underwriting, cause all shares covered
by each registration statement to be listed on a national
securities exchange or authorized to be quoted on the National
Association of Securities Dealers Automated Quotation System
("NASDAQ");
1.2.6. at any time when a prospectus relating to the
shares covered by such registration statement is required to
be delivered under the Securities Act, promptly notify Hecla
of the happening of any event as a result of which the
prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in
light of the circumstances then existing and, at the request
of Hecla, prepare, file and furnish to Hecla a reasonable
number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances then existing;
1.2.7. if ConSil has delivered preliminary or final
prospectuses to Hecla and after having done so the prospectus
is amended to comply with the requirements of the Securities
Act, ConSil shall promptly notify Hecla and, if requested,
Hecla shall immediately cease making offers of the shares and
return all prospectuses to ConSil. ConSil shall promptly
provide Hecla with revised prospectuses and, following receipt
of the revised prospectuses, Hecla shall be free to resume
making offers of the shares;
1.2.8. furnish, at the request of Hecla, on the date
any shares are delivered to the underwriters for sale in
connection with a registration pursuant to this schedule, if
such shares are being sold through underwriters, or, if such
shares are not being sold through underwriters, on the date
that the registration statement with respect thereto becomes
effective,
1.2.8.1. an opinion, dated such date, of the
counsel representing ConSil for the purposes of such
registration, in form and substance as is customarily
given to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to Hecla and
1.2.8.2. a letter dated such date, from the
independent certified public accountants of ConSil, in
form and substance as is customarily given by independent
certified public accountants to underwriters in an
underwritten public offering, addressed to the
underwriters, if any, and Hecla; and
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<PAGE> 10
1.2.9. before filing a registration statement or
prospectus or any amendments or supplements thereto with
respect to the shares, furnish to Hecla, its counsel and other
representatives, and the underwriters, if any, copies of all
such documents proposed to be filed, which documents shall be
made available on a timely basis for review and comment by
Hecla and any such underwriters. No references therein to
Hecla or the shares shall be made which have not been approved
in writing by Hecla.
1.2.10. give each of Hecla, its counsel, auditors and
other representatives and the underwriters, if any, access to
its books and records and opportunities to discuss the
business of ConSil with its officers and auditors as shall be
necessary in the opinion of Hecla, such underwriters and their
respective counsel, and to conduct all due diligence which
Hecla, such underwriters and their respective counsel may
reasonably require;
1.2.11. otherwise use its best efforts to comply with
the Securities Act, the Exchange Act, all applicable rules and
regulations of the Commission, and all applicable blue sky and
any other securities laws, rules and regulations which may be
applicable; and
1.2.12. if the Proposed Registration is an underwritten
public offering, provide a transfer agent and registrar for
the shares included in the Proposed Registration not later
than the closing date of the Proposed Registration.
1.3 COOPERATION BY HECLA. Hecla shall cooperate with ConSil
in connection with the preparation of the registration statement,
and for so long as ConSil is obligated to file and keep effective
the registration statement, shall timely provide ConSil, in
writing, for use in the registration statement, all such
information regarding Hecla and the shares as may be reasonably
necessary to enable ConSil to prepare the registration statement
and prospectus covering the shares to maintain the currency and
effectiveness thereof and otherwise to comply with all applicable
requirements of law in connection therewith.
1.4. LOCK-UP AGREEMENT. Hecla shall not, to the extent
requested in writing by ConSil and an underwriter of an offering of
shares of Common Stock (or securities convertible into or
exercisable or exchangeable for shares of Common Stock) of ConSil,
sell or otherwise transfer or dispose any shares not included in
such registration statement for 90 days following the effective
date of a registration statement filed by ConSil. In order to
enforce the foregoing covenant (and for no other purpose), ConSil
may impose stop-transfer instructions with respect to such excluded
shares until the end of such period.
1.5. EXPENSES. ConSil shall pay all expenses incurred by
ConSil and Hecla in complying with this paragraph 1, including,
without limitation, all registration and filing fees (including all
expenses incident to filing with the National Association of
Securities Dealers, Inc.), fees and expenses of complying with the
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<PAGE> 11
securities laws of all such jurisdictions in which the shares are
proposed to be offered and sold, printing expenses, and fees and
disbursements of counsel and auditors representing ConSil and of
counsel representing Hecla; provided, however, that Hecla shall pay
all transfer taxes and brokerage and underwriters' discounts and
commissions attributable to the shares.
1.6. INDEMNIFICATION BY CONSIL. In the event of any
registration under the Securities Act of any shares pursuant to
this Schedule, ConSil shall, to the extent permitted by law,
indemnify and hold harmless Hecla, any underwriter, broker or
dealer who participates in the offering or sale of such shares,
Hecla's counsel, auditors and other representatives, each officer,
director, employee or agent of Hecla, and each other person, if
any, who controls any of the foregoing persons within the meaning
of Section 15 of the Securities Act, against any losses, costs,
claims, damages or liabilities, joint or several (or actions in
respect thereof) ("Losses"), incurred by or to which each such
indemnified party may become subject under the Securities Act, the
Exchange Act or otherwise, but only to the extent such Losses arise
out of or are based upon
1.6.1. any untrue statement or alleged untrue
statement of any material fact contained or incorporated by
reference, in any registration statement under which shares
were registered under the Securities Act, in any preliminary
prospectus or in any final prospectus, or in any post-
effective amendment or supplement thereto or any document
incorporated by reference into any of the foregoing (the
"Disclosure Documents"),
1.6.2. any omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements made therein not misleading,
or
1.6.3. any violation of any federal or state
securities laws or rules or regulations thereunder committed
by ConSil in connection with the performance of its
obligations under the Agreement; and ConSil will reimburse
immediately on demand each such indemnified party for all
legal or other expenses reasonably incurred by such party in
connection with investigating or defending any such Losses,
including any amounts paid in settlement of any litigation,
commenced or threatened; provided, however, that ConSil shall
not be liable to an indemnified party in any such case to the
extent that any such Losses arise out of or are based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in any such Disclosure Documents in
reliance upon and in conformity with written information
relating to such indemnified party furnished to ConSil by or
on behalf of such indemnified party specifically stating that
it is for use in the preparation thereof.
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<PAGE> 12
2. CANADIAN PROSPECTUS.
-------------------
2.1. INCIDENTAL QUALIFICATION. If ConSil at any time proposes
to prepare and file a prospectus under any of the applicable
securities legislation of any of the provinces of Canada, as
amended (collectively, the "Securities Acts") for a distribution of
shares of its Common Stock, whether or not for sale for its own
account, ConSil will give prompt written notice to Hecla of its
intention to do so, describing such proposed distribution. Upon
the written request of Hecla delivered to ConSil within twenty (20)
days after the giving of any such notice (which request shall
specify the shares intended to be disposed of by Hecla and Hecla's
intended method of disposition (if not an underwritten offering),
ConSil will use its reasonable best efforts to effect the
qualification under the Securities Acts of the Provinces of Canada
in which ConSil proposes to make its distribution of the
distribution of all shares which ConSil has been so requested by
Hecla to qualify. If the distribution contemplated by ConSil is to
be made by or through one or more underwriters, ConSil shall cause
the managing underwriter to include the shares proposed to be
included therein to be included on the same terms and conditions as
any similar securities, if any, of ConSil included therein. Hecla
shall enter into the same underwriting agreement as shall ConSil
and the other selling security holders, if any, provided that such
underwriting agreement
2.1.1. contains
2.1.1.1. representations, warranties and agreements
on the part of the selling security holders that are not
substantially different from those customarily made by
selling security holders in underwriting agreements with
respect to secondary distributions and
2.1.1.2. representations, warranties and agreements
on the part of ConSil and such other terms and provisions
as are customarily contained in underwriting agreements
with respect to secondary distributions and
2.1.2. provides Hecla with an indemnification
substantially similar to the indemnification provided by
paragraph 1.6 hereof.
Notwithstanding the foregoing, if the lead underwriter of such
underwritten offering shall deliver a written opinion to ConSil,
with a copy to Hecla, that the distribution of any or all of the
shares, together with any other issued and outstanding shares of
Common Stock proposed to be included in the distribution, will
materially and adversely affect the distribution of such securities
by such underwriter (such opinion to state the reasons therefor),
then ConSil shall not be required to qualify the distribution of
shares in excess of the number, if any, of shares which such
underwriter shall reasonably and in good faith agree in writing to
include in such offering in excess of any amount to be registered
for ConSil; provided, however, that if any shares are not included
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for this reason, no shares of any other shareholders of ConSil will
be included in such proposed distribution until such time as all
shares which Hecla may request shall have been included in such
proposed distribution; and ConSil shall not be obligated to qualify
the distribution of shares under this subparagraph 2.1 incidental
to the qualification of a distribution of any of its securities in
connection with any acquisitions, mergers, amalgamations,
arrangements, reorganizations, securities exchange offers, dividend
reinvestment plans or stock option or other employee benefits
plans.
2.2. Procedures.
----------
2.2.1. If and whenever ConSil is required to effect
the qualification of any distribution of shares under any of
the Securities Acts as provided in subparagraph 2.1. hereof,
ConSil shall:
2.2.1.1. prepare and file in both the English and
French languages, as appropriate, a preliminary
prospectus or similar document in each of the provinces
of Canada in which ConSil proposes to make the
distribution and such other related documents as may be
necessary or appropriate relating to the proposed
distribution and shall, as soon as possible after any
comments of the securities commissions or similar
regulatory authorities of each of such provinces of
Canada (the "Commissions") have been satisfied with
respect thereto, prepare and file under the Securities
Acts of such provinces of Canada a final prospectus in
the English and French languages, as appropriate, and
shall take all other steps and proceedings that may be
necessary in order to qualify the shares for distribution
under the Securities Acts of such provinces of Canada by
registrants who comply with the relevant provisions of
those Securities Acts;
2.2.1.2. prepare and file with the Commissions such
amendments and supplements to the preliminary prospectus
and final prospectus as may be necessary to comply with
the provisions of the Securities Acts with respect to the
distribution of the shares and other securities covered
thereby until such time as all of the shares and other
securities have been disposed of in accordance with the
intended method of disposition by Hecla (and Hecla's
agents);
2.2.1.3. furnish to Hecla such number of commercial
copies of the preliminary prospectus and final prospectus
and of each amendment and supplement thereto (including
all documents incorporated therein by reference) and such
other relevant documents as Hecla may reasonably request;
2.2.1.4. furnish to Hecla:
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2.2.1.4.1. an opinion of counsel for ConSil
addressed to Hecla and dated the effective date of
the final prospectus and the closing date;
2.2.1.4.2. a "comfort" letter addressed to
the underwriter or underwriters dated each such date
signed by the auditors of ConSil; and
2.2.1.4.3. if translation into the French
language is required, an opinion of Quebec counsel
for ConSil addressed to Hecla and dated each such
date relating to the translation of the preliminary
prospectus and the final prospectus and, in each
case, covering substantially the same matters as are
customarily covered in such documents and such other
matters as Hecla may reasonably request;
2.2.1.5. promptly notify Hecla of the happening of
any event as a result of which the preliminary prospectus
or the final prospectus, as then in effect, would include
a misrepresentation (as defined in the Securities Act
(Ontario)) or an untrue statement of a material fact or
omit to state any material fact required to be stated
therein or necessary to make any statement therein not
misleading in the light of the circumstances in which it
was made, and at the request of Hecla prepare and furnish
to Hecla a reasonable number of commercial copies of a
supplement to or an amendment of the preliminary
prospectus and the final prospectus as may be necessary
so that, as thereafter delivered to purchasers of the
shares or other securities, such document shall not
include a misrepresentation or an untrue statement of a
material fact or omit to state a material fact required
to be stated therein or necessary to make any statement
therein not misleading in the light of the circumstances
in which it was made;
2.2.1.6. otherwise use its best efforts to comply
with all applicable Securities Acts and policies, rules
and regulations of the Commissions;
2.2.1.7. provide a transfer agent and registrar for
such securities not later than the closing date of the
offering; and
2.2.1.8. if the distribution is an underwritten
public offering, cause all shares covered by each
prospectus to be listed on a stock exchange in Canada or
authorized to be quoted on NASDAQ.
2.3. COOPERATION BY HECLA. Hecla shall cooperate with ConSil
in connection with the preparation of the preliminary and final
prospectus, shall provide ConSil, in writing, for use in the
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<PAGE> 15
preliminary and final prospectus all such information regarding
Hecla and the shares as may be necessary to enable ConSil to
prepare the preliminary and final prospectus covering the shares
and otherwise to comply with all applicable requirements of law in
connection therewith.
2.4. LOCK-UP AGREEMENT. Hecla shall not, to the extent
requested in writing by ConSil and an underwriter of an offering of
shares of Common Stock (or securities convertible into or
exercisable or exchangeable for shares of Common Stock) of ConSil,
sell or otherwise transfer or dispose any shares for 90 days
following the date of the final prospectus filed by ConSil. In
order to enforce the foregoing covenant (and for no other purpose),
ConSil may impose stop-transfer instructions with respect to such
excluded shares until the end of such period.
2.5. EXPENSES. ConSil and Hecla will each pay their pro rata
share, based on their proportion of the number of shares offered
pursuant to a final prospectus, of all expenses incidental to such
offering including, without limitation, all filing fees, all fees
and expenses of complying with the Securities Acts, all printing
fees and expenses, all fees associated with translations of the
preliminary prospectus and the final prospectus, All fees and
disbursements of counsel to Hecla and its associates or affiliates
shall be paid by Hecla. All fees and disbursements of counsel and
auditors of ConSil shall be paid by ConSil.
2.6. PREPARATION; REASONABLE INVESTIGATION. In connection
with the preparation and filing of any preliminary prospectus,
final prospectus or similar document, ConSil will give Hecla and
the underwriters, if any, and their respective counsel, auditors
and other representatives, the opportunity to participate in the
preparation of such documents and each amendment thereof or
supplement thereto and such documents, amendments and supplements
will be made available on a timely basis for review and comment by
Hecla, its counsel, auditors and other representatives and the
underwriters, if any. No references therein to Hecla or the shares
shall be made which have not been approved in writing by Hecla.
ConSil will give each of Hecla, its counsel, auditors and other
representatives and the underwriters, if any, access to its books
and records and opportunities to discuss the business of ConSil
with its officers and auditors as shall be necessary in the opinion
of Hecla, such underwriters and their respective counsel, and to
conduct all due diligence which Hecla, such underwriters and their
respective counsel may reasonably require in order to conduct a
reasonable investigation for purposes of establishing a due
diligence defense as contemplated by the Securities acts and in
order to enable such underwriters to execute the certificate
required to be executed by them at the end of each such document.
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<PAGE> 1
EXHIBIT 10.3
STOCK OPTION PLAN
OF
CONSIL CORP.
I.
PURPOSE OF PLAN
The ConSil Corp. Stock Option Plan (the "Plan") is intended to
advance the interests of ConSil Corp. (the "Company"), its
shareholders, and its subsidiaries by encouraging and enabling
selected officers, directors, and other key employees upon whose
judgment, initiative and effort the Company is largely dependent
for the successful conduct of its business, to acquire and retain a
proprietary interest in the Company by ownership of its stock.
Options granted under the Plan are intended to be options which do
not meet the requirements of Section 422 of the Internal Revenue
Code of 1986 (the "Code").
II.
DEFINITIONS
2.1 "Administrative Committee" means the Board of Directors or a
committee appointed by the Board of Directors, pursuant to
Article III below, administering the Plan.
2.2 "Affiliate" means a "parent corporation" of the Company, as
described in Section 424(e) of the Code, or a "subsidiary
corporation" of the Company, as described in Section 424(f) of
the Code.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986.
2.5 "Common Stock" means the Company's no par value Common Stock.
2.6 "Company" means ConSil Corp.
2.7 "Date of Grant" means the date on which an Option is granted
under the Plan.
2.8 "Disinterested Person" has the meaning defined in Article
3.1(c) of this Plan.
2.9 "Option" means an option granted under the Plan.
2.10 "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
2.11 "Plan" means this Stock Option Plan.
2.12 "Qualified Successor" means a person or persons entitled under
Optionee's will or applicable laws of descent and distribution
to receive Incentive Stock Options held by Optionee at the
time of Optionee's death.
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<PAGE> 2
2.13 "Reorganization" and "Reorganization Agreement" have the
meanings defined in Article VII of this Plan.
2.13 "Subsidiary" or "Subsidiaries" means a subsidiary corporation
or corporations of the Company as defined in Section 424 of
the Code.
2.14 "Successor" means the legal representative of the estate of a
deceased Optionee or the person or persons who acquire the
right to exercise an Option by bequest or inheritance or by
reason of the death of any Optionee.
III.
ADMINISTRATION OF PLAN
3.1 This Plan shall be administered by the Board of Directors of
the Company (the "Board") unless a committee of the Board is
appointed in accordance with Article 3.2 or 3.4(b) below. The
Board, or such committee if appointed, will be referred to in
this Plan as the "Administrative Committee."
3.2 The Board may at any time appoint a committee, consisting of
not less than two of its members, to administer this Plan on
behalf of the Board in accordance with such terms and
conditions not inconsistent with this Plan as the Board may
prescribe. After it is appointed, the committee shall
continue to serve until otherwise directed by the Board. The
Board may appoint additional members to the committee; remove
members (with or without cause); fill vacancies however
caused; and/or remove all members of the committee and
thereafter directly administer this Plan.
3.3 A majority of the members of the Administrative Committee
shall constitute a quorum; and subject to the limitations of
this Article III, all actions of the Administrative Committee
shall require the affirmative vote of members who constitute a
majority of a quorum. Members of the Administrative Committee
who are not Disinterested Persons (as defined in Article
3.4(c)) may vote on any matters affecting the administration
or the grant of Stock Options under the Plan; provided,
however, that no member shall vote on the granting of a Stock
Option to himself or herself (but a member may be counted in
determining the existence of a quorum at a meeting of the
Administrative Committee during which action is taken with
respect to the granting of such Stock Option).
3.4 Notwithstanding the foregoing provisions of this Article III,
to the extent necessary to be exempt from the operation of
Section 16(b) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), this Plan shall from the
effective date of registration until six months after the
termination thereof, be administered as follows:
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<PAGE> 3
a. The Board shall administer the Plan directly (regardless
of whether a committee of the Board has been appointed
under Article 3.2) as long as each member of the Board is
a Disinterested Person, and all actions of the Board as
the Administrative Committee shall require the
affirmative vote of directors who constitute a majority
of a quorum.
b. If at any time a member of the Board is not a
Disinterested Person, the Board shall appoint a committee
consisting of two or more of its members, each of whom is
a Disinterested Person, to administer this Plan on behalf
of the Board. Such committee shall act in accordance
with terms and conditions prescribed by the Board to the
extent such terms and conditions are not inconsistent
with this Plan. Once appointed, the committee shall
continue to serve until otherwise directed by the Board.
From time to time, the Board may appoint additional
members to the committee; remove members (with or without
cause); fill vacancies however caused; and/or at any time
when all members of the Board are Disinterested Persons,
remove all members of the committee and thereafter
directly administer this Plan. At no time shall a person
who is not a Disinterested Person serve on the committee
appointed under this Article 3.4(b), nor shall such
committee at any time have fewer than two members.
c. The term "Disinterested Person" shall mean a director
who, during the one year prior to service as a member of
the Administrative Committee or during such service, is
not granted or awarded equity securities pursuant to this
Plan or any other plan of the Company or any of its
Affiliates (as defined in Article 2.2) other than grants
or awards that pursuant to Rule 166-3(c)(2)(i) under the
Exchange Act will not cause the director to cease to be a
"Disinterested Person," as defined in such rule.
3.5 The following provisions shall apply to the Administrative
Committee:
a. The Administrative Committee shall have the authority to
(i) administer this Plan in accordance with its express
terms; (ii) determine all questions arising in connection
with the administration, interpretation, and application
of this Plan, including all questions relating to the
value of the Common Stock; (iii) correct any defect,
supply any information and reconcile any inconsistency in
such manner and to such extent as shall be deemed
necessary or advisable to carry out the purpose of this
Plan; (iv) prescribe, amend, and rescind rules and
regulations relating to the administration of this Plan;
(v) determine the duration and purposes of leaves of
absence which my be granted to participants without
constituting a termination of employment for purposes of
this Plan; and (vi) make all other determinations
necessary or advisable for administration of this Plan.
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<PAGE> 4
b. The authority of the Administrative Committee to
administer the Plan shall be exercised consistently with
the intent that (i) the Stock Options issued under this
Plan qualify under Section 422 of the Code (including any
amendments thereof or successor provision similar
thereto); and (ii) the Plan be administered in a manner
that satisfies the conditions of Rule 16b-3(c)(2)(i)
under the Exchange Act (including any amendments thereof
and any successor provision similar thereto) so that the
grant of Stock Options under this Plan, and all other
actions taken with respect to the Plan, to the options
granted thereunder and to the Common Stock acquired upon
exercise of Stock Options, shall to the extent possible
be exempt from the operation of Section 16(b) of the
Exchange Act.
c. All determinations made by the Administrative Committee
in good faith on matters referred to in this Article 3.5
shall be final, conclusive, and binding upon all persons.
The Administrative Committee shall have all powers
necessary or appropriate to accomplish its duties under
this Plan.
ARTICLE IV.
COMMON STOCK SUBJECT TO OPTIONS
The aggregate number of shares of the Company's Common Stock which
may be issued upon the exercise of Options granted under this Plan
and any other stock option plan adopted by the Company shall not
exceed ten percent (10%) of the then currently issued and
outstanding shares of the Company's Common Stock, subject to
adjustment under the provisions of Article VII. The aggregate
number of shares of the Company's Common Stock which may be issued
to any one person shall not exceed five percent (5%) of the then
currently issued and outstanding shares of the Company's Common
Stock. The shares of Common Stock to be issued upon the exercise
of Options may be authorized but unissued shares, shares issued and
reacquired by the Company or shares bought on the market for the
purposes of the Plan. In the event any Option shall, for any
reason, terminate or expire or be surrendered without having been
exercised in full, the shares subject to such Option but not
purchased thereunder shall again be available for Options to be
granted under the Plan.
ARTICLE V.
PARTICIPANTS
Options may be granted under the Plan to any person who is or who
agrees to become an officer, director, or employee (including
officers and employees who are also directors) of the Company or
any of its subsidiaries.
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<PAGE> 5
ARTICLE VI.
TERMS AND CONDITIONS OF OPTIONS
Any Option granted under the Plan shall be evidenced by an
agreement executed by the Company and the applicable officer or
employee and shall contain such terms and be in such form as the
Administrative Committee may from time to time approve, subject to
the following limitations and conditions:
6.1 OPTION PRICE. The Option price per share with respect to each
Option may be the lowest price allowable under applicable laws
and regulations.
6.2 PERIOD OF OPTION. The expiration date of each Option shall be
fixed by the Administrative Committee; but notwithstanding any
provision of the Plan to the contrary, such expiration date
shall not be more than five (5) years from the Date of Grant.
6.3 VESTING OF SHAREHOLDER RIGHTS. Neither an Optionee nor his
successor shall have any of the rights of a shareholder of the
Company until the Option has been exercised and the
certificates evidencing the shares purchased are properly
delivered to such Optionee or his successor.
6.4 EXERCISE OF OPTION. Each Option shall be exercisable from
time to time over a period commencing on the Date of Grant and
ending upon the expiration or termination of the Option;
provided, however, the Administrative Committee may by the
provisions of any Option agreement limit the number of shares
purchasable thereunder in any period or periods of time during
which the Option is exercisable. An Option shall not be
exercisable in whole or in part prior to the date of
shareholder approval of the Plan.
6.5 NON-TRANSFERABILITY OF OPTION. No Option shall be
transferable or assignable by an Optionee, otherwise than by
will or the laws of descent and distribution and each Option
shall be exercisable, during the Optionee's lifetime, only by
him. No Option shall be pledged or hypothecated in any way
and no Option shall be subject to execution, attachment, or
similar process except with the express consent of the
Administrative Committee.
6.6 TERMINATION OF EMPLOYMENT. Upon termination of an Optionee's
employment with the Company or with any of its subsidiaries,
his Option privileges shall be limited to the shares which
were immediately purchasable by him at the date of such
termination and such Option privileges shall expire unless
exercised by him within 30 days after the date of such
termination. In the event of termination of an Optionee's
employment "for cause," his Option privileges shall
immediately terminate. The granting of an Option to an
eligible person does not alter in any way the Company's or the
relevant subsidiary's existing rights to terminate such
person's employment at any time for any reason or for no
reason, nor does it confer upon such person any rights or
privileges except as specifically provided for in the Plan.
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<PAGE> 6
6.7 DEATH OF OPTIONEE. If an Optionee dies while a member of the
Board or in the employ of the Company or any subsidiary, the
Option privileges of the estate shall be limited to the shares
which were immediately purchasable by the Optionee at the date
of death and such Option privileges shall expire unless
exercised by the Optionee's successor within one year after
the date of death.
ARTICLE VII.
ADJUSTMENTS
7.1 In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or
other securities of the Company or of another corporation, by
reason of a recapitalization, reclassification, stock split-
up, combination of shares, or dividend or other distribution
payable in capital stock, appropriate adjustment shall be made
by the Administrative Committee in the number and kind of
shares for the purchase of which Options may be granted under
the Plan. In addition, the Administrative Committee shall
make appropriate adjustment in the number and kind of shares
as to which outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that the
proportionate interest of the holder of the Option shall, to
the extend practicable, be maintained as before the occurrence
of such event. Such adjustment in outstanding Options shall
be made without change in the total price applicable to the
unexercised portion of the Option but with a corresponding
adjustment in the Option price per share.
7.2 In the event of the dissolution or liquidation of the Company,
any Option granted under the Plan shall terminate as of a date
to be fixed by the Administrative Committee, provided that not
less than 30 days written notice of the date so fixed shall be
given to each Optionee and each such Optionee shall have the
right during such period to exercise his Option as to all or
any part of the shares covered thereby including shares as to
which such Option would not otherwise be exercisable by reason
of an insufficient lapse of time.
7.3 In the event of a Reorganization (as hereinafter defined) in
which the Company is not the surviving or acquiring company,
or in which the Company is or becomes a wholly-owned
subsidiary of another company after the effective date of the
Reorganization, then
a. If there is no plan or agreement respecting the
Reorganization ("Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide
for the change, conversion, or exchange of the shares
under outstanding and unexercised stock Options for
securities of another corporation, then the
Administrative Committee shall take such action, and the
Options shall terminate, as provided in Article 7.2; or
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b. If there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the
change, conversion, or exchange of the shares under
outstanding and unexercised stock Options for securities
of another corporation, then the Administrative Committee
shall adjust the shares under such outstanding and
unexercised stock Options (and shall adjust the shares
remaining under the Plan which are then available to the
Optionee under the Plan, if the Reorganization Agreement
makes specific provision therefor) in a manner not
inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion, or
exchange of such stock and such Options.
The term "Reorganization" as used in this Article VII shall
mean any statutory merger; statutory consolidation; sale of
all or substantially all of the assets of the Company; or
pursuant to an agreement with the Company, the sale of
securities of the Company pursuant to which the Company is or
becomes a wholly-owned subsidiary of another company after the
effective date of the Reorganization.
7.4 Adjustments and determinations under this Article VII shall be
made by the Administrative Committee, whose decisions as to
what adjustments or determinations shall be made, and the
extent thereof, shall be final, binding, and conclusive.
ARTICLE VIII.
RESTRICTIONS ON ISSUING SHARES
The exercise of each Option shall be subject to the condition that
if at any time the Company shall determine in its discretion that
the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of
any shares otherwise deliverable upon such exercise upon any
securities exchange or under any state or federal law, or that the
consent or approval of any regulatory body, is necessary or
desirable as a condition of, or in connection with, such exercise
or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such
withholding, listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any
conditions not acceptable to the Company.
ARTICLE IX.
USE OF PROCEEDS
The proceeds received by the Company from the sale of Common Stock
pursuant to the exercise of Options granted under the Plan shall be
added to the Company's general funds and used for general corporate
purposes.
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ARTICLE X.
AMENDMENT, SUSPENSION, OR TERMINATION OF PLAN
The Board may at any time suspend or terminate the Plan or may
amend it from time to time in such respects as the Board may deem
advisable in order that the Options granted thereunder may conform
to any changes in the law or in any other respect which the Board
may deem to be in the best interest of the Company; provided,
however, that without approval by the shareholders of the Company
representing a majority of the voting power, no such amendment
shall (i) except as specified in Article VII, increase the maximum
number of shares for which Options may be granted under the Plan;
(ii) change the provisions of Article 6.01 relating to the
establishment of the Option price; (iii) change the provisions of
Article 6.2 relating to the expiration date of each Option; or (iv)
change the provisions of the second sentence of this Article X
relating to the term of this Plan. Unless the Plan shall
theretofore have been terminated by the Board or as provided in
Article XI, the Plan shall terminate ten years after the effective
date of the Plan. No Option may be granted during any suspension
or after the termination of the Plan. Except as provided in
Article XI, no amendment, suspension, or termination of the Plan
shall, without an Optionee's consent, alter or impair any of the
rights or obligations under any Option theretofore granted to such
Optionee under the Plan.
ARTICLE XI
OPTION AGREEMENT AND LEGEND REQUIREMENT
Each Stock Option granted hereunder shall be evidenced by a written
agreement executed by the Company and the Optionee. Such agreement
shall contain the terms of the Stock Option specified by Article
VI, together with other terms, conditions, and provisions that the
Administrative Committee deems advisable and that are not
inconsistent with the terms and conditions of this Plan. Such
agreement shall also provide that, by accepting a Stock Option
granted under this Plan, the Optionee, for himself or herself, for
his or her Qualified Successor, and for his or her heirs,
successors and assigns:
(i) Recognizes, agrees and acknowledges that no registration
statement under the Securities Act of 1933, as amended
(the "1933 Act"), or under any state securities laws,
will have been filed as to either the Stock Option or any
shares of Common Stock that may be acquired upon exercise
of such Stock Option;
(ii) Warrants and represents that the Stock Option and
any shares of Common Stock of the Company acquired
upon exercise of the Stock Option will be acquired
and held by the Optionee for the Optionee's own
account, for investment purposes only, and not with
a view towards the distribution or public offering
thereof nor with any present intention of reselling
or distributing the same at any particular future
time;
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<PAGE> 9
(iii) Acknowledges and consents to the appearance of a
printed legend on the back of each stock certificate
representing shares of Common Stock issued upon
exercise of the Stock Option, which legend shall
read as follows:
NOTICE: RESTRICTION ON TRANSFER
The securities represented hereby have not been
registered under the Securities Act of 1933 or any
state securities laws, and may not be offered, sold,
transferred, encumbered or otherwise disposed of
except upon satisfaction of certain conditions set
forth in the ConSil Corporation Stock Option Plan.
Information concerning these restrictions may be
obtained from the corporation or its legal counsel.
Any offer or disposition of these securities without
satisfaction of such conditions will be wrongful and
will not entitle the transferee to register
ownership of the securities with the corporation.
These securities may also be subject to repurchase
by the corporation upon certain terms and conditions
set forth in said documents.
(iv) Agrees not to sell, transfer or otherwise dispose of
any shares of Common Stock that may be acquired upon
exercise of the Stock Option unless (i) there is an
effective registration statement under the 1933 Act
covering the proposed disposition and compliance
with governing state securities laws, (ii) the
Optionee delivers to the Company, at the Optionee's
expense, a "no-action" letter or similar
interpretative opinion, satisfactory in form and
substance to the Company, from the staff of each
appropriate securities agency, to the effect that
such shares may be disposed of by the Optionee in
the manner proposed, or (iii) the Optionee delivers
to the Company, at the Optionee's expense, a legal
opinion, satisfactory in form and substance to the
Company, of legal counsel designated by the Optionee
and satisfactory to the Company, to the effect that
the proposed disposition is exempt from registration
under the 1933 Act and governing state securities
laws; and
(v) Agrees to indemnify the Company and hold it harmless from
and against any loss, claim or liability, including
attorney's fees or other legal expenses incurred in the
defense thereof, incurred by the Company as a result of
any breach by the Optionee of, or any inaccuracy in, any
representation, warranty, covenant or other provision
contained in such agreement.
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If a registration statement under the 1933 Act is hereafter filed
with respect to Stock Options granted or to be granted hereunder
and the shares of Common Stock that may be acquired upon exercise
of such Stock Options, then, following the effectiveness of such
registration statement, the provisions in agreements representing
Stock Options that would otherwise be required by this Article XI
may, in the discretion of the Administrative Committee, be modified
or eliminated.
ARTICLE XII.
EFFECTIVE DATE OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan is January 13, 1997, the date of its
approval by the Board; provided, however, if the Plan is not
approved by the shareholders of the Company representing a majority
of the voting power at the next shareholders' meeting or if the
Plan is not approved by such shareholders before January 12, 1998,
the Plan shall terminate and any Options granted thereunder shall
be void and have no force or effect.
This Plan is adopted this 13th day of January, 1997.
CONSIL CORP.
BY: /s/ Ralph Noyes BY: /s/ Nathaniel K. Adams
------------------------- --------------------------------
Ralph Noyes, President Nathaniel K. Adams, Secretary
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EXHIBIT 10.4
INCENTIVE STOCK OPTION PLAN
OF
CONSIL CORPORATION
ARTICLE I. Purpose of Plan
ARTICLE II. Definitions
ARTICLE III. Administration of the Plan
ARTICLE IV. Eligibility
ARTICLE V. Shares Available for Incentive Stock Options
ARTICLE VI. Option Terms
ARTICLE VII. Limitation on Exercise of Options
ARTICLE VIII. Exercise of Option
ARTICLE IX. Transferability of Options
ARTICLE X. Termination of Options
ARTICLE XI. Adjustments to Options
ARTICLE XII. Termination and Amendment
ARTICLE XIII. Option Agreement and Legend Requirement
ARTICLE XIV. Miscellaneous Provisions
ARTICLE XV. Effective Date of Plan
ConSil Corporation, an Idaho corporation (the "Company"), hereby
establishes and sets forth the terms of the ConSil Corporation
INCENTIVE STOCK OPTION PLAN (the "Plan"), dated January 13, 1997.
ARTICLE I
Purpose of Plan
The purpose of this Plan is to provide participating employees an
incentive to exert their best efforts on behalf of the Company.
The Plan seeks to accomplish this purpose by giving such employees
an opportunity to gain a proprietary interest in the Company in the
form of stock options. Holders of the options are allowed to
acquire stock of the Company on favorable terms. An option granted
hereunder shall be referred to herein as an "Incentive Stock
Option," and all such options are intended to constitute an
"incentive stock option"' as such term is defined in Section 422 of
the Internal Revenue Code of 1986, as amended from time to time
(the "Code").
ARTICLE II
Definitions
2.1 "Administrative Committee" means the Board of Directors or
a committee appointed by the Board of Directors, pursuant
to Article III below, administering the Plan.
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2.2 "Affiliate" means a "parent corporation" of the Company, as
described in Section 424(e) of the Code, or a "subsidiary
corporation" of the Company, as described in Section 424(f)
of the Code.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Code" means the Internal Revenue Code of 1986.
2.5 "Common Stock" means the Company's no par value Common
Stock.
2.6 "Company" means ConSil Corp.
2.7 "Date of Grant" means the date on which an Incentive Stock
Option is granted under the Plan.
2.8 "Disinterested Person" has the meaning defined in Article
3.4(c) of this Plan.
2.9 "Incentive Stock Option" means an option granted under the
Plan.
2.10 "Optionee" means a person to whom an Incentive Stock
Option, which has not expired, has been granted under the
Plan.
2.11 "Plan" means this Incentive Stock Option Plan.
2.12 "Qualified Successor" shall have the meaning as defined in
Article 9.2 of this Plan.
2.13 "Reorganization" and "Reorganization Agreement" have the
meanings defined in Article XI of this Plan.
2.14 "Subsidiary" or "Subsidiaries" means a subsidiary
corporation or corporations of the Company as defined in
Section 424 of the Code.
2.15 "Successor" means the legal representative of the estate of
a deceased Optionee or the person or persons who acquire
the right to exercise an Incentive Stock Option by bequest
or inheritance or by reason of the death of any Optionee.
2.16 "Terminating Event" shall have the meaning as defined in
Article 11.2 of this Incentive Stock Option Plan.
ARTICLE III
Administration of the Plan
3.1 This Plan shall be administered by the Board of Directors
of the Company (the "Board") unless a committee of the
Board is appointed in accordance with Article 3.2 or 3.4(b)
below. The Board, or such committee if appointed, will be
referred to in this Plan as the "Administrative Committee."
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3.2 The Board may at any time appoint a committee, consisting
of not less than two of its members, to administer this
Plan on behalf of the Board in accordance with such terms
and conditions not inconsistent with this Plan as the Board
may prescribe. After it is appointed, the committee shall
continue to serve until otherwise directed by the Board.
The Board may appoint additional members to the committee;
remove members (with or without cause); fill vacancies
however caused; and/or remove all members of the committee
and thereafter directly administer this Plan.
3.3 A majority of the members of the Administrative Committee
shall constitute a quorum; and subject to the limitations
of this Article III, all actions of the Administrative
Committee shall require the affirmative vote of members who
constitute a majority of a quorum. Members of the
Administrative Committee who are not Disinterested Persons
(as defined in Article 3.4(c)) may vote on any matters
affecting the administration or the grant of Incentive
Stock Options under the Plan; provided, however, that no
member shall vote on the granting of an Incentive Stock
Option to himself or herself (but a member may be counted
in determining the existence of a quorum at a meeting of
the Administrative Committee during which action is taken
with respect to the granting of such an Incentive Stock
Option).
3.4 Notwithstanding the foregoing provisions of this Article
III, to the extent necessary to be exempt from the
operation of Section 16(b) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), this Plan shall
from the effective date of registration until six months
after the termination thereof, be administered as follows:
a. The Board shall administer the Plan directly
(regardless of whether a committee of the Board has
been appointed under Article 3.2) as long as each
member of the Board is a Disinterested Person, and all
actions of the Board as the Administrative Committee
shall require the affirmative vote of directors who
constitute a majority of a quorum.
b. If at any time a member of the Board is not a
Disinterested Person, the Board shall appoint a
committee consisting of two or more of its members,
each of whom is a Disinterested Person, to administer
this Plan on behalf of the Board. Such committee
shall act in accordance with terms and conditions
prescribed by the Board to the extent such terms and
conditions are not inconsistent with this Plan. Once
appointed, the committee shall continue to serve until
otherwise directed by the Board. From time to time,
the Board may appoint additional members to the
committee; remove members (with or without cause);
fill vacancies however caused; and/or at any time when
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all members of the Board are Disinterested Persons,
remove all members of the committee and thereafter
directly administer this Plan. At no time shall a
person who is not a Disinterested Person serve on the
committee appointed under this Article 3.4(b), nor
shall such committee at any time have fewer than two
members.
c. The term "Disinterested Person" shall mean a director
who, during the one year prior to service as a member
of the Administrative Committee or during such
service, is not granted or awarded equity securities
pursuant to this Plan or any other plan of the Company
or any of its Affiliates (as defined in Article 2.2)
other than grants or awards that pursuant to Rule 166-
3(c)(2)(i) under the Exchange Act will not cause the
director to cease to be a "Disinterested Person," as
defined in such rule.
3.5 The following provisions shall apply to the Administrative
Committee:
a. The Administrative Committee shall have the authority
to (i) administer this Plan in accordance with its
express terms; (ii) determine all questions arising in
connection with the administration, interpretation,
and application of this Plan, including all questions
relating to the value of the Common Stock; (iii)
correct any defect, supply any information and
reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to
carry out the purpose of this Plan; (iv) prescribe,
amend, and rescind rules and regulations relating to
the administration of this Plan; (v) determine the
duration and purposes of leaves of absence which my be
granted to participants without constituting a
termination of employment for purposes of this Plan;
and (vi) make all other determinations necessary or
advisable for administration of this Plan.
b. The authority of the Administrative Committee to
administer the Plan shall be exercised consistently
with the intent that (i) the Incentive Stock Options
issued under this Plan qualify under Section 422 of
the Code (including any amendments thereof or
successor provision similar thereto); and (ii) the
Plan be administered in a manner that satisfies the
conditions of Rule 16b-3(c)(2)(i) under the Exchange
Act (including any amendments thereof and any
successor provision similar thereto) so that the grant
of Incentive Stock Options under this Plan, and all
other actions taken with respect to the Plan, to the
options granted thereunder and to the Common Stock
acquired upon exercise of Incentive Stock Options,
shall to the extent possible be exempt from the
operation of Section 16(b) of the Exchange Act.
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c. All determinations made by the Administrative
Committee in good faith on matters referred to in this
Article 3.5 shall be final, conclusive, and binding
upon all persons. The Administrative Committee shall
have all powers necessary or appropriate to accomplish
its duties under this Plan.
ARTICLE IV
Eligibility
4.1 An officer, director or other individual shall be eligible
to participate in this Plan provided that such individual
(i) is in the employ of the Company or its Affiliate, (ii)
is determined by the Administrative Committee to be a key
employee of the Company or its Affiliate, and (iii) is
selected by the Administrative Committee to receive one or
more Incentive Stock Options under this Plan. Each key
employee so selected by the Administrative Committee shall
hereinafter be referred to as an "Optionee."
4.2 As used in this Plan, an "Affiliate" of a corporation shall
mean a "parent corporation" of such corporation, as
described in Section 424(e) of the Code, or to a
"subsidiary corporation" of such corporation, as described
in Section 424(f) of the Code.
4.3 No Incentive Stock Option shall be granted hereunder to a
key employee who is not a resident of the State of Idaho,
unless the Administrative Committee shall have determined,
based on the advice of counsel, that the grant of such
Incentive Stock Option (and the exercise thereof by the
Optionee) will not violate the securities laws of the state
where the Optionee resides.
ARTICLE V
Shares Available for Incentive Stock Options
The aggregate number of shares of the Company's Common Stock which
may be issued upon the exercise of Incentive Stock Options granted
under this Plan and any other stock option plan adopted by the
Company shall not exceed ten percent (10%) of the then issued and
outstanding shares of the Company's Common Stock, subject to
adjustment under the provisions of Article XI. The aggregate
number of shares of the Company's Common Stock which may be issued
to any one person shall not exceed five percent (5%) of the then
issued and outstanding shares of the Company's Common Stock. The
shares of Common Stock to be issued upon the exercise of Incentive
Stock Options may be authorized but unissued shares, shares issued
and reacquired by the Company or shares bought on the market for
the purposes of the Plan. In the event any Incentive Stock Option
shall, for any reason, terminate or expire or be surrendered
without having been exercised in full, the shares subject to such
Incentive Stock Option but not purchased thereunder shall again be
available for Incentive Stock Options to be granted under the Plan.
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ARTICLE VI
Option Terms
6.1 With respect to each Incentive Stock Option granted to an
Optionee selected by the Administrative Committee in
accordance with Article III, the Administrative Committee
shall specify the following terms of the Incentive Stock
Option:
a. The number of shares of Common Stock subject to the
Incentive Stock Option.
b. The date on which the grant of the Incentive Stock
Option shall be effective (the "Date of Grant").
c. The period of time during which the Incentive Stock
Option shall be exercisable, which shall in no event
be more than five (5) years from the Date of Grant of
the Incentive Stock Option.
d. The price or prices at which the Incentive Stock
Option shall be exercisable by the Optionee (the
"Option Price"); provided, however, that the Option
Price shall in no event be less than the fair market
value, on the Date of Grant, of the shares of Common
Stock subject thereto; and provided further, that, if
such Incentive Stock Option is granted to an Optionee
who on the Date of Grant owns, either directly or
indirectly within the meaning of Section 424(d) of the
Code, more than ten percent (10%) of the total
combined voting power of all classes of stock of the
Company or an Affiliate of the Company, then the
Option Price shall be at least one hundred ten percent
(110%) of the fair market value, on the Date of Grant,
of the Common Stock subject thereto.
e. Any vesting schedule pursuant to which the right of
the Optionee to exercise the Incentive Stock Option
shall be contingent upon the passage of a specified
period of time following its Date of Grant, it being
intended that the Administrative Committee shall have
complete discretion with respect to the terms of the
vesting schedule, including, without limitation,
discretion (i) to allow full and immediate vesting
upon grant of the Incentive Stock Option, (ii) to
permit partial vesting in stated percentage amounts
based on the length of the holding period of the
Incentive Stock Option, or (iii) to permit full
vesting after a stated holding period has passed. No
rights to exercise the Incentive Stock Option shall
vest after the termination of an Optionee's employment
with the Company, unless further vesting is expressly
allowed in the written agreement evidencing the
Incentive Stock Option.
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f. Whether shares of Common Stock acquired upon exercise
of the Incentive Stock Option will be subject to
repurchase in accordance with Article XII.
g. Such other terms and conditions as the Administrative
Committee deems advisable and as are consistent with
the terms and conditions of this Plan, including,
without limitation, any repurchase provisions
different from those set forth in Article XII.
6.2 Notwithstanding any provision of this Article VI to the
contrary, no Incentive Stock Option shall be granted
hereunder after the date immediately preceding the tenth
(10th) anniversary of the date this Plan is adopted by the
Board. Except as expressly provided herein, nothing
contained in this Plan shall require that the terms and
conditions of Incentive Stock Options granted hereunder be
uniform.
ARTICLE VII
Limitation on Exercise of Options
The aggregate fair market value of the Common Stock with respect to
which, during any calendar year, one or more Incentive Stock
Options under this Plan (and/or one or more options under any other
plan maintained by the Company or any of its Affiliates for the
granting of options intended to qualify under Section 422 of the
Code) are exercisable for the first time by an Optionee shall not
exceed $100,000 (said value to be determined as of the respective
Dates of Grant of such options).
ARTICLE VIII
Exercise of Option
Subject to Article VII and any terms of an Incentive Stock Option
specified pursuant to Article VI, an Optionee (or the Qualified
Successor, as defined in Articles 9.2 and 9.3) may exercise an
Incentive Stock Option, or any part thereof (unless partial
exercise is specifically prohibited by the terms of the Incentive
Stock Option), by giving written notice thereof to the Company at
its principal place of business. Such notice shall include a
written representation that the shares to be acquired will be
acquired and held for investment and not for resale or distribution
and be accompanied by any documents required by Article VII above.
Such notice shall be accompanied by full payment of the Option
Price for the shares of Common Stock for which exercise is made.
Payment shall be in lawful money of the United States and shall be
made in cash or by certified or cashier's check; provided, however,
that in the discretion of the Administrative Committee, payment may
be made, in whole or in part, in shares of Common Stock or in any
other form approved by the Administrative Committee. Following the
exercise of an Incentive Stock Option, the Administrative Committee
shall cause the information statement required by Section 6039 of
the Code to be furnished to the Optionee within the time and in the
manner prescribed by law.
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ARTICLE IX
Transferability of Options
9.1 Except as provided in Articles 9.2, 9.3 and 9.4 below, no
Incentive Stock Option shall be transferable or exercisable
by any person other than the Optionee to whom such
Incentive Stock Option was originally granted.
9.2 In the event of the demise of an Optionee while in the
employ of the Company, any Incentive Stock Options held by
the Optionee shall pass to the person or persons entitled
thereto under the will of the Optionee or applicable laws
of descent and distribution (such person or persons are
sometimes herein referred to collectively as the "Qualified
Successor" of the Optionee). Any right under an Incentive
Stock Option which the Optionee could have exercised
immediately prior to the date of his or her demise shall,
subject to Article X below, be exercisable by the Qualified
Successor for a period of one (1) year following such
demise.
9.3 In the event of an Optionee's demise, after the termination
of Optionee's employment on account of a Disability (as
defined in Article 11.2 below) but prior to the expiration
of the one (1) year period specified in Article 11.2, any
right under an Incentive Stock Option which the Optionee
could have exercised immediately prior to the date of his
or her demise shall, subject to Article X, pass to and be
exercisable by the Qualified Successor of the Optionee
until the expiration of such period of one (1) year
following the date of Optionee's termination.
9.4 In the event of the demise of an Optionee, after the
termination of Optionee's employment for any reason other
than Disability, but prior to the expiration of the three
(3) month period specified in Article 11.3, any right under
any Incentive Stock Option which the Optionee could have
exercised immediately prior to the date of his or her
demise shall, subject to Article X, pass to and be
exercisable by the Qualified Successor of the Optionee
until the expiration of the three (3) months period
following the date of Optionee's employment termination.
9.5 In the event two or more persons constitute the Qualified
Successor of an Optionee, all rights of such Qualified
Successor shall be exercisable, if at all, by the unanimous
agreement of such persons.
ARTICLE X
Termination of Options
To the extent not earlier exercised, an Incentive Stock Option
shall terminate at the earliest of the following dates:
a. The date specified in such Incentive Stock Option,
which date shall not be extended for any reason;
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b. One (1) year following the date of termination of the
Optionee's employment with the Company on account of
(a) the Optionee's demise, or (b) the Optionee's
disability, as defined in Section 22(e)(3) of the Code
(herein referred to as "Disability");
c. Three (3) months following the date of termination of
the Optionee's employment with the Company for any
reason other than the Optionee's demise or Disability;
d. The date of any sale, transfer or hypothecation, or
any attempted sale, transfer or hypothecation, of the
Incentive Stock Option, by the Optionee or his or her
Qualified Successor;
e. The date a voluntary or involuntary petition is filed
under the bankruptcy laws of the United States, or
under the insolvency laws of any state, for the estate
of the Optionee or his or her Qualified Successor; and
f. The date specified in Article 11.2 for such
termination in the event of a Terminating Event.
ARTICLE XI
Adjustments to Options
11.1 In the event that the outstanding shares of Common Stock of
the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares
or other securities of the Company or of another
corporation, by reason of a recapitalization,
reclassification, stock split-up, combination of shares, or
dividend or other distribution payable in capital stock,
appropriate adjustment shall be made by the Administrative
Committee in the number and kind of shares for the purchase
of which Incentive Stock Options may be granted under the
Plan. In addition, the Administrative Committee shall make
appropriate adjustment in the number and kind of shares as
to which outstanding Incentive Stock Options, or portions
thereof then unexercised, shall be exercisable, to the end
that the proportionate interest of the holder of the
Incentive Stock Option shall, to the extend practicable, be
maintained as before the occurrence of such event. Such
adjustment in outstanding Incentive Stock Options shall be
made without change in the total price applicable to the
unexercised portion of the Incentive Stock Option but with
a corresponding adjustment in the Incentive Stock Option
price per share.
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11.2 In the event of the dissolution or liquidation of the
Company, any Incentive Stock Option granted under the Plan
shall terminate as of a date to be fixed by the
Administrative Committee, provided that not less than 30
days written notice of the date so fixed shall be given to
each Optionee and each such Optionee shall have the right
during such period to exercise his Incentive Stock Option
as to all or any part of the shares covered thereby
including shares as to which such Incentive Stock Option
would not otherwise be exercisable by reason of an
insufficient lapse of time.
11.3 In the event of a Reorganization (as hereinafter defined)
in which the Company is not the surviving or acquiring
company, or in which the Company is or becomes a wholly-
owned subsidiary of another company after the effective
date of the Reorganization, then
a. If there is no plan or agreement respecting the
Reorganization ("Reorganization Agreement") or if the
Reorganization Agreement does not specifically provide
for the change, conversion, or exchange of the shares
under outstanding and unexercised incentive stock
options for securities of another corporation, then
the Administrative Committee shall take such action,
and the Incentive Stock Options shall terminate, as
provided in Article 11.2; or
b. If there is a Reorganization Agreement and if the
Reorganization Agreement specifically provides for the
change, conversion, or exchange of the shares under
outstanding and unexercised incentive stock options
for securities of another corporation, then the
Administrative Committee shall adjust the shares under
such outstanding and unexercised incentive stock
options (and shall adjust the shares remaining under
the Plan which are then available to the Optionee
under the Plan, if the Reorganization Agreement makes
specific provision therefor) in a manner not
inconsistent with the provisions of the Reorganization
Agreement for the adjustment, change, conversion, or
exchange of such stock and such Incentive Stock
Options.
The term "Reorganization" as used in this Article XI shall
mean any statutory merger; statutory consolidation; sale of
all or substantially all of the assets of the Company; or
pursuant to an agreement with the Company, the sale of
securities of the Company pursuant to which the Company is
or becomes a wholly-owned subsidiary of another company
after the effective date of the Reorganization.
11.4 Adjustments and determinations under this Article XI shall
be made by the Administrative Committee, whose decisions as
to what adjustments or determinations shall be made, and
the extent thereof, shall be final, binding, and
conclusive.
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ARTICLE XII
Termination and Amendment
12.1 Unless earlier terminated as provided below, this Plan
shall terminate on, and no Incentive Stock Option shall be
granted under this Plan after, the tenth (10th) anniversary
of the date immediately preceding the date this Plan is
adopted by the Board. Such termination shall not affect the
rights of the Administrative Committee or the Company under
the Plan (including, but not limited to, rights under
Article XI above) with respect to any Incentive Stock
Options theretofore granted or shares of Common Stock
issued upon exercise thereof.
12.2 The Board may at any time terminate, suspend or amend the
terms of this Plan; provided, however, that, except as
provided in Article XI above, the Board may not, without
prior approval by holders of shares of Common Stock
constituting at least a majority of the shares of Common
Stock represented in person or by proxy at the meeting at
which such approval is sought:
i. Change the aggregate number of shares of Common
Stock reserved for issuance upon exercise of
Incentive Stock Options granted under this Plan;
ii. Increase the period during which Incentive Stock
Options may be granted or exercised;
iii. Change the class of employees who are eligible to
receive Incentive Stock Options under this Plan;
or
iv. Make any change to the terms of this Plan which
would cause the Incentive Stock Options granted
hereunder to lose their qualification as
incentive stock options under Section 422 of the
Code.
12.3 Notwithstanding the above, the Administrative Committee
may, subject to the terms and conditions of this Plan,
grant additional Incentive Stock Options to an Optionee (if
such Optionee is otherwise eligible) or, with the consent
of the Optionee, grant a new Incentive Stock Option in lieu
of an outstanding Incentive Stock Option, for a number of
shares, at an Option Price and for a term which is greater
or less than that of the earlier Incentive Stock Option.
12.4 No Incentive Stock Option may be granted during any
suspension, or after termination, of this Plan. Amendment,
suspension or termination of this Plan shall not, without
the consent of the Optionee, alter or impair any rights or
obligations with respect to any Incentive Stock Option
theretofore granted or shares of Common Stock acquired upon
exercise thereof.
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<PAGE> 12
ARTICLE XIII
Option Agreement and Legend Requirement
Each Incentive Stock Option granted hereunder shall be evidenced by
a written agreement executed by the Company and the Optionee. Such
agreement shall contain the terms of the Incentive Stock Option
specified by Article VI, together with other terms, conditions, and
provisions that the Administrative Committee deems advisable and
that are not inconsistent with the terms and conditions of this
Plan. Such agreement shall also provide that, by accepting an
Incentive Stock Option granted under this Plan, the Optionee, for
himself or herself, for his or her Qualified Successor, and for his
or her heirs, successors and assigns:
i. Recognizes, agrees and acknowledges that no
registration statement under the Securities Act
of 1933, as amended (the "1933 Act"), or under
any state securities laws, will have been filed
as to either the Incentive Stock Option or any
shares of Common Stock that may be acquired upon
exercise of such Incentive Stock Option;
ii. Warrants and represents that the Incentive Stock
Option and any shares of Common Stock of the
Company acquired upon exercise of the Incentive
Stock Option will be acquired and held by the
Optionee for the Optionee's own account, for
investment purposes only, and not with a view
towards the distribution or public offering
thereof nor with any present intention of
reselling or distributing the same at any
particular future time;
iii. Acknowledges and consents to the appearance of a
printed legend on the back of each stock
certificate representing shares of Common Stock
issued upon exercise of the Incentive Stock
Option, which legend shall read as follows:
NOTICE: RESTRICTION ON TRANSFER
The securities represented hereby have not been
registered under the Securities Act of 1933 or
any state securities laws, and may not be
offered, sold, transferred, encumbered or
otherwise disposed of except upon satisfaction
of certain conditions set forth in the ConSil
Corporation Incentive Stock Option Plan.
Information concerning these restrictions may
be obtained from the corporation or its legal
counsel. Any offer or disposition of these
securities without satisfaction of such
conditions will be wrongful and will not
entitle the transferee to register ownership
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<PAGE> 13
of the securities with the corporation. These
securities may also be subject to repurchase by
the corporation upon certain terms and
conditions set forth in said documents.
iv. Agrees not to sell, transfer or otherwise dispose
of any shares of Common Stock that may be
acquired upon exercise of the Incentive Stock
Option unless (i) there is an effective
registration statement under the 1933 Act
covering the proposed disposition and compliance
with governing state securities laws, (ii) the
Optionee delivers to the Company, at the
Optionee's expense, a "no-action" letter or
similar interpretative opinion, satisfactory in
form and substance to the Company, from the staff
of each appropriate securities agency, to the
effect that such shares may be disposed of by the
Optionee in the manner proposed, or (iii) the
Optionee delivers to the Company, at the
Optionee's expense, a legal opinion, satisfactory
in form and substance to the Company, of legal
counsel designated by the Optionee and
satisfactory to the Company, to the effect that
the proposed disposition is exempt from
registration under the 1933 Act and governing
state securities laws; and
v. Agrees to indemnify the Company and hold it
harmless from and against any loss, claim or
liability, including attorney's fees or other
legal expenses incurred in the defense thereof,
incurred by the Company as a result of any breach
by the Optionee of, or any inaccuracy in, any
representation, warranty, covenant or other
provision contained in such agreement.
If a registration statement under the 1933 Act is hereafter filed
with respect to Incentive Stock Options granted or to be granted
hereunder and the shares of Common Stock that may be acquired upon
exercise of such Incentive Stock Options, then, following the
effectiveness of such registration statement, the provisions in
agreements representing Incentive Stock Options that would
otherwise be required by this Article XIII may, in the discretion
of the Administrative Committee, be modified or eliminated.
ARTICLE XIV
Miscellaneous Provisions
14.1 Nothing contained in this Plan shall obligate the Company
to employ an Optionee for any period, nor shall this Plan
interfere in any way with the right of the Company to
reduce such Optionee's compensation.
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<PAGE> 14
14.2 The provisions of this Plan, each Incentive Stock Option
issued to an Optionee hereunder, and the agreement
evidencing such Incentive Stock Option under Article XIV
above shall be binding upon the Optionee, and his or her
Qualified Successor, heirs, successors and assigns.
14.3 This Plan shall be construed, administered and enforced in
accordance with the laws of the United States, to the
extent applicable hereto, as well as the laws of the State
of Idaho.
ARTICLE XV
Effective Date of Plan
This Plan shall be effective upon adoption of a resolution of the
Board approving it; and it shall be subject to approval, within
twelve (12) months before or after the date it is adopted by the
Board, by holders of shares of Common Stock constituting at least a
majority of the shares of Common Stock represented in person or by
proxy at a meeting at which such approval is sought. This Plan
shall also be subject to any requirements imposed by the Director
of the Department of Finance pursuant to the Idaho Securities Act.
If the shareholder approval and notification requirements have not
been satisfied on or prior to January 12, 1998, this Plan and any
Incentive Stock Options granted hereunder prior to such date shall
be void.
This Plan is adopted this 13th day of January, 1997.
CONSIL CORP.
By: /s/ Ralph Noyes
----------------------------------------
Ralph Noyes, President
By: /s/ Nathaniel K. Adams
-----------------------------------------
Nathaniel K. Adams, Secretary
-14-
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