USMX, INC.
141 UNION BOULEVARD, SUITE 100
LAKEWOOD, COLORADO 80228
PROXY STATEMENT
This Statement is furnished in connection with the solicitation of Proxies
by and on behalf of the Board of Directors of USMX, Inc., a Delaware corporation
(the "Company" or "USMX"), for use at the Annual Meeting of Stockholders to be
held at 2:00 p.m, local time, on May 23, 1995, at the Sheraton Denver West
Hotel, 360 Union Boulevard, Lakewood, Colorado or at any adjournments thereof.
The Company anticipates that this Proxy Statement and the accompanying form of
Proxy will be first mailed or given to the stockholders of the Company on or
about April 20, 1995. The Company's Annual Report to Stockholders, including
financial statements, for the year ended December 31, 1994, accompanies this
Proxy Statement, but does not form a part of the proxy solicitation materials.
The cost of soliciting Proxies will be borne by the Company. Officers and
regular employees of the Company, without compensation other than their regular
compensation, may solicit Proxies by further mailing, by telephone and by
telegraph and by personal conversations. The Company will reimburse brokerage
firms and others for their expenses in forwarding solicitation material to the
beneficial owners of common stock. The Company has no plans to retain any
firms, or otherwise incur any extraordinary expense, in connection with the
solicitation of stockholders.
VOTING PROCEDURES
Stockholders of record at the close of business on April 7, 1995, ("Record
Date") will be entitled to vote at the meeting. On such Record Date, the
Company had outstanding and entitled to vote 14,766,134 shares of common stock.
Each stockholder is entitled to cast one vote for each share of common stock
registered in such stockholder's name on the books of the Company held on the
Record Date. The presence in person or by proxy of the holders of one-third of
the shares of the Company is necessary to constitute a quorum at the meeting.
Any Proxy may be revoked by the person giving it at any time before it has
been exercised or by attending the meeting and voting in person. Revocation in
writing is the sole means by which Proxies may be revoked. Proxies may be
revoked by execution of a later dated Proxy or by written notice to the
Secretary of the Company at the Company's address above before the Annual
Meeting or by a personal vote at the Annual Meeting of Stockholders.
Unless instructed to the contrary in the Proxies, the Proxies will be voted
for the persons named below in the election of the Company's Board for the
proposals related to the Company's option plans, and will be voted in the
discretion of the Proxies on such other matters as may properly come before the
meeting. The Company does not know of any other matters to come before the
meeting.
<PAGE>
Pursuant to applicable Delaware law, only votes cast "for" a matter
constitute affirmative votes. Votes "withheld" or abstaining from voting are
counted for quorum purposes, but as they are not cast "for" a particular matter,
they will have the same effect as negative votes or votes "against" a particular
matter.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The number of shares of the Company's common stock beneficially owned as of
March 31, 1995, by each of the directors and nominees is stated opposite each
individual's name in "ELECTION OF DIRECTORS". The number of shares of the
Company's common stock beneficially owned by all directors and officers of the
Company as a group is stated at the end of the list of directors in "ELECTION OF
DIRECTORS". The following is information with respect to the only persons known
by the Company to be the beneficial owners of more than 5% of the outstanding
shares of common stock of the Company:
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner Ownership of Class
----------- -------------------------------- ------------- ----------
<S> <C> <C>
Common Pegasus Gold Inc.
9 North Post Street, Suite 400
Spokane, WA 99201 4,826,000(1) 32.6%
Common Van Eck Associates
Corporation
122 East 42nd Street
New York, New York 10168 1,270,000(2) 8.6%
<FN>
(1) Represents direct ownership.
(2) Van Eck Associates Corporation has advised the Company that it is a
registered investment adviser, and that such shares are held for funds or
trusts managed by it, including 930,000 shares (6.3%) held for
Gold/Resources Fund and 275,000 shares (1.9%) held for International
Investors Incorporated and 65,000 shares (0.4%) for a private investor.
Gold/Resources Fund and International Investors Incorporated are open
end, diversified investment management companies which concentrate
investments in gold mining shares. The shares of both of such companies
are publicly held and Van Eck Associates Corporation has advised the
Company that to its knowledge no natural person owns beneficially more
than 5% of the outstanding shares of either such company. John C. Van
Eck, whose business address is the same as that of Van Eck Associates
Corporation, has voting control of Van Eck Associates Corporation.
</TABLE>
ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") is divided into three
Groups, with the terms of office of each Group ending in successive years. The
terms of directors of Group I expire with this Annual Meeting. The directors of
Group II and Group III will continue in office. Proxies will be voted at the
Annual Meeting, unless authority is withheld, FOR the election of the persons in
Group I named below.
The Company does not contemplate that any of the persons named below will
be unable or will decline to serve. However, if any such nominee is unable or
declines to serve, the persons named in the accompanying Proxy will vote for a
substitute, or substitutes, at their discretion.
<PAGE>
The following information is submitted respecting the nominees for election
and other directors of the Company:
<TABLE>
NOMINEES FOR DIRECTOR
GROUP I
FOR THREE YEAR TERM EXPIRING 1998
<CAPTION>
Director Shares Beneficially Percent
Name and Business Experience Since Owned of Class
<S> <C> <C> <C>
George J. Allen, age 66, has served as President of Allen
Engineering since 1983. From 1951 to 1983, he served in various
positions with Kennecott Corporation, including Vice President
and Director of Tolling. 1990 27,000(3) .2%
Werner G. Nennecker, age 41, joined Pegasus Gold Inc. in
September 1992 as Senior Vice President and Chief Operating
Officer. In November 1992, Mr. Nennecker assumed the position
of President and Chief Executive Officer of Pegasus. Prior to
joining Pegasus, Mr. Nennecker worked 15 years in the mining
industry with Ranchers Exploration and Santa Fe Pacific Gold
Corporation. Most recently, he held the positions of Executive
Vice-President of Santa Fe Pacific Minerals Corporation and
President of Santa Fe Pacific Gold Corporation. He has
extensive experience in all aspects of the mining business. Mr.
Nennecker is also a director of Pegasus Gold Inc., Zapopan NL,
the Gold Institute, and the National Mining Hall of Fame. 1992 4,846,000(1)(6) 31.8%
Robert Scullion, age 56, has been a partner in Scullion,
Strasheim & Company, a firm of Certified Public Accountants,
since 1975. He is a Certified Public Accountant licensed in the
United States as well as a Scottish Chartered Accountant. 1987 16,750(2) .1%
</TABLE>
<TABLE>
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE
GROUP II
THREE YEAR TERM EXPIRING 1996
<CAPTION>
Director Shares Benefically Percent
Name and Business Experience Since Owned of Class
<S> <C> <C> <C>
Phillips S. Baker, age 35, joined Pegasus Gold in January 1994 as
Vice President, Finance and Chief Financial Officer. Prior to
joining Pegasus, Mr. Baker worked seven years for Battle Mountain
Gold Company, most recently as Treasurer. He also worked as an
accountant for Arthur Andersen LLP. Mr. Baker is an Attorney,
Certified Public Accountant and Certified Cash Manager. 1995 4,836,000(4)(6) 31.8%
Terry P. McNulty, age 56, has served as President of T.P. McNulty &
Associates, a consulting firm, since 1988. From 1983 to 1988, he
was President of Hazen Research, Inc. 1990 28,000(3) .2%
James A. Knox, age 61, has served as President of the Company since
June 1991. From 1969 until June 1991, he was an officer and
director of Knox, Kaufman, Inc. That firm provided geological
consulting services and managed exploration programs in the United
States and Western Canada. Mr. Knox has previously been employed
as a geologist with several other companies, including The Superior
Oil Company where he was a district Exploration Manager, and Kermac
Nuclear Fuels Corporation where he also managed the exploration
efforts. 1985 317,232(5) 2.1%
</TABLE>
<PAGE>
<TABLE>
GROUP III
THREE YEAR TERM EXPIRING 1997
<CAPTION>
Director Shares Beneficially Percent
Name and Business Experience Since Owned of Class
<S> <C> <C> <C>
Donald P. Bellum, age 62, has over 35 years of experience in the
mining industry and related fields. Mr. Bellum currently serves as
a consultant to the mining industry. From 1987 to 1991, Mr. Bellum
was Executive Vice President of Cyprus Minerals Company. He served
as President of Cyprus Coal Company from 1978 to 1987. From 1974
to 1978, Mr. Bellum was Vice President of Operations for Tesoro
Coal Company. Mr. Bellum served as Project Manager (1965 to 1969)
and as Mine Manager (1969 to 1973) for Kennecott Copper 1992 20,000(1) .1%
Corporation.
Gregory Pusey, age 43, served as the Company's Chief Financial
Officer from May 1989 until January 1990 and he also has served as
the Secretary and Treasurer of the Company. Since 1983, Mr. Pusey
has been engaged in private investment activities. He has served
as President of Livingston Capital, Ltd. and President of the
General Partner of Graystone Capital, Ltd, a venture capital firm.
He is also President and a Director of Cambridge Holdings, Ltd.
Mr. Pusey was a founder of the Company. 1979 292,274(4) 1.9%
All directors and executive officers as a group (11 persons) 5,864,939(6)(7) 38.5%
<FN>
(1) Includes 20,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(2) Includes 16,750 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(3) Includes 15,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(4) Includes 10,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(5) Includes 190,000 shares underlying currently exercisable options granted
pursuant to the Company's 1987 Stock Option Plan.
(6) Messrs. Nennecker and Baker are officers and Mr. Nennecker is a director of
Pegasus. As such, they can be considered to be beneficial owners of the
4,826,000 shares held of record by Pegasus. Accordingly, the figures opposite
their names reflect the 4,826,000 shares owned by Pegasus.
(7) Includes currently exercisable options to purchase 436,750 shares.
</TABLE>
Effective September 1987, the Company and Pegasus Gold Inc. ("Pegasus")
entered into an Agreement pursuant to which the Company and Pegasus agreed that
the Board of Directors of the Company would consist of nine members including
three individuals designated by Pegasus (the "Pegasus Representatives"). The
Agreement expired in September 1989. None of the present members of the Board
of Directors was designated as a Pegasus Representative during the term of the
Agreement. Messrs. Nennecker and Baker were elected by the Board as directors
to fill vacancies created by the resignations of former officers of Pegasus who
themselves were either Pegasus Representatives or successors of Pegasus
Representatives.
The Board of Directors held ten meetings in person or by consent during the
year ended December 31, 1994. All incumbent directors attended at least 75
percent of the meetings of the Board held during the period for which they
served as directors except Mr. Nennecker who, because of previous business
commitments, was unable to attend three meetings.
The Company's Board of Directors had three standing committees in 1994: the
Audit Committee, the Compensation Committee and the Option Committee. The
members of the Audit Committee are Terry P. McNulty and Robert Scullion. The
primary
<PAGE>
functions of the Audit Committee are to review the scope and results of
audits by the Company's independent auditors, internal accounting controls, non-
audit services performed by the independent accountants and the cost of
accounting services. Although members of the Audit Committee had informal
discussions, the Audit Committee held no formal meetings in 1994.
The Compensation Committee determines matters related to compensation
payable to the Company's executive officers. The members of the Compensation
Committee during 1994 were George J. Allen, Donald P. Bellum and Gregory Pusey.
The Compensation Committee held two meetings in 1994.
The Option Committee administers the Company's 1987 Stock Option Plan. The
members of the Option Committee in 1994 were George J. Allen, a director of the
Company, c/o Allen Engineering Company, 2610 Skyline Drive, Salt Lake City, Utah
84108; Robert Scullion, a director of the Company, 1720 South Bellaire Street,
Suite 301, Denver, Colorado 80222; and Werner G. Nennecker, 601 West First
Avenue, Suite 1500, Spokane, Washington 99204. During the year ended December
31, 1994, the Option Committee held one meeting in person which was attended by
all members.
In October 1994, the Compensation Committee and the Option Committee were
combined. The members of the newly combined committee are George J. Allen,
Donald P. Bellum and Gregory Pusey.
EXECUTIVE OFFICERS
Set forth below are the names and offices held by each of the executive
officers of the Company:
<TABLE>
<CAPTION>
Name and Business Experience Offices Held
- ---------------------------------------------------------------------- --------------------------------
<S> <C>
James A. Knox. Information with respect to the age and business President, Chief Executive
experience of Mr. Knox is set forth under "Directors" above. Officer, Chairman
Dennis L. Lance, age 50, has served as Vice President -- Exploration
of the Company since May 1989. He also served as Secretary of the
Company from January 1990 to December 1990. He has served as a
geologist with the Company since June 1986. Prior thereto, he was
an independent consulting geologist. Vice President -- Exploration
Donald E. Nilson, age 50, joined the Company in October 1990.
Immediately prior thereto, he was Corporate Controller of Brazier
Forest Industries, Inc. Vice President -- Finance
Paul B. Valenti, age 45, joined the Company in May 1987 and was
elected Vice President in August 1988. From November 1983 to May
1987, he served as the Metallurgy Manager for Silver King Mines. Vice President -- Operations
</TABLE>
There are no family relationships among the officers or directors.
<PAGE>
EXECUTIVE COMPENSATION
Following is information regarding compensation paid during each of the
last three completed fiscal years to the executive officers of the Company whose
salary and bonus exceeded $100,000 during 1994.
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Compensation
---------------------------
Long Term
Compensation All Other
Name and Principal Awards Compen-
Position Year Salary($) Bonus($) (Options#) sation($)
- ---------------------- ------ ----------- ---------- -------------- -------------
<S> <C> <C> <C> <C> <C>
James A. Knox,
President and CEO 1994 $151,500 $20,000 30,000 $4,022(1)
1993 $142,500 $25,000 30,000 $4,069(1)
1992 $135,000 - 30,000 $13,750
Dennis L. Lance,
V.P. -- Exploration 1994 $93,816 $8,000 15,000 $2,814(1)
1993 $89,256 $16,227 15,000 $2,678(1)
1992 $84,448 $6,500 10,000 $2,533
Donald E. Nilson,
V.P. -- Finance 1994 $95,530 $8,000 15,000 $2,790(1)
1993 $91,719 $10,000 15,000 $2,741(1)
1992 $87,615 $6,500 10,000 $2,628
Paul B. Valenti,
V.P. -- Operations 1993 $98,650 $8,000 15,000 $2,959(1)
1993 $96,230 $13,050 15,000 $2,887(1)
1992 $93,429 $6,500 10,000 $2,803
<FN>
(1) The amounts shown represent the Company's matching contribution for the stated individuals to its 401(K) plan.
</TABLE>
<PAGE>
The following table sets forth information with respect to stock options
granted during 1994 to each of the executives named in the Summary Compensation
Table. The assumed annual rates of stock price appreciation of 5% and 10% are
set by a rule of the Securities and Exchange Commission, and are not intended as
a forecast of possible future appreciation and stock prices. The potential
value of options granted depends upon an increase in the market price of the
Company's common stock. If the stock price does not increase, the options would
be worthless and if the stock price does increase, this increase would benefit
both option holders and stockholders commensurately.
<TABLE>
OPTION GRANTS IN 1994
- ---------------------
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option
Term
-----------------------------
% of Total
Options
Options Granted to
Granted Employees in Exercise
Name (#) Fiscal Year Price ($/Sh) Expiration Date 5%($) 10%($)
- --------- -------- ------------ ------------ --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James A.
Knox 30,000 10.9 % $3.00 7/13/2004 $56,601 $143,437
Dennis L.
Lance 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718
Donald E.
Nilson 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718
Paul B.
Valenti 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718
All Stock-
holders(1) $27,801,000 $70,453,000
Executive
officers'
gain as a
% of All
Stock-
holders'
gain 0.53% 0.53%
<FN>
(1) The amounts shown for All Stockholders represent the potential realizable
value assuming appreciation at the rates indicated based on the exercise price
per share and the expiration date applicable to grants made in 1994 and the
number of outstanding shares on the date of grant.
</TABLE>
The following table sets forth, in the aggregate, the number of shares
underlying options exercised during 1994 and states the value at year-end of
exercisable and unexercisable options remaining outstanding. The "Value
Realized" column reflects the difference between the market price on the date of
exercise and the market price on the date of grant (which establishes the
exercise price for the option) for all options exercised. However, the "Value
Realized" numbers do not necessarily reflect what the executive might receive
should he choose to sell the shares acquired, as the market price of the shares
<PAGE>
so acquired may at any time be higher or lower than the price on the exercise
date of the option. Further, the executive may have actually received fewer
shares as a result of the surrender of previously owned shares to pay the
exercise price or the tax liability, or the withholding of shares to cover the
tax liability associated with the option exercise.
<TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
Value of
Number of Unexercised In-
Shares Unexercised the-Money
Acquired Options at Options at
on Value FY-End (#) FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- ----------------- ---------- --------- -------------- ----------------
<S> <C> <C> <C> <C>
James A. Knox 50,000 $71,625 160,000/ $75,200/
30,000 -
Dennis L. Lance 10,000 $26,225 45,000/ $16,800/
15,000 -
Donald E. Nilson - - 15,000 -
15,000 -
Paul B. Valenti - - 35,000/ $10,600/
15,000 -
</TABLE>
COMPENSATION OF DIRECTORS
In 1992, the Board adopted a plan by which all directors who are not
employed either by the Company or by Pegasus are paid a fee of $350 for each
meeting of the Board attended. In addition, each director who is not a full-
time employee of the Company receives a fee of $500 per month. These directors
also receive additional compensation plus reasonable expenses for any additional
services performed. Robert Scullion is paid an additional $4,000 per year as
chairman of the Audit Committee. During 1994, Terry P. McNulty was paid
consulting fees totaling $5,700 for technical work related to process
development for several of the Company's mining properties.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company employs James A. Knox on a full-time basis as its President and
Chief Executive officer. In July 1993, the Company entered into an Employment
Agreement with Mr. Knox for a two-year term ending June 30, 1995, at an annual
salary of $150,000. The salary may be supplemented by such merit raises or
bonuses as may be determined by the Company's Board of Directors. The
Employment Agreement also requires the Company to provide certain benefits to
Mr. Knox, including the use of an automobile. If the Employment Agreement is
terminated by Mr. Knox, or by the Company for "cause", which is defined to mean
willful or fraudulent misconduct or felonious or other behavior which is
materially injurious to the Company, then the Company would be obligated to pay
for Mr. Knox's services only through the date of termination. If the Employment
<PAGE>
Agreement is terminated by the Company without cause or if Mr. Knox terminates
the Agreement as a result of a breach by the Company, the Company would be
liable for severance pay equal to 50 percent of his annual salary. In the event
Mr. Knox's employment with the Company terminates as a result of his death or
disability, the Company would be required to pay six months' salary. If the
Company effects a merger or acquisition and Mr. Knox's employment is thereafter
terminated without cause, which includes a material change in his job
responsibilities, the Company would be obligated to pay Mr. Knox 50 percent of
his annual salary. Mr. Knox has agreed not to acquire, for two years after the
termination of the Employment Agreement, an interest in any mineral properties
within two miles of any properties in which the Company has an interest or is,
on the date of termination, negotiating to acquire an interest.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
George J. Allen, Donald P. Bellum and Gregory Pusey served as members of
the Compensation Committee during 1994. In addition, Mr. Allen also served as a
member of the Option Committee during 1994 along with Werner G. Nennecker and
Robert Scullion. Mr. Nennecker is also an officer and director of Pegasus and,
as such, can be considered to be a beneficial owner of the 4,826,000 shares of
the Company's common stock held of record by Pegasus.
BOARD COMPENSATION AND OPTION COMMITTEES' REPORT ON EXECUTIVE COMPENSATION
The compensation policies of the Compensation Committee and the Option
Committee applicable to the Company's executive officers are based on the
continuing need to attract and retain a management team capable of guiding the
growth of the Company over the long term. Compensation of executive officers
paid during 1994 is based on the qualifications and experience of the individual
officers, competitive market conditions for executive talent, and the
contributions of the individuals to the long term growth and stability of the
Company and to maximizing the long term value of stockholders' investment in the
Company. Factors considered by the Compensation Committee and the Option
Committee to be important in the long term growth and stability of the Company
and to maximizing the long term value of the stockholders' investment include
increasing the quantity and quality of the Company's portfolio of exploration
properties, development of these properties into producing mines where
justified, acquisition and improvement of producing properties, increasing the
amount and timeliness of internal and external financial reporting and building
and maintaining a complement of well trained and highly motivated employees.
The Compensation and Option Committees also compared annual salary and bonuses
with those paid by other gold mining companies.
The Company's Compensation and Option Committees did not make its
determinations based specifically upon objective measures of corporate
performance in 1994 such as revenue or net income, nor did those Committees set
any targets of performance using such objective measures. Those Committees
believe that, for a growing exploration and mining company, primary emphasis
<PAGE>
should be placed on the exploration and development of mining properties with
superior potential that will ultimately result in the achievement of improved
financial results, through mineral production or property sale. The Committees
believe that the performance of the Company's CEO and other executive officers
during 1994 was commendable in continuing to lay the groundwork for such success
and considered their performance as well as other factors discussed above in
making its compensation decisions.
The salary paid by the Company to James A. Knox for his services as
President and Chief Executive Officer during 1994 was in accordance with the
Employment Agreement which the Company entered into with Mr. Knox in July of
1993. During 1994 Mr. Knox was granted an option to purchase up to 30,000
shares of the Company's common stock. The number of options granted to Mr. Knox
and the other executive officers was based on the Option Committee's positive
assessment of their performance and a review of similar benefits offered by
other gold mining companies. The exercise price for all options granted in 1994
was the fair market value of the stock on the date of grant.
George J. Allen
Donald P. Bellum
Werner G. Nennecker
Gregory Pusey
Robert Scullion
PERFORMANCE GRAPH
The paper copy contains a line graph based on the following table:
Base Year Dec Dec Dec Dec Dec
1989 1990 1991 1992 1993 1994
USMX,INC. 100 55 50 98 152 95
NASDAQ Stock Market 100 85 136 159 181 177
S & P Gold Mining Index 100 87 70 64 116 93
The above graph assumes an initial investment of $100 as of the close of
trading December 31, 1989. Each of the data points gives the dollar value of
the investment from December 31, 1989, forward assuming dividends, where paid,
are reinvested monthly plus any price change in the investment.
<PAGE>
PROPOSAL TO INCREASE NUMBER OF SHARES
RESERVED FOR ISSUANCE
UNDER 1987 STOCK OPTION PLAN
The Board of Directors of the Company, subject to approval by the Company's
stockholders at this Annual Meeting, has increased from 1,200,000 to 2,000,000
the number of shares of the Company's common stock reserved for issuance under
the Company's 1987 Stock Option Plan (the "Plan"). The increase in the number
of shares reserved for issuance is intended to enable the Company to provide
incentives for employees of the Company and its subsidiaries by providing up to
an additional 800,000 shares of the Company's common stock issuable pursuant to
grants.
The Plan was originally adopted effective May 1987 to supplement the Stock
Option Plan adopted by the Company in 1982 by providing 400,000 shares issuable
under option grants and by allowing for the grant of both incentive and non-
qualified stock options. The Company's stockholders have twice approved
increases in the number of shares reserved for issuance under the Plan: at the
Annual Meeting of Stockholders in July 1990 from 400,000 to 800,000 shares, and
at the Annual Meeting of Stockholders in May 1992 from 800,000 to 1,200,000
shares. The Board of Directors has approved, subject to stockholder approval,
an increase in the number of shares reserved for issuance under the Plan to
2,000,000. The Plan provides that incentive stock options may be granted solely
to key employees, whereas non-qualified stock options may be granted to any
employee. There are also different tax consequences associated with incentive
and non-qualified stock options (see Federal Income Tax Effects below.) As of
April 11, 1995, no shares remained available for grant under the Plan, the
Company had approximately 35 employees eligible to participate in the Plan, and
the closing price of the Company's common stock as quoted on the Nasdaq Stock
Market was $2.25.
By increasing the number of shares issuable under option grants, the
Company will be able to provide the opportunity for increased levels of
compensation for its personnel without the need to make cash payments.
Accordingly, the Company will be able to maximize cash available for other
purposes such as investment, acquisitions and operations. In addition, because
the incentives are provided in the form of stock options rather than cash,
benefits accruing under the Plan through appreciation of the shares which
underlie the options will also be realized by the Company's stockholders. The
following discussion is a summary of the Plan and is qualified in its entirety
by reference to the Plan as set forth in Exhibit A.
The aggregate number of shares currently subject to options under the Plan
for all current executive officers as a group is 455,000. There are no
outstanding options under the Plan granted to any directors who are not
executive officers. Additional information with respect to options granted to
the Company's directors and executive officers is set forth under the headings
of ELECTION OF DIRECTORS and EXECUTIVE COMPENSATION herein. On March 14, 1995,
the Company granted an option to purchase 50,000 shares to James A. Knox. Aside
from that grant, the Company has made no grants to any individual of five
percent or more of the additional shares to be available pursuant to the Plan;
however, it is possible that such grants may be made in the future.
<PAGE>
The following table sets forth information concerning grants of stock
options which are subject to approval by the stockholders of the proposed
amendment to increase the number of shares reserved for issuance under the Plan.
The named individuals are executive officers whose salary and bonus exceeded
$100,000 in the year ended December 31, 1994.
<TABLE>
<CAPTION>
Options Granted Exercise Price
Name (#) ($/sh) Expiration Date
------------------ --------------- -------------- ---------------
<S> <C> <C> <C>
James A. Knox 50,000 $2.1875 3/14/2005
Dennis L. Lance 15,000 $3.00 7/21/2004
25,000 $2.1875 3/14/2005
Donald E. Nilson 15,000 $3.00 7/21/2004
25,000 $2.1875 3/14/2005
Paul B. Valenti 15,000 $3.00 7/21/2004
25,000 $2.1875 3/14/2005
All others 268,800 $2.1875- 7/21/2004-
$3.94 3/14/2005
</TABLE>
The approval of holders of shares representing a majority of the votes
represented at the Annual Meeting will be necessary to approve the increase of
the number of shares reserved for issuance under the Plan from 1,200,000 to
2,000,000 shares.
The Board of Directors recommends a vote for the approval of the increase
of the number of shares reserved for issuance under the Plan from 1,200,000 to
2,000,000 shares.
GENERAL PROVISIONS OF THE PLAN
The Plan is administered by the Option Committee. The members of the
Option Committee are George J. Allen, Donald P. Bellum and Gregory Pusey. The
Option Committee is authorized, within the limits of the Plan, to determine the
individuals to whom, and the time or times at which, options will be granted,
the number of shares to be subject to each grant and the applicable restriction
period. In addition, the Option Committee may determine the purchase price for
the shares subject to the option and specify such other terms and provisions of
any grants of options under the Plan as it deems necessary or desirable;
provided, however, that grants intended to qualify as incentive stock options
shall not be for less than 100% of the fair market value of the shares
underlying the grant on the date of the grant.
The Option Committee may adopt rules and regulations for carrying out the
purposes of the Plan. It may also make such changes in and to the Plan as it
deems in the best interests of the Company; provided, however, that no change or
addition may impair any option previously granted under the Plan and that the
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approval by the affirmative votes of the holders of a majority of the
outstanding shares of the Company entitled to vote and represented at a meeting
held in accordance with Delaware law is required for any amendment which would
modify the eligibility requirements for receiving options under the Plan,
increase the benefits accruing to any employee under the Plan or increase the
number of shares as to which options may be granted.
The term of any option granted under the Plan may not be greater than 10
years and no option may be exercised for a six-month period following the date
of its grant (except in the event of death). The Option Committee may determine
whether an option will be exercisable in installments and, if it so decides, the
number of installments and the percentage of the option exercisable at each
installment date. If an optionee ceases to be employed by the Company or its
subsidiaries because of his death or permanent and total disability, any
exercisable option not exercised by him or his representative within 90 days of
the date his employment ceases will expire. Any exercisable options granted to
an employee whose employment ceases for any other reasons may be exercised
within 30 days of the date of termination of employment.
Payment of the purchase price of any shares underlying an option must be
made in cash or certified funds except that if the purchase price at one time
exceeds $2,000, the Option Committee may permit payment to be made by delivery
to the Company for cancellation shares of the Company's common stock previously
owned by the optionee with a fair market value at the date of payment equal to
the portion of the purchase price not paid in cash. The Option Committee may
also permit the optionee to use shares to be received from the exercise of the
option to satisfy the minimum federal and state tax withholding requirements.
In the event of any merger, consolidation, reorganization or exchange or
reclassification, appropriate adjustments will be made to the number and kind of
shares of stock which underlie options to be granted under the Plan.
In the event of a "change in control" of the Company or a "reorganization
event" (as these terms are defined in the Plan), including the merger or
consolidation, reorganization, dissolution or liquidation of the Company, the
Option Committee may advance the dates upon which outstanding options may be
exercised, provide for the payment upon termination or cancellation of an option
of an amount by which the fair market value of the shares underlying the options
exceeds their exercise price or make such other adjustments as it deems
appropriate.
Incentive stock options may be granted only to those employees who are
regarded by the Committee as "key" employees. With respect to incentive stock
options, the aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which an incentive stock option first
becomes exercisable may not exceed $100,000 per calendar year. Further, no
incentive stock option shall be granted to an individual if, at the time the
option is granted, such individual owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company unless (i) at
the time such option is granted the option price is at least 110% of the fair
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market value of the stock subject to the option and (ii) such option by its
terms is not exercisable after the expiration of five years from the date of
grant.
No options may be granted after the date on which the Plan terminates. The
Plan will terminate at midnight on May 5, 1997, unless eliminated or terminated
at an earlier date by the Board of Directors. Termination of the Plan does not
affect options then outstanding under the Plan.
FEDERAL INCOME TAXATION OF OPTIONS
The following is a summary of the federal income tax consequences of the
issuance and exercise of stock options under the Plan to optionees and the
Company under the Code. The discussion does not purport to be complete and does
not cover foreign, state and/or local tax treatments.
Options granted under the Plan may be either non-qualified stock options or
incentive stock options as the Option Committee may determine.
NON-QUALIFIED OPTIONS
Non-qualified stock options do not qualify for special federal income tax
treatment. Generally, no tax is imposed on the optionee upon the grant of a
non-qualified stock option. Except as described below, upon the exercise of a
non-qualified stock option, the optionee will be treated as receiving
compensation taxable as ordinary income in the year of exercise, in an amount
equal to the excess of the fair market value of the shares at the time of
exercise over the option price paid for those shares. There is no item of tax
preference upon such exercise. When shares received on exercise of a non
- -qualified stock option are sold or otherwise disposed of, any difference
between the fair market value of the shares at the time of exercise and the
amount realized on the disposition would be treated as long-term or short-term
capital gain or loss, depending on the period for which the shares have been
held. Upon the exercise of a non-qualified stock option, the Company may claim
a deduction for compensation paid in the same amount as compensation is recog
nized to the optionee.
INCENTIVE STOCK OPTIONS
Options granted under the Plan may also constitute incentive stock options.
No federal income tax is imposed on the optionee upon the grant of an incentive
stock option. If the optionee does not dispose of shares acquired pursuant to
the exercise of an incentive stock option within two years from the date the
option was granted nor within one year after the shares were transferred to him,
except for the item of alternative minimum tax adjustment described below, no
income is recognized by the optionee by reason of his exercise of the option.
The difference between the option price paid and the amount realized on
disposition of the shares is treated as long-term capital gain or loss. In such
event, the Company would not be entitled to any deduction in connection with the
grant or exercise of the option or the disposition of the shares so acquired.
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Disqualifying Dispositions
If, however, an optionee disposes of shares acquired pursuant to the
exercise of an incentive stock option prior to the end of the two-year or
one-year holding periods noted above, the disposal would be treated as a
disqualifying disposition. The optionee is treated as having received, at the
time of such disposition, compensation taxable as ordinary income. The Company
may claim a deduction for compensation paid in the same amount as compensation
is treated as received by the optionee. The amount treated as compensation is
the excess of the fair market value of the shares at the time of exercise (or,
in the case of a sale in which a loss (if sustained) would be recognized, the
amount realized on the sale, if less) over the option price. Any amount
realized in excess of the fair market value of the shares at the time of
exercise would be treated as long-term or short-term capital gain, depending on
the period for which the shares had been held. Compensation taxable to an
optionee as ordinary income is generally subject to a maximum effective income
tax rate of 39.6%.
Exercise of incentive stock option is a tax preference
The excess of the fair market value of shares acquired upon exercise of an
incentive stock option over the option price paid for such shares is an item of
tax preference for the taxable year in which the shares are acquired.
Accordingly, such excess would be taken into account in determining the
optionee's alternative minimum taxable income subject to the alternative minimum
tax. The alternative minimum tax, which is imposed in addition to regular
income tax, is equal to the excess of (i) up to 28% of the taxpayer's
alternative minimum taxable income in excess of a specified exemption amount,
over (ii) the taxpayer's regular tax on his regular taxable income.
Computation of gain on sale of stock acquired by means of incentive stock
option
Gain on the sale or other disposition of stock acquired by means of an
incentive stock option is computed differently for regular tax and alternative
minimum tax purposes. If the taxpayer is subject to the regular income tax
regime in the year of sale, the taxable gain (for regular tax purposes) will be
equal to the excess of the amount received for such shares over the option price
paid for them. The taxpayer may be entitled to a credit against the regular
federal income tax imposed on such gain for all or a portion of the alternative
minimum tax previously paid. For alternative minimum tax purposes the taxable
gain will be equal to the excess of the amount received for such shares over the
fair market value of such shares at the time the option was exercised, and no
credit will be allowed against the resulting alternative minimum tax liability
for any previously paid alternative minimum tax.
USE OF PREVIOUSLY ACQUIRED SHARES FOR PAYMENT OF OPTION PRICE
Non-qualified stock options
In the case of a non-qualified stock option, if the option price is paid by
the delivery of shares of common stock previously acquired by the optionee
having a fair market value equal to the option price ("Previously Acquired
Shares"), gain or loss would not be recognized on the exchange of the Previously
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Acquired Shares for a like number of shares pursuant to such an exercise of the
option, and the optionee's basis in the number of shares received equal to the
number of Previously Acquired Shares would be the same as his basis in the
Previously Acquired Shares. In addition, the optionee would be treated as
receiving compensation taxable as ordinary income equal to the fair market value
at the time of exercise of the shares received in excess of the number of
Previously Acquired Shares, and the optionee's basis in such excess shares would
be equal to their fair market value at the time of exercise, except as described
below.
Incentive stock options
In the case of an incentive stock option, the federal income tax
consequences to the optionee of the payment of the option price with Previously
Acquired Shares will depend on the nature of the Previously Acquired Shares. If
the Previously Acquired Shares were acquired through the exercise of an
incentive stock option and if such Previously Acquired Shares are being trans
ferred prior to the expiration of the applicable minimum statutory holding
period, the transfer would be treated as a disqualifying disposition of the
Previously Acquired Shares (see DISQUALIFIYING DISPOSITIONS above). If the
Previously Acquired Shares were acquired other than pursuant to the exercise of
an incentive stock option, or were acquired pursuant to the exercise of an
incentive stock option but had been held for the applicable minimum statutory
holding period, no gain or loss would be recognized on the exchange of the
Previously Acquired Shares.
In either case, (i) the optionee's basis in the number of shares received
equal to the number of Previously Acquired Shares would be the same as his basis
in the Previously Acquired Shares, increased by any income recognized by the
optionee upon the disqualifying disposition of the Previously Acquired Shares,
(ii) the optionee's basis in the shares received in excess of the number of
Previously Acquired Shares would be zero, and (iii) the other incentive stock
option rules would apply. Upon a subsequent disqualifying disposition of the
shares so received, the shares with the lowest basis would be treated as
disposed of first.
NON-QUALIFIED STOCK OPTIONS HELD BY PERSONS SUBJECT TO SECTION 16(B)
If shares of common stock are received upon the exercise of a non-qualified
stock option by an optionee who is subject to liability under Section 16(b) of
the Securities Act Of 1934 (the "Exchange Act"), recognition of the compensation
attributable to such exercise is postponed (for not more than six months) so
long as the sale at a profit of the shares so acquired could subject the
optionee to suit under Section 16(b) of the Exchange Act. One effect of this
postponement is to measure the amount of compensation taxable to the optionee as
ordinary income by reference to the fair market value of such shares at the time
such liability to suit under Section 16(b) of the Exchange Act no longer exists
(rather than at the earlier date of exercise of the option). Similarly, the
fair market value of such shares at that time would become the optionee's basis
in the shares for purposes of computing gain or loss upon a subsequent
disposition, and the optionee's holding period for the shares would date from
that time. However, an optionee may elect with respect to such shares, pursuant
to Section 83(b) of the Code, to recognize the compensation attributable to such
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exercise at the time of such exercise, in which case his tax treatment would be
as described above. Such election must be made not later than 30 days after the
date such shares are transferred to the optionee.
PROPOSAL TO EXTEND THE TERM OF OPTIONS IN THE
NON-DISCRETIONARY STOCK OPTION PLAN
The Board of Directors of the Company adopted a Non-Discretionary Stock
Option Plan for non-employee directors (the "Non-Discretionary Plan"), on
October 7, 1991. The Non-Discretionary Plan was approved by the stockholders on
May 14, 1992. As originally adopted, the Non-Discretionary Plan provided for
the grant of options with an expiration date of three years from the date of
grant. The options also expire 90 days after the optionholder ceases to be a
director of the Company. On March 14, 1995, the Option Committee of the Board
determined that it would be in the best interest of the Company to extend the
term of all outstanding options to employees of the Company to ten years from
the respective dates of grant. The extension of the terms of the options to
employees of the Company was made to foster and promote the long term financial
success of the Company by attracting and retaining able employees, to enable
such employees to participate in the financial success of the Company and to
align the economic interests of the employees with stockholders. On March 14,
1995, the Board determined that similar incentives should be provided to the
non-employee directors. The Board believes that a long term option position
will more closely align the financial interests of the directors with the
stockholders and create significant incentives for increasing stockholder value.
The Board recommends that stockholders approve the extension of the term of the
outstanding options pursuant to the Non-Discretionary Plan, as well as an
amendment to the Non-Discretionary Plan to provide that all options to be
granted in the future under the Non-Discretionary Plan will expire ten years
after the date of grant. The provision that options also expire 90 days after
the optionholder ceases to be a director of the Company will be unaffected by
this amendment. The full text of the Non-Discretionary Plan, as amended, is set
forth in Exhibit B.
The Non-Discretionary Plan provides that the Company grant options to
purchase 10,000 shares of the Company's common stock to each person who becomes
a non-employee director of the Company and, as of October 1 of each year,
options to purchase an additional 5,000 shares of common stock are granted to
each person who is at that time a non-employee director of the Company. The
exercise price of the options is the fair market value of the Company's common
stock on the date the options are granted. The options are exercisable in full
as of the date of grant. Shares acquired upon exercise of these options cannot
be sold for six months following the date of grant.
Options granted pursuant to the Non-Discretionary Plan are non-transferable
during the optionee's lifetime other than by will, by the laws of descent and
distribution, or by court order in a domestic relations proceeding. Options are
exercisable during the optionee's lifetime only by the optionee or by the
optionee's guardian or legal representative.
At present the Company has outstanding options to purchase 106,750 shares
of the Company's common stock under the Non-Discretionary Plan. The amendment
to the Non-Discretionary Plan will not increase the number of shares available
<PAGE>
for purchase pursuant to outstanding options, nor will it increase the number of
shares that have been authorized to be issued under the Non-Discretionary Plan.
A total of 500,000 shares of common stock are authorized. Options to purchase
93,250 shares have been previously exercised; therefore, there remain 300,000
shares available for future grants.
Options granted pursuant to the Non-Discretionary Plan will not qualify for
the special tax benefits given to incentive stock options under Section 422 of
the Internal Revenue Code. Accordingly, all of the stock options granted
pursuant to the Non-Discretionary Plan may be deemed to be non-qualified stock
options. A discussion of the federal income tax consequences of the issuance
and exercise of non-qualified stock options is provided in the PROPOSAL TO
INCREASE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER 1987 STOCK OPTION PLAN
section above.
The Company currently has seven directors who are eligible to receive
option grants under the Non-Discretionary Plan. Details with respect to
outstanding options to each non-employee director are included in the ELECTION
OF DIRECTORS section above.
The approval of holders of shares representing a majority of the votes
represented at the Annual Meeting will be necessary to approve the extension of
the term of options in the Non-Discretionary Plan.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of KPMG Peat Marwick was engaged to audit the financial statements
of the Company for the year ended December 31, 1994. A representative of KPMG
Peat Marwick is expected to be present at the meeting and available to respond
to appropriate questions and, although the firm has indicated that no statement
will be made, an opportunity for a statement will be provided. Management has
not made an appointment of auditors for 1995 but anticipates that it will use
KPMG Peat Marwick.
There were no disagreements with the Company's principal independent
accountants on any matter of accounting principles or practices, financial
statement disclosures, or auditing scope or procedure.
SECTION 16 REPORTING
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership to the Securities and Exchange Commission.
Officers, directors and greater than 10% stockholders are required by the
regulations of the Securities and Exchange Commission to furnish the Company
with copies of all Section 16(a) reports they file. Based solely on its review
of copies of such reports received by it and written representations from
certain reporting persons that no other reports were required for those persons,
the Company believes that all filing requirements applicable to its officers,
directors and greater than 10% stockholders were complied with for the fiscal
year ended December 31, 1994.
<PAGE>
STOCKHOLDER PROPOSALS
Any proposal which a stockholder may desire to present to the Annual
Meeting of Stockholders for the year ending December 31, 1995, must be received
in writing by the Secretary of the Company prior to December 1, 1995.
OTHER MATTERS
The Board does not know of any other matters to be brought before the
meeting. However, if any other matters should properly come before the meeting,
it is the intention of the persons named in the accompanying proxy to vote such
Proxy as in their discretion they may deem advisable.
BY ORDER OF THE BOARD OF DIRECTORS
\s\ Donald E. Nilson
Donald E. Nilson, Secretary
DATED: April 14, 1995
USMX, INC.
1987 STOCK OPTION PLAN
This Stock Option Plan (the "Plan") is adopted in consideration for
services rendered and to be rendered to USMX, Inc. and related companies.
1. Definitions.
The terms used in this Plan shall, unless otherwise indicated or
required by the particular context, have the following meanings:
Board: The board of Directors of USMX, Inc.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The $.001 par value Common Stock of USMX, Inc.
Company: USMX, Inc., a corporation incorporated under the laws of
Delaware, and any successors in interest by merger, operation of law,
assignment or purchase of all or substantially all of the property, assets or
business of the Company.
Date of Grant: The date on which an Option (see below) is granted
under the Plan.
Disinterested Person: A director who has not been granted or awarded
equity securities pursuant to any plan of the Company or of any of the
Company's affiliates during one year prior to that directors' service as an
administrator of the Plan, except as otherwise provided in Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") with respect to (a) participation in formula plans or ongoing
securities acquisitions plans, and (b) an election to receive securities for an
annual retainer fee.
Employee: An Employee is an employee of the Company or any Related
Company.
Fair Market Value: The Fair Market Value of the Option Shares. Such
Fair Market Value as of any date shall be reasonably determined by the Option
Committee (sse below); provided, however, that if there is a public market for
the Common Stock, the Fair Market Value of the Option Shares as of any date
shall be the average of the representative closing bid and asked prices, as
quoted by the National Association of Securities Dealers through NASDAQ (its
automated system for reporting quotes), for the date in question, or, if the
Common Stock is listed on the NASDAQ National Market System or is listed on a
national stock exchange, the officially-quoted closing price on such exchange
<PAGE>
on the date in question. In the event the Common Stock is not traded publicly,
the Fair Market Value of a share of Common Stock on any date shall be
determined, in good faith, by the Board or the Option Committee after such
consultation with outside legal, accounting and other experts as the Board or
the Option Committee may deem advisable, and the Board or the Option Committee
may deem advisable, and the Board or the Option Committee shall maintain a
written record of its method of determining such value.
Incentive Stock Options ("ISOs"): "Incentive Stock Options" as that
term is defined in Section 422A of the Internal Revenue Code.
Key Employee: A person designated by the Option Committee who either
is employed by the Company or a Related Company (see below) and upon whose
judgment, initiative and efforts the Company or a Related Company is largely
dependent for the successful conduct of its business; provided, however, that
Key Employees shall not include those members of the Board who are not
employees of the Company or a Related Company.
Non-Incentive Stock Options ("Non-ISOs"): Options which are not
intended to qualify as "Incentive Stock Options" under Section 422A of the
Code.
Option: The rights granted to an Employee to purchase Common Stock
pursuant to the terms and conditions of an Option Agreement (see below).
Option Agreement: The written agreement (and any amendment or
supplement thereto) between the Company and an Employee designating the terms
and conditions of an Option.
Option Committee: With respect to grants of Options to Employees
other than Officers and Directors of the Company, the Plan shall be
administered by an Option Committee ("Option Committee") composed of the Board
or at least three members of the Board. With respect to grants of Options to
Officers or to Directors, the Plan shall be administered by the Board, if each
member is a Disinterested Person, or by a committee, selected by the Board,
consisting of two or more persons, each of whom is a Disinterested Person.
Such committee may also be deemed an Option Committee.
Option Shares: The shares of Common Stock underlying an Option
granted to an Employee.
Optionee: An Employee who has been granted an Option.
<PAGE>
Related Company: Any corporation that is a "parent corporation" or a
"subsidiary corporation" with respect to the Company, as those terms are
defined in Section 425 of the Code. The determination of whether a corporation
is a Related Company shall be made without regard to whether the corporation or
the relationship between the corporation and the Company now exists or comes
into existence hereinafter.
2. Purpose and Scope.
(a) The purpose of this Plan is to advance the interests of the
Company and its stockholders by affording Employees an opportunity for
investment in the Company and the incentive advantages inherent in stock
ownership in this Company.
(b) This Plan authorizes the Option Committee to grant Options to
purchase shares of Common Stock to Employees selected by the Option Committee
while considering criteria such as employment position or other relationship
with the Company, duties and responsibilities, ability, productivity, length of
service or association, morale, interest in the Company, recommendations by
supervisors, and other matters.
3. Administration of the Plan. The Plan shall be administered by the
Option Committee. The Option Committee shall have the authority granted to it
under this section and under each other section of the Plan.
In accordance with and subject to the provisions of the Plan, the
Option Committee shall select the Optionees, shall determine (i) the number of
shares of Common Stock to be subject to each Option, (ii) the time at which
each Option is to be granted, (iii) whether an Option shall be granted in
exchange for the cancellation and termination of a previously granted optionor
options under the Plan or otherwise, (iv) the purchase price for the Option
Shares, (v) the option period, and (vi) the manner in which the Option becomes
exercisable. In addition, the Option Committee shall fix such other terms of
each Option as the Option Committee may deem necessary or desirable. The
Option Committee shall determine the form of Option Agreement to evidence each
Option.
The Option Committee from time to time may adopt such rules and
regulations for carrying out the purposes of the Plan as it may deem proper and
in the best interests of the Company. The Option Committee shall keep minutes
of its meeting and those minutes shall be distributed to every member of the
Board.
The Board may from time to time make such changes in and additions to
the Plan as it may deem proper and in the best interest of the Company;
provided, however, that no such change or addition shall impair any Option
previously granted under the Plan, and that the approval by the affirmative
<PAGE>
votes of the holders of a majority of the Company's securities entitled to vote
and represented at a meeting duly held in accordance with the applicable laws
of the State of Delaware, shall be required for any amendment which would:
(a) modify the eligibility requirements for receiving Options under
the Plan;
(b) increase the benefits accruing to Employees under the Plan; or
(c) increase the number of shares of Common Stock that may be issued
under the Plan.
All actions taken and all interpretations and determinations made by
the Option Committee in good faith (including determinations of Fair Market
Value) shall be final and binding upon all Employees, the Company and all other
interested persons. No member of the Option Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Option Committee shall, in addition
to rights they may have if Directors of the Company, be fully protected by the
Company with respect to any such action, determination or interpretation.
4. The Common Stock. The Board is authorized to appropriate, issue and
sell for the purposes of the Plan, and the Option Committee is authorized to
grant Options with respect to, a total number, not in excess of 2,000,000
shares of Common Stock, either treasury or authorized but unissued, or the
number and kind of shares of stock or other securities which in accordance with
Section 9 shall be substituted for the 2,000,000 shares or into which such
2,000,000 shares shall be adjusted. All or any unsold shares subject to an
Option that for any reason expires or otherwise terminates may again be made
subject to Options under the Plan.
5. Eligibility. Options which are intended to qualify as ISOs will be
granted only to Key Employees. Key Employees and other Employees may hold more
than one Option under the Plan and may hold Options under the Plan and options
granted pursuant to other plans or otherwise.
6. Option Price. The Option Committee shall determine the purchase
price for the Option Shares, provided that the purchase price to be paid by
Optionees for the Option Shares which are intended to qualify as ISOs shall not
be less than 100 percent of the Fair Market Value of the Option Shares on the
Date of Grant. The purchase price to be paid by Optionees for Option Shares
which are not intended to qualify as ISOs may be less than the Fair Market
<PAGE>
Value of the Option Shares on the Date of Grant. The purchase price for the
Option Shares shall be a fixed, and cannot be a fluctuating, price.
7. Duration and Exercise of Options.
(a) The option period shall commence on the Date of Grant and shall
be as set by the Option Committee, but not to exceed 10 years in length. No
Option shall be exercised for the period of six months following the Date of
Grant; provided, however, that this limitation shall not apply to the exercise
of an Option pursuant to the terms of the relevant Option Agreement upon the
Optionee's death.
(b) During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee; provided, that in the event of the legal
disability of an Optionee, the guardian or personal representative of the
Optionee may exercise the Option. However, if the Option is an ISO it may be
exercised by the guardian or personal representative of the Optionee only if
such guardian or personal representative obtains a ruling from the Internal
Revenue Service or an opinion of counsel to the effect that neither the grant
nor the exercise of such power is violative of Section 422A(b)(5) of the Code.
Any opinion of counsel must be both from counsel and in a form acceptable to
the Option Committee.
(c) The Option Committee may determine whether any Option shall be
exercisable as provided in Paragraph (a) of this Section 7 or whether the
Options shall be exercisable in installments only; if the Option Committee
determines the latter, it shall determine the number of installments and the
percentage of the Option exercisable at each installment date. All such
installments shall be cumulative.
(d) If the Optionee ceases to be employed by either the Company or a
Related Company because of the death or permanent and total disability of the
Optionee, any Option held by the Optionee at the time his employment ceases may
be exercised within 90 days after the date his employment ceased, but only to
the extent that the Option was exercisable according to its terms on the date
the Optionee's employment ceased. After such 90-day period, any unexercised
portion of an Option shall expire.
(e) Notwithstanding the provisions of Paragraph (d) of this Section
7, if an Optionee's employment by the Company or a Related Company ceased for
any reason other than the Optionee's death or permanent and total disability,
any unexercised portion of any Option held by the Optionee at the time his
employment ceases may be exercised within 30 days after the date his employment
ceased, but only to the extent that the Option was exercisable according to its
terms on the date the Optionee's employment ceased. After such date, any
unexercised portion of an Option shall expire.
<PAGE>
(f) Each Option shall be exercised in whole or in part by delivering
to the office of the Treasurer of the Company written notice of the number of
shares with respect to which the Option is to be exercised by paying in full
the purchase price for the Option Shares purchased as set forth in Section 8;
provided, that an Option may not be exercised in part unless the purchase price
for the Option Shares purchased is at least $2,000.
(g) No Option Shares may be sold, transferred or otherwise disposed
of within six months of the Date of Grant by any person who is subject to the
reporting requirements of Section 16(a) of the Exchange Act on the Date of
Grant.
8. Payment for Option Shares. If the purchase price of the Option
Shares purchased by any Optionee at one time exceeds $2,000, the Option
Committee may permit all or part of the purchase price for the Option Shares to
be paid by delivery to the Company for cancellation shares of the Company's
Common Stock previously owned by the Optionee with a Fair market Value as of
the date of payment equal to the portion of the purchase price for the Option
Shares that the Optionee does not pay in cash. In the case of all other Option
exercises, the purchase price shall be paid in cash or certified funds upon
exercise of the Option.
9. Change in Stock, Adjustments, Etc. In the event that each of the
outstanding shares of Common Stock (other than shares held by dissenting
stockholders which are not changed or exchanged) should be changed into, or
exchanged for, a different number or kind of shares of stock or other
securities of the Company, or, if further changes or exchanges of any stock or
other securities into which the Common Stock shall have been changed, or for
which it shall have bene exchanged, shall be made (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividends,
reclassification, split-up, combination of shares or otherwise), then there
shall be substituted for each share of Common Stock that is subject to the Plan
but not subject to an outstanding Option thereunder, the number and kind of
shares of stock or other securities into which each outstanding share of Common
Stock (other than shares held by dissenting stockholders which are not changed
or exchanged) shall be so changed or for which each outstanding share of Common
Stock (other than shares held by dissenting shareholders) shall be exchanged.
Any securities so substituted shall be subject to similar successive
adjustments.
In the event of any such changes or exchanges, the Option Committee
shall determine whether, in order to prevent dilution or enlargement of rights,
an adjustment should be made in the number, or kind, or option price of the
shares or other securities then subject to an Option or Options granted
pursuant to the Plan and the Option Committee shall make any such adjustment,
<PAGE>
and such adjustments shall be made and shall be effective and binding for all
purposes of the Plan.
10. Relationship to Employment. Nothing contained in the Plan, or in any
Option granted pursuant to the Plan, shall confer upon any Optionee any right
with respect to continuance of employment by the Company, or interfere in any
way with the right of the Company to terminate the Optionee's employment at any
time.
11. Nontransferability of Option. No Option granted under the Plan shall
be transferable by the Optionee, either voluntarily or involuntarily, except by
will or the laws of descent and distribution, or except pursuant to a qualified
domestic relations order as defined in the Code, the Employee Retirement Income
Security Act, or rules promulgated thereunder. Except as provided in the
preceding sentence, any attempt to transfer the Option shall void the Option.
12. Rights as a Stockholder. No person shall have any rights as a
stockholder with respect to any share covered by an Option until that person
shall become the holder of record of such share and, except as provided in
Section 9, no adjustments shall be made for dividends or other distributions or
other rights as to which there is an earlier record date.
13. Securities Laws Requirements. No Option Shares shall be issued
unless and until, in the opinion of the Company, any applicable registration
requirements of the Securities Act of 1933, as amended, any applicable listing
requirements of any securities exchange on which stock of the same class is
then listed, and any other requirements of law or of any regulatory bodies
having jurisdiction over such issuance and delivery, have been fully complied
with. Each Option and each Option Share certificate may be imprinted with
legends reflecting federal and state securities laws, restrictions and
conditions, and the Company may comply therewith and issue "stop transfer"
instructions to its transfer agent and registrar in good faith without
liability.
14. Disposition of Shares. Each Optionee, as a condition of exercise,
shall represent, warrant and agree, in a form of written certificate approved
by the Company, as follows: (a) that all Option Shares are being acquired
solely for his own account and not on behalf of any other person or entity; (b)
that no Option Shares will be sold or otherwise distributed in violation of the
Securities Act of 1933, as amended, or any other applicable federal or state
securities laws; (c) that if he is subject to reporting requirements under
Section 16(a) of the Securities Exchange Act of 1934, as amended, he will (i)
not violate Section 16(b) of the Exchange Act, (ii) furnish the Company with a
copy of each Form 4 and Form 5 filed by him, and (iii) timely file all reports
required under the federal securities laws; and (d) that he will report all
<PAGE>
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
15. Effective Date of Plan; Termination Date of Plan. Subject to the
approval of the Plan by the affirmative vote of the holders of a majority of
the Company's securities entitled to vote and represented at a meeting duly
held in accordance with applicable law, the Plan shall be deemed effective as
of May 5, 1987. The Plan shall terminate at midnight on the date that is ten
years from such date, except as t Options previously granted and outstanding
under the Plan at that time. No Options shall be granted after the date on
which the Plan terminates. The Plan may be abandoned or terminated at any
earlier time by the Board, except with respect to any Options then outstanding
under the Plan.
16. Limitation on Amount of Option. With respect to ISOs, the aggregate
Fair Market Value (determined as of the time the ISO is granted) of the stock
as to which an ISO may first become exercisable in a particular calendar year
may not exceed $100,000.
17. Ten Percent Shareholder Rule. With respect to ISO's, no Option may
be granted to a Key Employee who, at the time the Option is granted, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any "parent corporation" or "subsidiary
corporation", as those terms are defined in Section 425 of the Code, unless at
the time the Option is granted the purchase price for the Option Shares is at
least 110 percent of the Fair Market Value of the Option Shares on the Date of
Grant and such Option by its terms is not exercisable after the expiration of
five years from the Date of Grant. For purposes of the preceding sentence,
stock ownership shall be determined as provide din Section 425 of the Code.
18. Withholding Taxes. The Company, or any Related Company, may take
such steps as it may deem necessary or appropriate for the withholding of any
taxes which the Company, or any Related Company, is required by any law or
regulation or any governmental authority, whether federal, state r local,
domestic or foreign, to withhold in connection with any Option including, but
not limited to, the withholding of all or any portion of any payment or the
withholding of issuance of Option Shares to be issued upon the exercise of any
Option.
19. Effect of Changes in Control and Certain Reorganizations.
(a) In the event of a Change in Control of the Company (as defined
below), the Option Committee may, in its discretion, make any or all of the
following adjustments: (i) provide that all Options granted pursuant to the
Plan shall become exercisable immediately upon such Change in Control (or such
other time as the Committee shall determine), subject to Section 16 with
<PAGE>
respect to ISOs; (ii) provide for the payment to an Optionee upon surrender of
an Option (or portion thereof) of an amount in cash equal to the excess of (a)
the higher of (I) the aggregate Fair Market Value of the Option Shares covered
by such Option (or portion thereof) on the date of surrender or (II) the
average price per share paid for the most highly priced one percent of the
Common Stock acquired in connection with the Change in Control times the number
of Option Shares covered by such Option (or portion thereof) over (b) the
aggregate exercise price, except that in no event shall an Optionee have a
right to receive with respect to any ISO an amount in excess of the Fair Market
Value on the date of surrender of the total number of Option Shares with
respect to which such Option is surrendered, less the exercise price which the
Optionee would otherwise have been required to pay upon purchase of such Option
Shares had he exercised the Option; (iii) make any other adjustments, or take
such other action, as the Option Committee, in its discretion, shall deem
appropriate. In the event that the Option Committee provides for the surrender
of Options pursuant to clause (ii) above, to the extent any Option is
surrendered, it shall be deemed to have been exercised for purposes of Section
4. For purposes of this Section 19, a "Change in Control" of the Company shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or
not the Company is then subject to such reporting requirement; provided that,
without limitation, a Change in Control shall be deemed to have occurred if (i)
any individual, partnership, firm, corporation, association, trust,
unincorporated organization or other entity, or any syndicate or group deemed
to be a person under Section 14(d)(2) of the Exchange Act, is or becomes the
"beneficial owner" (within the meaning of Section 13(d) of the Exchange Act and
the rules and regulations promulgated thereunder), directly or indirectly, of
securities of the Company representing 35% or more of the combined voting power
of the Company's then outstanding securities entitled to vote in the election
of directors of the Company; or (ii) during any period of two consecutive years
(not including any period prior to the adoption of this Plan), individuals who
at the beginning of such period constituted the Board and any new directors,
whose appointment by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least a majority of the directors
then still in office who either were directors at the beginning of the period
or whose appointment or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof.
(b) In the event that (i) the Company is merged or consolidated with
another corporation, (ii) one person becomes the beneficial owner of all of the
issued and outstanding equity securities of the Company (for purposes of this
Section 19(b), the terms "person" and "beneficial owner" shall have the
meanings assigned to them in Section 13(d) of the Exchange Act and the rules
<PAGE>
and regulations promulgated thereunder), (iii) a division or subsidiary of the
Company is acquired by another corporation, person or entity, (iv) all or
substantially all of the assets of the Company are acquired by another
corporation, (v) the Company is reorganized, dissolved or liquidated (each such
event in (i), (ii), (iii), (iv) or (v) being hereinafter referred to as a
"Reorganization Event"), or (vi) the Board shall propose that the Company enter
into a Reorganization Event, then the Option Committee may, in its sole
discretion, make any or all of the following adjustments: (A) by written notice
to each Optionee provide that such Optionee's Options shall be terminated or
cancelled, unless exercised within thirty (30) days (or such other period as
the Option Committee shall determine) after the date of such notice; (B)
subject to Section 16 with respect to ISOs, advance the dates upon which any or
all outstanding Options shall be exercised; (C) provide for the payment upon
termination or cancellation of an Option of an amount in cash or securities
equal to the excess, if any, of the Fair Market Value f the Option Shares
subject to the Option at the time of such termination or cancellation over the
exercise price of such Option; and (D) make any other adjustments, or take such
other action, as the Option Committee, in its discretion, shall deem
appropriate. Any action taken by the Option Committee may be made conditional
upon the consummation of the applicable Reorganization Event.
20. Other Provisions.
(a) The use of a masculine gender in the Plan shall also include
within its meaning the feminine, and the singular may include the plural, and
the plural may include the singular, unless the context clearly indicates to
the contrary.
(b) Any expenses of administering the Plan shall be borne by the
Company.
(c) This Plan shall be construed to be in addition to any and all
other compensation plans or programs. Neither the adoption of the Plan by the
Board nor the submission of the Plan tot he stockholders of the Company for
approval shall be construed as creating any limitations on the power of
authority of the Board to adopt such other additional incentive or other
compensation arrangements as the Board may deem necessary or desirable.
(d) The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and the rights of any and
all personnel having or claiming to have an interest therein or thereunder
shall be governed by and determined exclusively and solely in accordance with
the laws of the State of Colorado.
USMX, INC.
NON-DISCRETIONARY STOCK OPTION PLAN
This Non-Discretionary Stock Option Plan (the "Plan") is adopted by USMX,
Inc. (the "Company"), on October 7, 1991.
1. Definitions.
Unless otherwise indicated or required by the particular context, the
terms used in this Plan shall have the following meanings:
Board: The Board of Directors of the Company.
Code: The Internal Revenue Code of 1986, as amended.
Common Stock: The $.001 par value common stock of the Company.
Company: USMX, Inc., a corporation incorporated under the laws of
Delaware, any current or future wholly owned subsidiaries of the Company, and
any successors in interest by merger, operation of law, assignment or purchase
of all or substantially all of the property, assets or business of the Company.
Date Of Grant: The date on which an Option, as defined below, is
granted under the Plan.
Fair Market Value: Fair Market Value of the Common Stock as of a
certain date shall be calculated as follows: (i) if there is a public market
for the Common Stock, the Fair Market Value of the Common Stock shall not be
less than the last reported sale price for the Common Stock on that date (or on
the preceding stock market business day if such date is a Saturday, Sunday, or
a holiday), on either a national or local over-the- counter market, as reported
by The Denver Post, Denver, Colorado, or if not available there, in the Wall
Street Journal; (ii) if no such published last sale price is available and a
published bid price is available from one of those sources, then the Fair
Market Value of the Common Stock shall not be less than such last reported bid
price for the Common Stock on that date (or on the preceding stock market
business day if such date is a Saturday, Sunday, or a holiday), and (iii) if no
such published bid price is available, the Fair Market Value of the Common
Stock shall not be less than the average of the bid prices quoted as of the
close of business on that date (or on the preceding stock market business day
if such date is a Saturday, Sunday, or a holiday) by any two independent
persons or entities making a market for the Common Stock, and (iv) if there are
no bid prices available, the Fair Market Value shall be as determined in good
<PAGE>
faith by the Board after such consultation with outside legal, accounting and
other experts as the Board may deem advisable.
Non-Employee Director: A person who is a member of the Board of
Directors and who is not an employee of the Company.
Option: The rights to purchase Common Stock granted pursuant to the
terms and conditions of an Option Agreement (defined below).
Option Agreement: The written agreement (including any amendments or
supplements thereto) between the Company and a Non-Employee Director
designating the terms and conditions of an Option.
Option Shares: The shares of Common Stock underlying an Option
granted pursuant to this Plan.
Optionee: A Non-Employee Director who has been granted an Option.
2. Purpose And Scope.
(a) The purpose of the Plan is to advance the interests of the
Company and its shareholders by affording Non-Employee Directors, whose
participation and guidance contributes to the successful operation of the
Company, an opportunity for investment in the Company and the incentive
advantages inherent in stock ownership in the Company.
(b) This Plan provides that Options be granted to Non-Employee
Directors according to the formula set forth in Section 3 of this Plan.
3. Operation Of The Plan.
(a) Grant Of Options: Amount And Timing. Options to purchase
10,000 shares of Common Stock shall be granted under the Plan to each
Non-Employee Director at the later to occur of (i) October 7, 1991 and (ii) the
date he or she becomes a Non-Employee Director of the Company. In addition,
effective October 1 of each year, commencing 1992, Options to purchase an
additional 5,000 shares shall be granted to the Optionee provided that, at that
time, he or she is a Non-Employee Director. All Options shall be exercisable
only as set forth in Section 3(c) below and shall be subject to the other terms
and conditions set forth in this Plan or otherwise established by the Company.
(b) Option Exercise Price. The exercise price for the Options shall
be the Fair Market Value of the Common Stock on the Date Of Grant.
<PAGE>
(c) Exercise. Each Option granted pursuant to this Plan shall be
exercisable in full effective as of the Date of Grant, except as provided in
Section 6 (c) below.
(d) Term. Each Option shall expire ten years from the Date Of
Grant, except that an Option will expire, if not exercised, 90 days after the
Optionee ceases to be a director of the Company.
(e) Amendments. This Plan may be changed or modified from time to
time provided, however, that (A) no such change or modification shall impair
any Option previously granted under the Plan, (B) the provisions relating to
the amount, price and timing of the options shall not be amended more than once
every six months other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or rules promulgated thereunder, and (C) the
approval by the affirmative votes of the holders of a majority of shares of the
Company's securities present, or represented, and entitled to vote at a meeting
duly held in accordance with the applicable laws of the state of Delaware,
shall be required for any amendment which would do any of the following:
(i) materially modify the eligibility requirements for receiving
Options under the Plan;
(ii) materially increase the benefits accruing to Non-Employee
Directors under the Plan; or
(iii) materially increase the number of shares of Common Stock that
may be issued under the Plan.
4. Number of Shares.
The Board is authorized to appropriate, issue and sell for the
purposes of the Plan an aggregate maximum of 500,000 shares of Common Stock,
including both treasury and newly issued shares, or the number and kind of
shares of stock or other securities which in accordance with Section 8 shall be
substituted for the 500,000 shares or into which such 500,000 shares shall be
adjusted. All or any unsold shares subject to an Option, that for any reason
expires or otherwise terminates before it has been exercised, again may be made
subject to other Options under the Plan.
5. Eligibility.
Options shall be granted under the Plan only to Non- Employee
Directors provided that any Non-Employee Director may waive his right to
participate in the Plan.
<PAGE>
6. Exercise Of Options.
(a) During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee; provided that, subject to Sections 3(c) and
3(d), in the event of the legal disability of an Optionee, the guardian or
personal representative of the Optionee may exercise the Option.
(b) Each Option shall be exercised in whole or in part by delivering
to the office of the Treasurer of the Company written notice of the number of
shares with respect to which the Option is to be exercised and by paying in
full the purchase price for the Option Shares purchased as set forth in Section
7 herein; provided, that an Option may not be exercised in part unless the
purchase price for the Option Shares purchased is at least $1,000.
(c) No Option may be exercised until the Plan is approved by the
shareholders of the Company as provided in Section 14 below.
(d) No Option Shares may be sold, transferred or otherwise disposed
of for a period of at least six months following the Date Of Grant of the
Option.
(e) No Option Shares may be sold, transferred or otherwise disposed
of for a period of at least six months following shareholder approval of the
Plan.
7. Payment For Option Shares.
(a) For any single purchase by an Optionee of Option Shares at a
total purchase price in excess of $5,000, the Company, in its sole discretion,
upon request by the Optionee, may permit all or part of the purchase price for
the Option Shares to be paid by delivery to the Company for cancellation shares
of the Common Stock previously owned by the Optionee ("Previously Owned
Shares") with a Fair Market Value as of the date of the payment equal to the
portion of the purchase price for the Option Shares that the Optionee does not
pay in cash. Notwithstanding the above, an Optionee shall be permitted to
exercise his Option by delivering Previously Owned Shares only if he has held,
and provides appropriate evidence of such, the Previously Owned Shares for more
than six months prior to the date of exercise. This period (the "Holding
Period") may be extended by the Company acting in its sole discretion as is
necessary, in the opinion of the Company, so that, under generally accepted
accounting principles, no compensation shall be considered to have been or to
be paid to the Optionee as a result of the exercise of the Option in this
manner. At the time the Option is exercised, the Optionee shall provide an
affidavit, and such other evidence and documents as the Company shall request,
to establish the Optionee's Holding Period. As indicated above, an Optionee
<PAGE>
may deliver shares of Common Stock as part of the purchase price only if the
Company, in its sole discretion agrees, on a case by case basis, to permit this
form of payment.
(b) If payment for the exercise of an Option is made other than by
the delivery to the Company for cancellation of shares of the Common Stock, the
purchase price shall be paid in cash or certified funds.
8. Change In Stock, Adjustments, Etc.
In the event that each of the outstanding shares of Common Stock
(other than shares held by dissenting shareholders which are not changed or
exchanged) should be changed into, or exchanged for, a different number or kind
of shares of stock or other securities of the Company, or if further changes or
exchanges of any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged, shall be made
(whether by reason of merger, consolidation, reorganization, recapitalization,
stock dividends, reclassification, split-up, combination of shares or
otherwise), then there shall be substituted for each share of Common Stock that
is subject to the Plan but not subject to an outstanding Option hereunder, the
number and kind of shares of stock or other securities into which each
outstanding share of Common Stock (other than shares held by dissenting
shareholders which are not changed or exchanged) shall be so changed or for
which each outstanding share of Common Stock (other than shares held by
dissenting shareholders) shall be so changed or for which each such share shall
be exchanged. Any securities so substituted shall be subject to similar
successive adjustments.
In the event of any such changes or exchanges, (i) the Company shall
adjust the number, or kind, or option price of the shares or other securities
that are then subject to an Option or Options granted pursuant to the Plan in
order to prevent dilution or enlargement of rights and (ii) such adjustments
shall be effective and binding for all purposes of the Plan.
9. Status As Director.
Nothing contained in the Plan, or in any Option granted or Option
Shares issued pursuant to the Plan, (i) shall confer upon any Optionee any
right with respect to continuance of his position as a director of the Company,
or (ii) shall interfere in any way with the right of the Company at any time to
elect not to continue or to terminate the Optionee's position as a director of
the Company.
10. Nontransferability Of Option.
No Option granted under the Plan shall be transferable by the
Optionee, either voluntarily or involuntarily, except by
<PAGE>
will or by the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined in the Code, the Employee Retirement Income
Security Act, or rules promulgated thereunder. Except as provided in the
preceding sentence, any attempt to transfer an Option shall void the Option.
11. Rights As A Shareholder.
No person shall have any rights as a shareholder with respect to any
share covered by an Option until that person shall become the holder of record
of such share and, except as provided in Section 8, no adjustments shall be
made for dividends or other distributions or other rights as to which there is
an earlier record date.
12. Securities Laws Requirements.
No Option Shares shall be issued unless and until, in the opinion of
the Company, any applicable registration requirements of the Securities Act of
1933, as amended, any applicable listing requirements of any securities
exchange on which stock of the same class is then listed, and any other
requirement of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with. Each Option Agreement
and each Option Share certificate may be imprinted with legends reflecting
federal and state securities laws restrictions and conditions, and the Company
may comply therewith and issue "stop transfer" instructions to its transfer
agent and registrar in good faith without liability.
13. Disposition Of Shares.
To the extent reasonably requested by the Company, each Optionee, as
a condition of exercise, shall represent, warrant and agree, in a form of
written certificate approved by the Company, as follows: (a) that all Option
Shares are being acquired solely for his own account and not on behalf of any
other person or entity; (b) that no Option Share will be sold for at least six
months following the Date Of Grant of the Option (c) that no Option Shares will
be sold or otherwise distributed in violation of the Securities Act of 1933, as
amended, or any other applicable federal or state securities laws; (d) that he
will report all sales of Option Shares to the Company in writing on a form
prescribed by the Company; and (e) that if he is subject to reporting require
ments under Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), (i) he will not violate Section 16(b) of the Exchange
Act, (ii) he will furnish the Company with a copy of each Form 4 and Form 5
filed by him, and (iii) he will timely file all reports required under the
federal securities laws.
<PAGE>
14. Effective Date Of Plan; Termination Date Of Plan.
The Plan shall be deemed effective October 7, 1991 and shall
terminate at midnight on October 1, 2001, except as to Options previously
granted and outstanding under the Plan at that time. No Options shall be
granted after the date on which the Plan terminates. The Plan may be abandoned
or terminated at any earlier time by the affirmative vote of the holders of a
majority of the shares of Common Stock present, or represented, and entitled to
vote at a meeting duly held in accordance with the applicable laws of the State
of Delaware, except with respect to any Options then outstanding under the
Plan. If the adoption of this Plan is not approved by the affirmative vote of
the holders of a majority of the shares of Common Stock present, or
represented, and entitled to vote at a meeting duly held in accordance with the
applicable laws of the State of Delaware by October 7, 1992, then all Options
granted shall terminate and the Plan shall be terminated.
15. Withholding Taxes.
The Option Agreement shall provide that the Company may take such
steps as it may deem necessary or appropriate for the withholding of any taxes
which the Company is required by any law or regulation or any governmental
authority, whether federal, state or local, domestic or foreign, to withhold in
connection with any Option including, but not limited to, the withholding of
all or any portion of any payment or the withholding of issuance of Option
Shares to be issued upon the exercise of any Option.
16. Other Provisions.
The following provisions are also in effect under the Plan:
(a) The use of a masculine gender in the Plan shall also include
within its meaning the feminine, and the singular may include the plural, and
the plural may include the singular, unless the context clearly indicates to
the contrary.
(b) Any expenses of administering the Plan shall be borne by the
Company.
(c) This Plan shall be construed to be in addition to any and all
other compensation plans or programs. The adoption of the Plan by the
shareholders of the Company shall not be construed as creating any limitations
on the power or authority of the Board to adopt such other additional incentive
or other compensation arrangements as the Board may deem necessary or
desirable.
(d) The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and the rights of any and
all persons having or claiming to have an interest therein or thereunder shall
be governed by and determined exclusively and solely in accordance with the
laws of the State of Colorado.
