CRONUS CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 2, 1998
The Annual Meeting of Shareholders of Cronus Corporation, a Nevada
corporation (the "Company"), will be held at 11:00 a.m., on Monday, February 2,
1998, at 6366 East Broadway, Terra Nova banquet room, Tucson, Arizona
85210, for the following purposes:
1. To elect seven directors to serve until the next annual meeting of
shareholders and until their successors are elected and qualified.
2. To adopt the Company's 1997 Employee Stock Option Investment Plan (the
"1997 Plan") in order to bring the plan in compliance with provisions of the
Internal Revenue Code of 1986, as amended, and with recent rules promulgated
under Section 16 of the Securities Exchange Act of 1934, as amended.
3. To ratify the appointment of Addison Roberts & Ludwig, PC as the
independent auditors of the Company for the fiscal year ending December 31,
1997.
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement
accompanying this Notice.
Only shareholders of record at the close of business on December 15, 1997 are
entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person. To
assure your representation at the meeting, however, you are urged to mark,
sign, date and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder
attending the meeting may vote in person even if he or she previously has
returned a proxy.
Sincerely,
Kevin M. Sherlock, Secretary
Tucson, Arizona January 9, 199
CRONUS CORPORATION
7660 E. Broadway
Suite 210
Tucson, Arizona 85710
PROXY STATEMENT
VOTING AND OTHER MATTERS
General
The enclosed proxy is solicited on behalf of Cronus Corporation, a Nevada
corporation (the "Company"), by the Company's board of directors (the "Board of
Directors") for use at the Company's Annual Meeting of Shareholders to be
held at 11:00 a.m. on Monday, February 2, 1998 (the "Meeting"), or at any
adjournment thereof, for the purposes set forth in this Proxy Statement and in
the accompanying Notice of Annual Meeting of Shareholders. The Meeting will
be held at 6366 East Broadway, Terra Nova banquet room, Tucson, Arizona
85710.
The principal executive offices of the Company are located at 7660 East
Broadway, Suite 210, Tucson, Arizona 85710.
These proxy solicitation materials were first mailed on or about January 9,
1997, to all shareholders entitled to vote at the Meeting.
Voting Securities and Voting Rights
Shareholders of record at the close of business on December 15, 1997 (the
"Record Date") are entitled to notice of and to vote at the Meeting. On the
Record Date, there were issued and outstanding 15,277,316 shares of the
Company's Common Stock, $0.001 par value per share (the "Common Stock").
Each holder of Common Stock voting at the Meeting, either in person or by
proxy, may cast one vote per share of Common Stock held on all matters to be
voted on at the Meeting.
The presence, in person or by proxy, of the holders of a majority of the total
number of shares entitled to vote constitutes a quorum for the transaction of
business at the Meeting. Assuming that a quorum is present, the affirmative
vote of a majority of the shares of the Company present in person or
represented by proxy at the Meeting and entitled to vote is required (i) for
the election of directors; (ii) for ratification of the Company's 1997 Stock
Option Investment Plan (the "1997 Plan"); and (iii) for the ratification of
the appointment of Addison Roberts & Ludwig, PC as the independent auditors
of the Company for the fiscal year ending December 31, 1997.
The Company's articles provide for cumulative voting in elections for
directors, which means that each shareholder may cast that number of votes
that is equal to the number of shares held of record, multiplied by the
number of directors to be elected. Each shareholder may cast the whole
number of votes for one candidate, or distribute such votes among two or more
candidates. The enclosed proxy does not seek discretionary authority to
cumulate votes in the election of directors.
Votes cast by proxy or in person at the Meeting will be tabulated by the
election inspectors appointed for the Meeting and will determine whether a
quorum is present. The election inspectors will treat abstentions as shares
that are present and entitled to vote for purposes of determining the
presence of a quorum but as unvoted for purposes of determining the approval
of any matter submitted to the shareholders for a vote. If a broker
indicates on the proxy that it does not have discretionary authority as to
certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Voting of Proxies.
When a proxy is properly executed and returned, the shares it represents will
be voted at the Meeting as directed. If no specification is indicated, the
shares will be voted: (i) "FOR" the election of nominees set forth in this
Proxy Statement; (ii) "FOR" the adoption of the 1997 Plan; and (iii) "FOR"
the ratification of the appointment of Addison Roberts & Ludwig, PC as the
independent auditors of the Company for the fiscal year ending December 31,
1997.
Revocability of Proxies.
Any person giving a proxy may revoke the proxy at any time before its use by
delivering to the Company written notice of revocation or a duly executed proxy
bearing a later date or by attending the Meeting and voting in person.
The laws of the state of incorporation, Nevada, make no provision for
dissenters' rights in connection with the matters to be considered at the
Meeting. The failure of a shareholder to vote against any proposal will not
constitute a waiver of any rights otherwise afforded by the laws of Nevada.
Solicitation.
The cost of this solicitation will be borne by the Company. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for expenses incurred in forwarding solicitation
materials to such beneficial owners. Proxies also may be solicited by
certain of the Company's directors and officers, personally or by telephone or
telegram, without additional compensation.
Annual Report and Other Matters.
The Company's 1996 Annual Report to Shareholders, which was mailed to
shareholders with or preceding this Proxy Statement, contains financial and
other information about the activities of the Company, but is not incorporated
into this Proxy Statement and is not to be considered a part of these proxy
soliciting materials or subject to Regulations 14A or 14C or to the
liabilities of Section 18 of the Exchange Act.
The Company will provide upon written request, without charge to each
shareholder of record as of the Record Date, a copy of the Company's annual
report on Form 10-KSB for the fiscal year ended December 31, 1996, as filed
with the Securities and Exchange Commission (the "SEC"), including the
financial statements and financial schedules included therein. Any exhibits
listed in the Form 10-KSB report also will be furnished upon request at the
actual expense incurred by the Company in furnishing such exhibit. Any such
requests should be directed to the Company's Secretary at the Company's
executive offices set forth in this Proxy Statement.
ELECTION OF DIRECTORS
Nominees.
The Company's articles provide that the number of directors shall be seven.
All directors are elected at each annual meeting of the Company's
shareholders. Directors hold office until the next annual meeting of
shareholders or until their successors have been elected and qualified.
A board of seven directors is to be elected at the Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies received by them for each
of the nominees named below. Three of the nominees currently are directors
of the Company. Of the remaining four nominees, one nominee is the president
of a subsidiary of the Company, one nominee is the Chief Financial Officer of
the Company, one nominee has a beneficial interest in a consulting contract
with the Company, and the remaining nominee is not employed by the Company and
does not otherwise have an interest or arrangement with the Company. In the
event that any such nominee is unable or declines to serve as a director at the
time of the Meeting, the proxies will be voted for any nominee designated by
the current Board of Directors to fill the vacancy. It is not expected that
any nominee will be unable or will decline to serve as a director.
The following table sets forth the Company's nominees for directors of the
Company, together with certain related information:
Name Age Position Held with Company
Jonathan Roberts 39 Chairman of the Board, President
and Chief Executive Officer
Kevin M. Sherlock 36 Vice President, Secretary, and
Director
George Hennessey 56 Chief Geological Consultant, and
Director
Gordon M. LeBlanc, Jr. 45 President of subsidiary
(PetroSun)
J. Dennis Bartlett 45 Chief Financial Officer
Jim Karten 38 Consultant
Thomas J. Nieman 41 None
Management.
The following table sets forth all current directors, nominees for director,
executive officers and significant employees of the Company, and of its
significant subsidiaries, as well as their ages:
Name Age Position Held with Company
Jonathan Roberts 39 Chairman of the Board, President,
and Chief Executive Officer
Kevin M. Sherlock 36 Vice President, Secretary, and
Director
George Hennessey 56 Chief Geological Consultant, and
Director
Gordon M. LeBlanc, Jr. 45 President of subsidiary
(PetroSun), nominee for Director
J. Dennis Bartlett 45 Chief Financial Officer, nominee
for Director
Jim Karten 38 Consultant, nominee for Director
Thomas J. Nieman 41 Nominee for Director
The Board of Directors recommends a vote "FOR" each of the seven persons
nominated by it for election as directors.
No current director or executive officer has any arrangement or understanding
whereby they have been or will be selected as a director. Further, no
executive officer is related to any other executive officer or director. All
directors hold office until the next annual meeting of shareholders, and
until their successors have been duly elected and qualified. Executive
officers are elected by the board at its annual meeting and hold office until
the first to occur of their death, resignation or removal from office. The
Company does not have any standing audit, nominating or compensation
committee, or any committee performing similar functions.
Biographical Profiles.
JONATHAN ROBERTS, was appointed a director in December 1994, and was
appointed as President in December, 1994. In addition to his management
position with the Company, Mr. Roberts has been the General Manager of R K
Management Group L. C., a management consulting company, since 1993.
Prior to 1993, Mr. Roberts had over 10 years of experience owning and
managing businesses in the area of health management and acquisitions and
mergers.
KEVIN SHERLOCK, was appointed a director and the Secretary in July, 1996.
In May, 1997, Mr. Sherlock was appointed Vice President in charge of Legal
Affairs. He has been a practicing attorney since 1988. Mr. Sherlock practiced
aviation law and insurance defense litigation in Washington D.C. until 1993,
when he then opened a solo practice assisting small businesses with various
matters, including mergers and acquisitions. Additionally, Mr. Sherlock is
currently the Vice President of Perimeter Bicycling Association of America,
Inc., a non-profit organization.
GEORGE HENNESSEY, was appointed a director in July, 1996. He has been a
geological consultant since 1977. As a geological consultant, and in some
instances as owner/operator, Mr. Hennessey has consulted for several major
mining companies, at various exploration, development and production levels
of involvement regarding surface, underground and offshore precious metals
and base metal deposits and mill tailing recovery undertakings. Mr.
Hennessey is also a director, geological consultant, and shareholder of
Temple Summit Financial Projects, Inc. ("TSFP"). The Company and TSFP are
engaged in a joint venture project in Moapa, Nevada to test out the
viability of extracting gold from mining claims held be TSFP.
GORDON M. LEBLANC, JR., has been an oil and gas operator for over 20
years. Mr. LeBlanc is the president of PetroSun Exploration & Production,
Incorporated, a wholly owned subsidiary of Cronus. Mr. LeBlanc is also
president of Tiger Tool, Inc., an enhanced oil recovery service company, and
Tiger Energy, Inc., an enhanced oil recovery operating company. Mr. LeBlanc is
also a member of the Executive Committee of the Arizona Chapter of the NFL
Alumni Association and is the founder and director of Every Kid Counts, a non-
profit children's charity.
J. DENNIS BARTLETT, is a certified public accountant and the principal behind
J. Dennis Bartlett, PC. Mr. Bartlett has been in practice since 1975 and
specializes in taxation, financial planning and consulting with closely held
businesses and individuals. Mr. Bartlett's clients include large and small
businesses and individuals in need of tax planning.
JIM KARTEN, has over 15 years experience in finance and investment. Mr.
Karten is a consultant to the Company which negotiated and arranged for
various sources of financing since the Company's inception. Additionally, Mr.
Karten is managing director of Karten Asset Management, a money
management firm specializing in derivative trading of foreign and domestic
currencies, indexes, bonds and energy for institutions and high net worth
individuals.
THOMAS J. NIEMAN, has been a licensed commercial real estate agent since
1977, possessing a diverse background in brokerage, development and
management. Additionally, Mr. Nieman is very active in community affairs in
Tucson, Arizona, including being the President Elect of the Tucson
Mayor & Council's Downtown Advisory Committee.
The following biographical profiles relate to each individual currently
serving or nominated hereby as a director, executive officer or significant
employee of the Company and its significant subsidiaries.
Meetings of the Board of Directors.
The Board of Directors of the Company held eleven meetings during the fiscal
year ended December 31, 1996. Each of the Company's directors attended all
of the meetings of the Board of Directors held during fiscal 1996.
Director Compensation and Other Information.
Employees of the Company do not receive compensation for serving as
members of the Company's Board of Directors. Non-employee directors may
receive $100 for each meeting attended in person. All directors are reimbursed
for their expenses in attending meetings of the Board of Directors. Directors
of the Company are eligible to receive stock options pursuant to the Company's
1997 Stock Option Plan. Pursuant to the 1997 Plan, each director of the
Company may receive a grant of options to acquire 10,000 shares of the
Common Stock upon the date of his or her election or appointment as directors.
Directors also may receive a grant of options to purchase 10,000 shares of
Common Stock on the date of each annual meeting of shareholders of the
Company. See "Proposal to Adopt the Company's 1997 Stock Option Plan."
To the knowledge of the Company, no director, officer or affiliate of the
Company, and no record or beneficial owner of more than 5% of the Company's
Common Stock, is an adverse party, or has an adverse material interest, in any
proceeding involving the Company.
EXECUTIVE COMPENSATION
Summary of Cash and Other Compensation.
The following table sets forth certain information concerning the compensation
for the fiscal year ended December 31, 1996 earned by the Company's
executive officers. None of the Company's executive officers received or
became entitled to any long term compensation during such fiscal year. None of
the Company's executive officers received or became entitled to any long-term
compensation during he 1996 fiscal year.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
Name and Year Paid Deferred Other
Position 1996 Salary Salary
Jonathan Roberts,
President, CEO
and Director $18,000 $157,000 0
_____________________________________________________
Kevin Sherlock,
Secretary and
Director $10,500 $4,000 $3,186.78*
_____________________________________________________
George Hennessey,
Director and Geological
Consultant 0 0 $26,180.26*
_____________________________________________________
*Consists of Consulting and Expense reimbursement.
During fiscal years 1994 and 1995, there was no cash compensation for officers
or directors of the Company for the performance of their duties. In fiscal
year 1995, Mr. Roberts was issued 1,000,000 shares of the Common Stock of
the Company in consideration of his services in 1995. Also, as part of the
Company's Executive Long-Term Stock Investment Plan, Mr. Roberts was
granted, in 1995, an option to purchase 2,000,000 shares of Common Stock,
which was exercised in 1996. Pursuant to the Executive Long-Term Stock
Investment Plan, Mr. Roberts was granted an option in 1997 to purchase
500,000 shares of Common Stock of the Company.
The following table provides information on stock options granted to the
Company's Named Officers during the fiscal year ended December 31, 1996.
OPTION GRANTS IN FISCAL YEAR 1996
Number of Percent Exercise Expiration
Securities of Total Price Date
Name Underlying Options
Options Granted to
Granted Employees
_____________________________________________________
Kevin Sherlock 550,000 100% $0.05 7-22-2001
__________________________________________or termination
( 1 ) The options were granted at the fair value of the shares on the date of
grant and have a six-year term. One third of the options vest and become
exercisable on three consecutive six-month periods after the date of the grant.
( 2 ) Mr. Sherlock exercised the option for 550,000 shares on September 10,
1997.
The following table provides information on options exercised in the last
fiscal year by the Company's Named Officers and the value of each such
officer's unexercised options at December 31, 1996.
AGGRAGATED OPTIONS EXERCISED IN FISCAL YEAR 1996 AND FISCAL
YEAR END OPTION VALUES
Shares Value Number of Value of
Acquired Realized Securities Unexercised
Name on Underlying In-the-Money
Exercise Unexercised Options at
Options at FY-End
FY-End
________________________________________________________
Jonathan Roberts 2,000,000 $1,540,000 0 0
________________________________________________________
Kevin Sherlock 0 0 550,000 $396,000
________________________________________________________
( 1 ) Calculated based upon the closing price as reported on the OTC Bulletin
Board National Market on December 31, 1996 of $0.77 per share.
Recent Grants of Stock Options.
Subsequent to December 31, 1996, the Company granted options to acquire an
aggregate of 3,400,000 shares of Common Stock.
Pursuant to the Executive Long-Term Stock Investment Plan, Mr. Roberts was
granted an option on February 14, 1997 to purchase 500,000 shares of Common
Stock of the Company at the exercise price of $0.31.
As part of the acquisition of PetroSun Exploration & Production, Incorporated,
Gordon M. LeBlanc, Jr. received an employment contract to act as President of
PetroSun. Pursuant to the Executive Long-Term Stock Investment Plan Mr.
LeBlanc was granted an option on March 31, 1997 to purchase 2,400,000
shares of the Common Stock of the Company at the exercise price of $0.50.
Pursuant to the June 4, 1997, consulting agreement with its chief geological
consultant, Mr. George Hennessey, the Company issued 500,000 shares of the
Company's Common Stock, and granted Mr. Hennessey an option to acquire
500,000 shares of the Company's Common Stock at the exercise price of $0.50.
40l(k) Profit Sharing Plan.
In October 1997, the Company established a defined contribution plan (the
"401(k) Plan") that qualifies as a cash or deferred profit sharing plan under
Sections 401(a) and 40I(k) of the Internal Revenue Code of 1986, as amended
(the "Internal Revenue Code"). Under the 401(k) Plan, participating employees
may defer from 1% to 15%, of their pre-tax compensation, subject to the
maximum allowed under the Internal Revenue Code. The Company will
contribute $1.00 for each dollar contributed by the employee, up to a maximum
contribution of 2% of the employee's defined compensation. In addition, the
401(k) Plan provides that the Company may make an employer profit sharing
contribution in such amounts as may be determined by the Board of Directors.
1997 Stock Option Plan. The Company's 1997 Stock Option Plan provides
for the granting of options to acquire the Company's Common Stock, the direct
granting of shares of Common Stock, the granting of stock appreciation
rights, or the granting of other cash awards to persons who at the time of
grant are either (i) key personnel (including officers and directors) of the
Company or its subsidiaries, or (ii) consultants and independent contractors
who provide valuable services to the Company or to its subsidiaries.
Employment and Consulting Agreements.
In 1996, Mr. Roberts also entered into an employment agreement with the
Company for $175,000 per year, of which $100,000 is deferred until the
Company obtains additional operating funds. Mr. Roberts received total cash
compensation of $18,000.00 in 1996. In May 1997, the Company amended the
six year employment agreement with Mr. Roberts by including a 1% over-riding
royalty interest on all oil and gas leaseholds.
In 1996, the Company entered into an employment agreement with Mr. Sherlock
for $48,000 per year. Mr. Sherlock received employee compensation of
$10,500.00, and $3,186.78 in consulting and expense reimbursement, for a total
cash compensation of $13,686.78, in 1996. In May 1997, the Company
amended the four year employment agreement with Mr. Sherlock to reflect an
annual salary of $60,000, of which $24,000 is deferred until such time as the
Company has sufficient operating funds, and included a 0.5% over-riding
royalty interest on all oil and gas leaseholds.
As part of the acquisition of PetroSun Exploration & Production, Incorporated,
Gordon M. LeBlanc, Jr. received an employment contract dated April 28, 1997,
to act as President of PetroSun. The two year employment agreement calls for a
base salary of $60,000 and contains bonuses for reaching certain goals of
discovery oil and gas wells.
On June 2, 1997 the Company entered into a consulting agreement with Ian
Collins for marketing services. Mr. Collins is entitled to receive up to
1,400,000 shares of the Company's Common Stock upon the reaching of certain
goals.
On June 4, 1997, the Company entered into a consulting agreement with its
chief geological consultant, Mr. George Hennessey, with a term of two years.
The Consulting Agreement called for the issuance of 500,000 shares of the
Company's Common Stock, granted Mr. Hennessey an option to acquire
500,000 shares of the Company's Common Stock at the exercise price of $0.50,
and provides for consulting fees in the amount of $4,000 per month while Mr.
Hennessey is devoting himself to the Moapa project. Mr. Hennessey has not
received any consulting fees under the Consulting Agreement through
September 30, 1997.
Limitation of Directors' Liability; Indemnification of Directors, Officers,
Employees, and Agents.
The Company's Amended and Restated By-Laws (the "Restated By-Laws")
eliminate the personal liability of any director of the Company to the
Company or its shareholders for money damages for any action taken or failure
to take any action as a director of the Company, to the fullest extent
allowed by the Nevada Business Associations Act (the "Business Association
Act") Title 7, Chapter 78. Under the Business Association Act, directors of
the Company will be liable to the Company or its shareholders only for (a)
the amount of a financial benefit received by the director to which the
director is not entitled; (b) an intentional infliction of harm on the
Company or its shareholders; (c) certain unlawful distributions to
shareholders; and (d) an intentional violation of criminal law. The effect
of these provisions in the Restated By-Laws is to eliminate the rights of
the Company and its shareholders (through shareholders' derivative suits on
behalf of the Company) to recover money damages from a director for all actions
or omissions as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (a)
through (d) above. These provisions do not limit or eliminate the rights of
the Company or any shareholder to seek non-monetary relief such as an
injunction or rescission in the event of a breach of a director's duty of care.
The Company's Restated By-Laws require the Company to indemnify and
advance expenses to any person who incurs liability or expense by reason of
such person acting as a director of the Corporation, to the fullest extent
allowed by the Business Association Act. This indemnification is mandatory
with respect to directors in all circumstances in which indemnification is
permitted by the Business Association Act, subject to the requirements of the
Business Association Act. In addition, the Company may, in its sole
discretion, indemnify and advance expenses, to the fullest extent allowed by
the Business Association Act, to any person who incurs liability or expense
by reason of such person acting as an officer, employee or agent of the
Company, except where indemnification is mandatory pursuant to the Business
Association Act, in which case the Company is required to indemnify to the
fullest extent required by the Business Association Act.
CERTAIN TRANSACTIONS.
On February 27, 1996 the Company sold all of the stock of its subsidiaries
Amateur Golf Association of America, Inc. ("AGAA") and TGI Inc., to Applied
Logic Inc., pursuant to an Assignment and Release Agreement, in exchange for
3,114,000 shares of the Company's Common Stock. Such 3,114,000 shares
of Common stock consisted of (i) the 614,000 shares previously issued to the
former shareholders of AGAA, (ii) 2,000,000 shares previously issued to the
former shareholders of TGII, and (iii) 500,000 shares previously issued in
payment of consulting fees in connection with the original acquisition of
TGII, all of which were transferred by the holders thereof to Applied Logic,
Inc., and then by Applied Logic, Inc. to the Company, pursuant to the
Assignment and Release Agreement. Also pursuant to the agreement, Applied
Logic, Inc. issued shares of its common stock to the former shareholders of
AGAA and TGII. In addition, AGAA, TGII and their former shareholders agreed
to release the Company from all liabilities the Company might have to any of
them in connection with the matters arising prior to the date of the
Assignment and Release Agreement, and the Company agreed to release AGAA,
TGII and their former shareholders from all liability any of them might have
to the Company in connection with matters arising prior to the date of such
agreement. Pursuant to such agreement, the Company received a note for
$500,000.00 and 500,000 shares of Applied Logic, Inc. common stock for those
assets.
On March 4, 1996, the Company changed its name to Cronus Corporation.
On March 31, 1996 the Company entered into an agreement with the Black
Diamond Mining Corporation to purchase the Lelan-Dividend Mine Group
assets. The Company agreed to issue 2,250,000 shares of its Common Stock
for the purchase of the Lelan-Dividend Mine Group assets owned by Black
Diamond Mining Corporation. Subsequently, while waiting for the appraisal and
audited financial statements, a new agreement was negotiated. The new
agreement consisted of a Reorganization and Stock Exchange Agreement
between Cronus Corporation and Black Diamond Mining Corporation which was
signed May 23, 1996. While this agreement was in effect, the parties
formulated a second reorganization agreement on July 8, 1996 in the form of
a reverse triangular merger for tax purposes. Pursuant to the merger
agreement, the shareholders of Black Diamond Mining Corporation's sole
shareholder were to have acquired shares of the Company's Common Stock
constituting 80% of the outstanding Common Stock of the Company.
On July 19, 1996 PBAA, then a wholly owned subsidiary of Cronus Corporation,
sold substantially all of its assets, other than shares of the Company's Common
Stock held by PBAA, to EI Tour De Tucson, Inc., a Arizona non-profit
corporation, as provided for in an Asset Purchase Agreement. As consideration
for such sale, El Tour de Tucson, Inc. assumed PBAA's outstanding obligations.
On August 7, 1996, Perimeter Bicycling Association of America, Inc. changed its
name to Sunorc, Inc.
On December 11, 1996, the Company and Black Diamond Mining Corporation
agreed to terminate the amended reorganization Agreement, due to questions
that had arisen regarding the appraisals of the Leland-Dividend Mine Group
assets. Subsequently, share certificates previously delivered to Black Diamond
Mining Corporation's shareholders pending closing of the merger were returned
to the Company and certain affiliates of Black Diamond Mining Corporation
transferred their interests in certain mining claims to the Company as
consideration for certain testing and development expenditures made by the
Company in connection with the Leland-Dividend mine Group assets. The
mining claims transferred to the Company consist of the Black Diamond Lode
Mining Claims and Gila Gold Placer Claims.
On April 3, 1997, the Company entered into a Reorganization Agreement with
PetroSun Exploration & Production, Inc. (hereinafter referred to as
"PetroSun"), an Arizona corporation incorporated on April 4, 1996. PetroSun
controls certain oil and gas leases in Louisiana and Northern Arizona.
Pursuant to the Reorganization Agreement, the outstanding shares of PetroSun
were acquired by the Company in return for 600,000 shares of the Company's
restricted common stock. The Agreement called for PetroSun to be merged with
Big Bug Acquisition Company, a wholly owned subsidiary of the Company, in the
form of a reverse triangular merger. The transaction closed on June 4, 1997.
PetroSun has executed an Employment Contract with the President of PetroSun,
Gordon M. LeBlanc, Jr. for a period of 2 years. Additionally, Mr. LeBlanc was
granted an employee Incentive Stock Option. The grant provides the option for
Mr. LeBlanc, Jr. to acquire up to 2,400,000 shares of the Company's stock at a
price of $0.50.
Also on April 3, 1997, Cronus Corporation, and Temple Summit Financial
Projects Inc. ("TSFP") entered into a Joint Venture Agreement to conduct
testing regarding the viability of extracting gold from an area of mining
claims held by Temple Summit. Temple Summit holds an existing 80 acre block
of proven gold reserves in the Moapa District, Nevada. The assets of the new
Moapa Project are approximately two square miles of claims adjacent to TSFP's
proven reserve block. Cronus and Temple Summit will test the area and
samples from the Moapa Project will be assayed. If the assays reflect
economical viable gold, the Joint Venture will proceed with the project.
On October 17, 1997, Cronus Corporation entered into an agreement to acquire
all the outstanding shares of Strategic Consulting and Administration, Inc.
("SCI"). SCI holds ATP 636P, a 640,000 acre oil and gas concession located in
Queensland, Australia within the oil and gas producing region of the Eromanga
basin. Cronus has issued 500,000 shares of the restricted common stock of the
Company and will pay $475,000 to shareholders of SCI. Additionally, Cronus
will issue up to an additional 1,500,000 shares of the Company's restricted
common stock and pay up to an additional $500,000 to the shareholders of SCI
upon the reaching of certain goals and conditions.
Cronus entered the secondary oil recovery business through its acquisition of
50% of Tiger Energy Corporation on July 24, 1997. Cronus issued 400,000
shares of its restricted common stock, and will issue another 400,000 shares to
the shareholders of Tiger Energy Corporation in return for 50% of the
outstanding shares of Tiger Energy Corporation. Tiger Energy is the exclusive
"Enhanced Oil Recovery Operating Company" for Tiger Tool Inc. Tiger Tool Inc.
holds the exclusive U.S. license for the patented electro-hydraulic crude oil
recovery technology using a pulsed plasma tool. Target properties consist of
shut-in, plugged, or marginal oil fields with proven reserves that require
secondary recovery operations to produce commercial quantities of crude oil.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.
Section l6(a) of the Exchange Act requires the Company's directors, officers,
and persons who own more than 10 percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with
the Securities and Exchange Commission (the "Commission"). Directors, officers
and greater than 10 percent shareholders are required by the Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file. Based solely upon the Company's review of the copies of such forms
received by it during the fiscal year ended December 31, 1996 and written
representations that no other reports were required, the Company believes that
each person who at any time during such fiscal year was a director, officer, or
beneficial owner of more than 10 percent of the Company's Common Stock
complied with all Section 16(a) filing requirements during such fiscal year,
except that (i) Jonathan Roberts filed a late report on Form 5 covering the
grant and exercise of stock options; and (ii) Kevin M. Sherlock filed a late
report on Form 5 covering the grant of stock options.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS, DIRECTORS,
AND OFFICERS.
The following table sets forth certain information regarding the shares of the
Company's outstanding Common Stock beneficially owned as of December 15,
1997 by (i) each other person who is known by the Company to own beneficially
or exercise voting or dispositive control over more than 5% of the Company's
Common Stock, (ii) each of the Company's directors and executive officers, and
(iii) officers all directors and executive officers as a group.
Name and Address of Amount and Nature Percent
Security Ownership of Beneficial of
of Certain Beneficial Ownership Class
Owners and Management
Ownership of Management:
Jonathan Roberts 3,500,000* 19%
President and Director
660 S. Freeman Rd.
Tucson, Arizona 85748
Kevin Sherlock 550,000 3%
43 E. 2nd Street
Tucson, Arizona 85705
George Hennessey 1,000,000* 5.4%
4291 S. Polaris Ave, #A
Las Vegas, Nevada 89117
Gordon M. LeBlanc, Jr. 3,000,000** 16%
8129 N. 87th Place
Scottsdale, Arizona 85258
J. Dennis Bartlett 0 0
2461 E. 6th Street
Tucson, Arizona 85716
Jim Karten 84,943 0.4%
4422 N. Palisade Drive
Tucson, Arizona 85749
Thomas J. Nieman 0 0
5761 East 13th Street
Tucson, Arizona 85711
All Directors and Officers 8,034,943*** 43%
*Includes option to purchase 500,000 shares.
**Includes options to purchase 2,400,000 shares.
***Includes options to purchase 3,400,000 shares.
(1) Each person named in the table has sole voting and investment power with
respect to all Common Stock beneficially owned by him or her, subject to
applicable community property law, except as otherwise indicated. Except as
otherwise indicated, each of such persons may be reached through the
Company at 7660 East Broadway, Suite 210, Tucson, Arizona 85710.
(2) The percentages shown are calculated based upon 18,677,316 shares of
Common Stock on December 15, 1997. The numbers and percentages shown
include the shares of Common Stock actually owned and outstanding as of
December 15, 1997, (15,277,316) and the shares of Common Stock that the
identified person or group had the right to acquire within 60 days of such
date, (3,400,000). In calculating the percentage of ownership, all shares
of Common Stock that the identified person or group had the right to acquire
within 60 days of December 15, 1997 upon the exercise of options are deemed
to be outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by such person or group, but are not deemed to be
outstanding for the purpose of computing the percentage of the shares of
Common Stock owned by any other person.
CHANGE IN CONTROL.
At the end of fiscal year 1995, Mr. Jonathan Roberts held 23% of the
outstanding shares of the Company. At the end of fiscal year 1996, Mr. Roberts
continued to hold 23%. During 1997, Mr. Gordon M. LeBlanc, Jr. President of
PetroSun, a wholly owned subsidiary of the Company, acquired 16%, while
Mr. Roberts' holding equaled 19% as of December 15, 1997. While the holdings
of Mr. Roberts and Mr. LeBlanc together total 35% as of December 15, 1997, the
Company does not believe that a change in control has taken place. There are
no agreements or understandings with respect to the voting of the stock held by
either Mr. Roberts or Mr. LeBlanc.
PROPOSAL TO ADOPT THE COMPANY'S 1997 STOCK OPTION PLAN
The Board of Directors has approved a proposal to adopt a 1997 Stock Option
Plan (the "1997 Plan"), subject to approval by the Company's shareholders at
the Meeting. The full text of the 1997 Stock Option Plan as proposed is
included as "Appendix A" to this Proxy Statement. The Board of Directors
recommends a vote "FOR" the proposed 1997 Plan.
The 1997 Plan is intended to promote the interests of the Company by providing
key employees, consultants, and independent contractors who provide valuable
services to the Company with the opportunity to acquire, or otherwise increase,
their proprietary interest in the Company as an incentive to remain in
service to the Company. The Board of Directors determined that as a result
of the Company's recent business acquisitions, it was in the best interests
of the Company to establish the number of shares authorized for issuance
pursuant to the Plan at 4,000,000. The Board of Directors believes that it
is in the best interests of the Company to adopt the l997 Plan.
Description of the 1997 Stock Option Plan
General.
The 1997 Plan provides for the grant of options to acquire Common Stock of the
Company ("Options"), the direct grant of Common Stock ("Stock Awards"), the
grant of stock appreciation rights ("SARs"), and the grant of other cash awards
("Cash Awards") (Stock Awards, SARs, and Cash Awards are collectively
referred to herein as "Awards"). The 1997 Plan states that it is not
intended to be the exclusive means by which the Company may issue options or
warrants to acquire its Common Stock, stock awards, or any other type of
award. To the extent permitted by applicable law, the Company may issue any
other options, warrants, or awards other than pursuant to the 1997 Plan
without shareholder approval.
Shares Subject to the Plan.
A maximum of 4,000,000 shares of the Company's Common Stock may be
issued under the 1997 Plan. If any Option or SAR terminates or expires without
having been exercised in full, stock not issued under such Option or SAR will
again be available for the purposes of the 1997 Plan. If any change is made in
the stock subject to the 1997 Plan or subject to any Option or SAR granted
under the 1997 Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, split-up, combination of shares, exchange of
shares, change in corporate structure, or otherwise), the 1997 Plan provides
that appropriate adjustments will be made as to the maximum number of shares
subject to the 1997 Plan and the number of shares and exercise price per share
of stock subject to outstanding Options or Awards. As of December 15, 1997, no
Options or Awards have been granted under the 1997 Plan.
Eligibility and Administration.
Options and Awards may be granted pursuant to the 1997 Plan only to persons
("Eligible Persons") who at the time of grant are either (i) key personnel
(including officers and directors) of the Company, or (ii) consultants and
independent contractors who provide valuable services to the Company.
Options granted pursuant to the 1997 Plan may be incentive stock options or
non-qualified stock options. Options that are incentive stock options may be
granted only to key personnel of the Company who are also employees of the
Company. To the extent that granted Options are incentive stock options, the
terms and conditions of those Options must be consistent with the qualification
requirements set forth in the Internal Revenue Code of 1986, as amended (the
"Code").
The Eligible Persons under the 1997 Plan are divided into two groups, and there
is a separate administrator (each a "Plan Administrator") for each group. One
group consists of the executive officers and directors of the Company and
persons who own 10 percent or more of the Company's issued and outstanding
stock. The power to administer the 1997 Plan with respect to those persons is
vested exclusively with the Board of Directors or a committee (the "Senior
Committee") comprised of two or more non-employee directors who are
appointed by the Board of Directors. The power to administer the 1997 Plan
with respect to the remaining Eligible Persons is vested with the Board of
Directors of the Company or with a committee of one or more directors appointed
by the Board of Directors. Each Plan Administrator determines (i) which of the
Eligible Persons in its group will be granted Options and Awards; (ii) the
amount and timing of the grant of such Options and Awards; and (iii) such
other terms and conditions as may be imposed by the Plan Administrator
consistent with the 1997 Plan. No person who is an employee of the Company
may receive Options or Awards in an amount that exceeds 50 percent of the
shares of Common Stock that may be issued under the 1997 Plan.
Notwithstanding the foregoing, the Board of Directors must approve the grant
to any Eligible Person of Options to acquire more than 50,000 shares of
Common Stock.
Terms and Conditions of Options; Exercise of Options.
Each Plan Administrator will determine the expiration date, maximum number of
shares purchasable, and the other provisions of the Options at the time of
grant. Options may be granted for terms of up to 10 years. Options will
vest and become exercisable in whole or in one or more installments at such
time as may be determined by the Plan Administrator upon the grant of the
Options. However, a Plan Administrator has the discretion to provide for the
automatic acceleration of the vesting of any Options or Awards granted under
the 1997 Plan in the event of a "Change in Control," as defined in the 1997
Plan.
Each Plan Administrator also will determine the exercise prices of Options at
the time of grant. However, the exercise price of any Option intended to be an
incentive stock option may not be less than 100 percent of the fair market
value of the Common Stock at the time of the grant (110 percent if the Option
is granted to a person 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). On December 15, 1997, the closing price of
the Company's Common Stock on the OTC Bulletin Board was $0.65 per share.
To exercise an Option, the optionholder will be required to deliver to the
Company full payment of the exercise price for the shares as to which the
Option is being exercised. Generally, Options can be exercised by delivery
of cash, check, or shares of Common Stock of the Company.
Transferability; Termination of Employment or Services.
Except as otherwise allowed by the Plan Administrator, Options and Awards
granted under the 1997 Plan are nontransferable other than by will or by the
laws of descent and distribution upon the death of the holder and, during the
lifetime of the holder, are exercisable only by such holder. In the event of
the termination of an employee holder's services with the Company, other than
for death or disability, the holder may exercise any vested incentive stock
options or vested SARs granted in conjunction with incentive stock options
until the earlier of (i) three months after the date of termination of
service, or (ii) the expiration date of such Options or SARs. However, such
Options or SARs held by the terminated employee will immediately become void
and terminate if the holder is discharged for "cause," as defined in the 1997
Plan, or if the holder commits acts detrimental to the Company's interests
after his or her service is terminated. If termination is by reason of
disability, however, the holder may exercise his or her vested Options or
vested SARs until the earlier of (i) 12 months after the termination of
service, or (ii) the expiration of the term of the Option or SAR. If the
holder dies while in service to the Company, the holder's estate or successor
by bequest or inheritance may exercise any vested Options or SARs that the
holder was entitled to exercise on the date of his or her death at any time
until the earlier of (i) the period ending three months after the holder's
death, or (ii) the expiration of the term of the Option or SAR. Vested
Options that are not incentive stock options and vested SARs granted in
conjunction with non-qualified stock options will remain exercisable for the
period of time determined by the Plan Administrator at the time of grant and
set forth in the documents evidencing such vested Options or SARs. In the
absence of such provisions, such Options and SARs will remain exercisable for
one year after termination as a result of disability and for three months after
termination as a result of death or for any reason other than termination by
the Company for "cause" or if the holder commits acts detrimental to the
Company's interests, in which case the Options and SARs will immediately
become void and terminate.
Awards.
SARs will entitle the recipient to receive a payment equal to the
appreciation in market value of a stated number of shares of Common Stock
from the price on the date the SAR was granted or became effective to the
market value of the Common Stock on the date the SARs are exercised or
surrendered. Stock Awards will entitle the recipient to receive shares of
the Company's Common Stock directly. Cash Awards will entitle the recipient
to receive direct payments of cash depending on the market value or the
appreciation of the Common Stock or other securities of the Company. The
Plan Administrators may determine such other terms, conditions, or
limitations, if any, on any Awards granted pursuant to the 1997 Plan.
Duration and Modification.
The 1997 Plan will remain in effect until December 15, 2007. The Board of
Directors of the Company may at any time suspend, amend, or terminate the
1997 Plan, except that without approval of the Company's shareholders, the
Board of Directors may not (i) increase the maximum number of shares of
Common Stock subject to the 1997 Plan (except in the case of certain organic
changes to the Company), (ii) reduce the exercise price at which Options may be
granted or the exercise price for which any outstanding Options may be
exercised, (iii) extend the term of the 1997 Plan, (iv) change the class of
persons eligible to receive Options or Awards under the 1997 Plan, or (v)
materially increase the benefits accruing to participants under the 1997
Plan. In addition, the Board may not, without the consent of the
optionholder, take any action that disqualifies any Option previously granted
under the Plan for treatment as an incentive stock option or which adversely
affects or impairs the rights of the optionholder of any outstanding Option.
Notwithstanding the foregoing, the Board of Directors may amend the 1997 Plan
from time to time as it deems necessary in order to meet the requirements of
any amendments to Rule 16b-3 under the Exchange Act without the consent of
the shareholders.
Federal Income Tax Consequences.
Certain Options granted under the 1997 Plan will be intended to qualify as
incentive stock options under Section 422 of the Code. Accordingly, there will
be no taxable income to an employee when an incentive stock option is granted
to him or her or when that option is exercised. The amount by which the
fair market value of the shares at the time of exercise exceeds the exercise
price generally will be treated as an item of preference in computing the
alternate minimum taxable income of the optionholder. If an optionholder
exercises an incentive stock option and does not dispose of the shares within
either two years after the date of the grant of the Option or one year of the
date the shares were issued to the optionholder, any gain realized upon
disposition will be taxable to the optionholder as a capital gain. If the
optionholder does not satisfy the applicable holding periods, however, the
difference between the exercise price and the fair market value of the shares
on the date of exercise of the Option will be taxed as ordinary income, and
the balance of the gain, if any, will be taxed as capital gain. If the
shares are disposed of before the expiration of the one-year and two-year
periods and the amount realized is less than the fair market value of the
shares at the date of exercise, the employee's ordinary income is limited to
the amount realized less the exercise price paid. The Company will be
entitled to a tax deduction only to the extent the optionholder has ordinary
income upon the sale or other disposition of the shares received when the
Option was exercised.
Options issued under the 1997 Plan also may be non-qualified options. The
income tax consequences of non-qualified options and Stock Awards will be
governed by Section 83 of the Code. Under Section 83, the excess of the fair
market value of the shares of the Company's Common Stock acquired pursuant
to the grant of a Stock Award or the exercise of any Option over the amount
paid for such stock (hereinafter referred to as "Excess Value") must be
included in the gross income of the holder in the first taxable year in which
the Common Stock acquired by the holder is not subject to a substantial risk
of forfeiture. In calculating Excess Value, fair market value will be
determined on the date that the substantial risk of forfeiture expires,
unless a Section 83(b) election is made to include the Excess Value in income
immediately after the acquisition, in which case fair market value will be
determined on the date of the acquisition. Generally, the Company will be
entitled to a federal income tax deduction in the same taxable year that
holders, including "highly compensated officers" for purposes of Section
162(m) of the Internal Revenue Code, recognize income. The Company will be
required to withhold income taxes with respect to income reportable pursuant
to Section 83 by a holder. The basis of the shares acquired by an
optionholder will be equal to the exercise price of those shares plus any
income recognized pursuant to Section 83. Subsequent sales of the acquired
shares will produce capital gain or loss. Such capital gain or loss will be
long term if the stock has been held for one year from the date the
substantial risk of forfeiture lapsed or, if a Section 83(b) election is
made, one year from the date the shares were acquired.
Generally, all Cash Awards granted to employees will be treated as
compensation income to the employees when the cash payment is made
pursuant to the award. Such cash payment will also result in a federal income
tax deduction for the Company.
Ratification by Shareholders of the 1997 Plan.
Approval of the 1997 Plan will require the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock of the Company present in
person or by proxy at the Meeting and voting on the proposal. Upon approval of
the 1997 Plan by the Company's shareholders, any Options or Awards granted
pursuant to the 1997 Plan prior to approval will remain valid and unchanged.
In the event that the 1997 Plan is not approved by the Company's shareholders
at the Meeting, any Options and Awards granted pursuant to the 1997 Plan will
automatically terminate and be forfeited to the same extent and with the same
effect as though the 1997 Plan had never been adopted, and the Company will
not make any further grants of Options or Awards under the 1997 Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Addison Roberts & Ludwig, PC,
independent public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ending December 31, 1997. Addison Roberts
& Ludwig, PC previously audited the consolidated financial statements of the
Company for the fiscal years 1995 and 1996. The Board of Directors
recommends that the shareholders vote "FOR" the ratification of such
appointment. Ratification of such appointment will require the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
of the Company present in person or by proxy at the meeting. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection. The Board of Directors anticipates that representatives of Addison
Roberts & Ludwig, PC will be present at the Meeting, will have the opportunity
to make a statement if they desire, and will be available to respond to
appropriate questions.
By mutual agreement, the Company released its former independent
accountants, Schroeder & Stevenson, C.P.A.'s, from performing further
accounting services on November 7, 1996. Schroeder & Stevenson reports on
the financial statements of the Company did not contain any adverse opinion
or disclaimer of opinion, nor were they modified as to uncertainty, audit
scope, or accounting practices. The Board of Directors approved the decision
to change independent accountants. There were no disagreements with the former
accountants on any matter of accounting principle or practices, financial
statement or disclosure, or audit scope or procedure, which, if not resolved to
the former accountant's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report. The Company hired Addison Roberts & Ludwig, PC, to audit the
consolidated financial statements of the Company for the fiscal years 1995
and 1996.
1997 ANNUAL MEETING
The date for the annual meeting of shareholders for 1997 has been tentatively
set for June 1, 1998. Qualifying shareholders may submit to the Company for
inclusion in proxy materials relating to the 1997 annual meeting appropriate
shareholders proposals which are consistent with the requirements set forth in
the Company's articles and by-laws and in applicable federal securities laws.
Appropriate proposals from qualifying shareholders must be received by
the Company at its principal executive offices by January 30, 1998, for
inclusion in the proxy currently anticipated for use in conjunction with the
1997 annual meeting of shareholder to be held in 1998.
OTHER MATTERS
The Board of Directors is not aware of any other matter which may come before
the meeting. The designee named in the accompanying form of proxy will vote
your proxy in accordance with his judgment if any other matter does properly
come before the meeting. A majority of those votes present, if a quorum is
attained and if case in favor of any such matter, is currently anticipated to
result in passage.
It is urged that proxies for the meeting be returned promptly. Shareholders
are requested to fill in, sign, date and return the accompanying proxy card.
Dated: January 9, 1997
APPENDIX A
CRONUS CORPORATION
1997 STOCK OPTION PLAN
ARTICLE I
General
I.1 Purpose of Plan; Term.
(a) Adoption. On November 24, 1997, the Board of Directors
(the "Board") of Cronus Corporation, a Nevada corporation (the "Company"),
adopted this stock option plan to be known as the Cronus Corporation 1997
Stock Option Plan (the "Plan").
(b) Defined Terms. All initially capitalized terms used hereby
shall have the meaning set forth in Article V hereto.
(c) General Purpose. The purpose of the Grant Program is to
further the interests of the Company and its shareholders by encouraging key
persons associated with the Company (or Parent or Subsidiary Corporations) to
acquire shares of the Company's Stock, thereby acquiring a proprietary interest
in its business and an increased personal interest in its continued success and
progress. Such purpose shall be accomplished by providing for the granting of
options to acquire the Company's Stock ("Options"), the direct granting of the
Company's Stock ("Stock Awards"), the granting of stock appreciation rights
("SARs"), or the granting of other cash awards ("Cash Awards") (Stock Awards,
SARs and Cash Awards shall be collectively referred to herein as "Awards").
(d) Character of Options. Options granted under this Plan to
employees of the Company (or Parent or Subsidiary Corporations) that are
intended to qualify as "incentive stock options" as defined in Code section 422
("Incentive Stock Options") will be specified in the applicable stock option
agreement. All other Options granted under this Plan will be nonqualified
options.
(e) Rule 16b-3 Plan. The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and therefore the Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the 1934 Act. To the extent any provision of the Plan or action by a
Plan Administrator fails to so comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by such Plan Administrator.
In addition, the Board may amend the Plan from time to time as it deems
necessary in order to meet the requirements of any amendments to Rule 16b-3
without the consent of the shareholders of the Company.
(f) Duration of Plan. The term of the Plan is 10 years
commencing on the date of adoption of the original Plan by the Board as
specified in Section 1.1(a) hereof. No Option or Award shall be granted under
the Plan unless granted within 10 years of the adoption of the Plan by the
Board, but Options or Awards outstanding on that date shall not be terminated
or otherwise affected by virtue of the Plan's expiration.
I.2 Stock and Maximum Number of Shares Subject to Plan.
(a) Description of Stock and Maximum Shares Allocated. The
shares of stock subject to the provisions of the Plan and issuable upon the
grant of Stock Awards or upon the exercise of SARs or Options granted under
the Plan are shares of the Company's common stock, $.001 par value per share
(the "Stock"), which may be either unissued or treasury shares. The Company
may not issue more than 4,000,000 shares of Stock pursuant to the Plan, unless
the Plan is amended as provided in Section 1.3 or the maximum number of
shares subject to the Plan is adjusted as provided in Section 3.1.
(b) Calculation of Available Shares. The number of shares of
Stock available under the Plan shall be reduced (i) by any shares of Stock
issued (including any shares of Stock withheld for tax withholding
requirements) upon exercise of an Option and (ii) by any shares of Stock
issued (including any shares of Stock withheld for tax withholding
requirements) upon the grant of a Stock Award or the exercise of a SAR.
(c) Restoration of Unpurchased Shares. If an Option or SAR
expires or terminates for any reason prior to its exercise in full and before
the term of the Plan expires, the shares of Stock subject to, but not issued
under, such Option or SAR shall, without further action or by or on behalf of
the Company, again be available under the Plan.
I.3 Approval; Amendments.
(a) Approval by Shareholders. The Plan shall be submitted to
the shareholders of the Company for their approval at a regular or special
meeting to be held within 12 months after the adoption of the Plan by the
Board. Shareholder approval shall be evidenced by the affirmative vote of the
holders of a majority of the shares of the Company's Common Stock present in
person or by proxy and voting at the meeting. The date such shareholder
approval has been obtained shall be referred to herein as the "Effective Date."
(b) Commencement of the Grant Program. The Grant Program
is effective immediately, but if the Plan is not approved by the shareholders
within 12 months after its adoption by the Board, the Plan and all Options and
Awards made under the Grant Program will automatically terminate and be
forfeited to the same extent and with the same effect as though the Plan had
never been adopted.
(c) Amendments to Plan. The Board may, without action on the
part of the Company's shareholders, make such amendments to, changes in and
additions to the Plan as it may, from time to time, deem necessary or
appropriate and in the best interests of the Company; provided, the Board may
not, without the consent of the applicable Optionholder, take any action
which disqualifies any Option previously granted under the Plan for treatment
as an Incentive Stock Option or which adversely affects or impairs the rights
of the Optionholder of any Option outstanding under the Plan, and further
provided that, except as provided in Article III hereof, the Board may not,
without the approval of the Company's shareholders, (i) increase the
aggregate number of shares of Stock subject to the Plan, (ii) reduce the
exercise price at which Options may be granted or the exercise price at which
any outstanding Option may be exercised, (iii) extend the term of the Plan,
(iv) change the class of persons eligible to receive Options or Awards under
the Plan, or (v) materially increase the benefits accruing to participants
under the Plan. Notwithstanding the foregoing, Options or Awards may be
granted under this Plan to purchase shares of Stock in excess
of the number of shares then available for issuance under the Plan if (A) an
amendment to increase the maximum number of shares issuable under the Plan
is adopted by the Board prior to the initial grant of any such Option or
Award and within one year thereafter such amendment is approved by the
Company's shareholders and (B) each such Option or Award granted does not
become exercisable or vested, in whole or in part, at any time prior to the
obtaining of such shareholder approval.
ARTICLE II
Grant Program
II.1 Participants; Administration.
(a) Eligibility and Participation. Options and Awards may be
granted only to persons ("Eligible Persons") who at the time of grant are (i)
key personnel (including officers and directors) of the Company or Parent or
Subsidiary Corporations, or (ii) consultants or independent contractors who
provide valuable services to the Company or Parent or Subsidiary Corporations;
provided that (1) Incentive Stock Options may only be granted to key personnel
of the Company (and its Parent or Subsidiary Corporation) who are also
employees of the Company (or its Parent or Subsidiary Corporation) and (2) the
maximum number of shares of stock with respect to which Options or Awards
may be granted to any employee during the term of the Plan shall not exceed 50
percent of the shares of stock covered by the Plan. A Plan Administrator shall
have full authority to determine which Eligible Persons in its administered
group are to receive Option grants under the Plan, the number of shares to be
covered by each such grant, whether or not the granted Option is to be an
Incentive Stock Option, the time or times at which each such Option is to
become exercisable, and the maximum term for which the Option is to be
outstanding. A Plan Administrator shall also have full authority to
determine which Eligible Persons in such group are to receive Awards under
the Grant Program and the conditions relating to such Award. Notwithstanding
the foregoing, the Board must approve the grant to any Eligible Person of
Options to acquire more than 50,000 shares of Stock.
(b) General Administration. The Eligible Persons under the
Grant Program shall be divided into two groups and there shall be a separate
administrator for each group. One group will be comprised of Eligible Persons
that are Affiliates. For purposes of this Plan, the term "Affiliates" shall
mean all "officers" (as that term is defined in Rule 16a-1(f) promulgated
under the 1934 Act) and directors of the Company and all persons who own ten
percent or more of the Company's issued and outstanding equity securities.
Initially, the power to administer the Grant Program with respect to Eligible
Persons that are Affiliates shall be vested with the Board. At any time,
however, the Board may vest the power to administer the Grant Program with
respect to Persons that are Affiliates exclusively with a committee (the
"Senior Committee") comprised of two or more Non-Employee Directors who are
appointed by the Board. The Senior Committee, in its sole discretion, may
require approval of the Board for specific grants of Options or Awards under
the Grant Program. The administration of all Eligible Persons that are not
Affiliates ("Non-Affiliates") shall be vested exclusively with the Board.
The Board, however, may at any time appoint a committee (the "Employee
Committee") of one or more persons who are members of the Board and delegate
to such Employee Committee the power to administer the Grant Program with
respect to the Non-Affiliates. In addition, the Board may establish an
additional committee or committees of persons who are members of the Board
and delegate to such other committee or committees the power to administer
all or a portion of the Grant program with respect to all or a portion of the
Eligible Persons. Members of the Senior Committee, Employee Committee or any
other committee allowed hereunder shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.
The Board may at any time terminate all or a portion of the functions of the
Senior Committee, the Employee Committee, or any other committee allowed
hereunder and reassume all or a portion of powers and authority previously
delegated to such committee. The Board in its discretion may also require
the members of the Senior Committee, the Employee Committee or any other
committee allowed hereunder to be "outside directors" as that term is defined
in any applicable regulations promulgated under Code section 162(m).
(c) Plan Administrators. The Board, the Employee Committee, Senior
Committee, and/or any other committee allowed hereunder, whichever is
applicable, shall be each referred to herein as a "Plan Administrator." Each
Plan Administrator shall have the authority and discretion, with respect to its
administered group, to select which Eligible Persons shall participate in the
Grant Program, to grant Options or Awards under the Grant Program, to
establish such rules and regulations as they may deem appropriate with respect
to the proper administration of the Grant Program and to make such
determinations under, and issue such interpretations of, the Grant Program and
any outstanding Option or Award as they may deem necessary or advisable.
Unless otherwise required by law or specified by the Board with respect to any
committee, decisions among the members of a Plan Administrator shall be by
majority vote. Decisions of a Plan Administrator shall be final and binding
on all parties who have an interest in the Grant Program or any outstanding
Option or Award.
(d) Guidelines for Participation. In designating and selecting
Eligible Persons for participation in the Grant Program, a Plan Administrator
shall consult with and give consideration to the recommendations and criticisms
submitted by appropriate managerial and executive officers of the Company. A
Plan Administrator also shall take into account the duties and
responsibilities of the Eligible Persons, their past, present and potential
contributions to the success of the Company and such other factors as a Plan
Administrator shall deem relevant in connection with accomplishing the
purpose of the Plan.
II.2 Terms and Conditions of Options.
(a) Allotment of Shares. A Plan Administrator shall determine
the number of shares of Stock to be optioned from time to time and the number
of shares to be optioned to any Eligible Person (the "Optioned Shares"). The
grant of an Option to a person shall neither entitle such person to, nor
disqualify such person from, participation in any other grant of Options or
Stock Awards under this Plan or any other stock option plan of the Company.
(b) Exercise Price. Upon the grant of any Option, a Plan
Administrator shall specify the option price per share. If the Option is
intended to qualify as an Incentive Stock Option under the Code, the option
price per share may not be less than 100 percent of the fair market value per
share of the stock on the date the Option is granted (110 percent if the
Option is granted to a shareholder who at the time the Option is granted owns
or is deemed to own stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company or of any Parent
or Subsidiary Corporation). The determination of the fair market value of
the Stock shall be made in accordance with the valuation provisions of
Section 3.5 hereof.
(c) Individual Stock Option Agreements. Options granted under
the Plan shall be evidenced by option agreements in such form and content as a
Plan Administrator from time to time approves, which agreements shall
substantially comply with and be subject to the terms of the Plan, including
the terms and conditions of this Section 2.2. As determined by a Plan
Administrator, each option agreement shall state (i) the total number of
shares to which it pertains, (ii) the exercise price for the shares covered
by the Option, (iii) the time at which the Options vest and become
exercisable and (iv) the Option's scheduled expiration date. The option
agreements may contain such other provisions or conditions as a Plan
Administrator deems necessary or appropriate to effectuate the sense and
purpose of the Plan, including covenants by the Optionholder not to compete
and remedies for the Company in the event of the breach of any such covenant.
(d) Option Period. No Option granted under the Plan that is
intended to be an Incentive Stock Option shall be exercisable for a period in
excess of 10 years from the date of its grant (five years if the Option is
granted to a shareholder who at the time the Option is granted owns or is
deemed to own stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company or of any Parent or any
Subsidiary Corporation), subject to earlier termination in the event of
termination of employment, retirement or death of the Optionholder. An
Option may be exercised in full or in part at any time or from time to time
during the term of the Option or provide for its exercise in stated
installments at stated times during the Option's term.
(e) Vesting; Limitations. The time at which Options may be
exercised with respect to an Optionholder shall be in the discretion of that
Optionholder's Plan Administrator. Notwithstanding the foregoing, to the
extent an Option is intended to qualify as an Incentive Stock Option, the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Stock for which one or more Options granted to any person under
this Plan (or any other option plan of the Company or its Parent or
Subsidiary Corporations) may for the first time become exercisable as
Incentive Stock Options during any one calendar year shall not exceed the sum
of $100,000 (referred to herein as the "$100,000 Limitation"). To the extent
that any person holds two or more Options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability as an Incentive Stock Option shall be applied on the basis of
the order in which such Options are granted.
(f) No Fractional Shares. Options shall be exercisable only for
whole shares; no fractional shares will be issuable upon exercise of any Option
granted under the Plan.
(g) Method of Exercise. To exercise an Option with respect to
any vested Optioned Shares, an Optionholder (or in the case of an exercise
after an Optionholder's death, such Optionholder's executor, administrator,
heir or legatee, as the case may be) must take the following action:
(i) execute and deliver to the Company a written notice
of exercise signed in writing by the person exercising the Option specifying
the number of shares of Stock with respect to which the Option is being
exercised;
(ii) pay the aggregate Option Price in one of the
alternate forms as set forth in Section 2.2(h) below; and
(iii) furnish appropriate documentation that the person or persons
exercising the Option (if other than the Optionholder) has the right to
exercise such Option.
As soon as practicable after the Exercise Date, the Company will mail or
deliver to or on behalf of the Optionholder (or any other person or persons
exercising an Option under the Plan) a certificate or certificates
representing the Stock acquired upon exercise of the Option.
(h) Payment of Option Price. The aggregate Option Price shall
be payable in one of the alternative forms specified below:
(i) Full payment in cash or check made payable to the Company's order; or
(ii) Full payment in shares of Stock held for the requisite
period necessary to avoid a charge to the Company's reported earnings and
valued at fair market value on the Exercise Date (as determined in accordance
with Section 3.5 hereof); or
(iii) If a cashless exercise program has been
implemented by the Board, full payment through a sale and remittance
procedure pursuant to which the Optionholder (A) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate
sale of the Optioned Shares to be purchased and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate exercise price payable for the Optioned Shares to be purchased
and (B) shall concurrently provide written directives to the Company to
deliver the certificates for the Optioned Shares to be purchased directly to
such brokerage firm in order to complete the sale transaction.
(i) Rights of a Shareholder. An Optionholder shall not have
any of the rights of a shareholder with respect to Optioned Shares until such
individual shall have exercised the Option and paid the Option Price for the
Optioned Shares. No adjustment will be made for dividends or other rights for
which the record date is prior to the date of such exercise and full payment
for the Optioned Shares.
(j) Repurchase Right. The Plan Administrator may, in its sole
discretion, set forth other terms and conditions upon which the Company (or its
assigns) shall have the right to repurchase shares of Stock acquired by an
Optionholder pursuant to an Option. Any repurchase right of the Company shall
be exercisable by the Company (or its assignees) upon such terms and
conditions as the Plan Administrator may specify in the Stock Repurchase
Agreement evidencing such right. The Plan Administrator may also in its
discretion establish as a term and condition of one or more Options granted
under the Plan that the Company shall have a right of first refusal with
respect to any proposed sale or other disposition by the Optionholder of any
shares of Stock issued upon the exercise of such Options. Any such right of
first refusal shall be exercisable by the Company (or its assigns) in
accordance with the terms and conditions set forth in the Stock Repurchase
Agreement.
(k) Termination of Incentive Stock Options.
(i) Termination of Service. If any Optionholder ceases
to be in Service to the Company for a reason other than permanent disability or
death and any vested Option held by such Optionholder is an Incentive Stock
Option, then such Optionholder may, within three months after the date of
termination of such Service, but in no event after the Incentive Stock Option's
stated expiration date, exercise some or all of the Incentive Stock Options
that the Optionholder was entitled to exercise on the date the Optionholder's
Service terminated; provided, that if the Optionholder is discharged for
Cause or commits acts detrimental to the Company's interests after the
Service of the Optionholder has been terminated, then the Incentive Stock
Options will thereafter be void for all purposes. "Cause" shall mean a
termination of Service based upon a finding by the applicable Plan
Administrator that the Optionholder: (i) has committed a felony involving
dishonesty, fraud, theft or embezzlement; (ii) after written notice
from the Company has repeatedly failed or refused, in a material respect, to
follow reasonable policies or directives established by the Company; (iii)
after written notice from the Company, has willfully and persistently failed
to attend to material duties or obligations; (iv) has performed an act or
failed to act, which, if he were prosecuted and convicted, would constitute a
theft of money or property of the Company; or (v) has misrepresented or
concealed a material fact for purposes of securing employment with the
Company. If any Optionholder ceases to be in Service to the Company by
reason of permanent disability within the meaning of section 22(e)(3) of the
Code (as determined by the applicable Plan Administrator), the Optionholder
will have 12 months after the date of termination of Service, but in no event
after the stated expiration date of the Optionholder's Incentive Stock
Options, to exercise Incentive Stock Options that the Optionholder was
entitled to exercise on the date the Optionholder's Service terminated as a
result of the disability.
(ii) Death of Optionholder. If an Optionholder dies while
in the Company's Service, any vested Options that are Incentive Stock Options
that the Optionholder was entitled to exercise on the date of death will be
exercisable within three months after such date or until the stated expiration
date of the Optionholder's Incentive Stock Options, whichever occurs first,
by the person or persons ("successors") to whom the Optionholder's rights
pass under a will or by the laws of descent and distribution. As soon as
practicable after receipt by the Company of the notice of exercise and of
payment in full of the Option Price as specified in Sections 2.2(g) and (h)
hereof, a certificate or certificates representing the Optioned Shares shall
be registered in the name or names specified by the successors in the written
notice of exercise and shall be delivered to the successors.
(l) Termination of Nonqualified Options. Any Options that are
not Incentive Stock Options and that are exercisable at the time an
Optionholder ceases to be in Service to the Company shall remain exercisable
for such period of time thereafter as determined by the Plan Administrator at
the time of grant and set forth in the documents evidencing such Options. In
the absence of any provision in the documents evidencing such Options, the
Options shall remain exercisable (i) for a period of three months after
termination as a result of the Optionholder's death; (ii) for a period of 12
months if the Optionholder ceases to be in service to the Company by reason
of permanent disability within the meaning of section 22(e)(3) of the Code
(as determined by the applicable Plan Administrator); and (iii) for a period
of three months after termination for any other reason; provided, that no
Option shall be exercisable after the Option's stated expiration date, and
provided further, that if the Optionholder is discharged for Cause (as
defined in Section 2.2(k)(i)) or commits acts detrimental to the Company's
interests after the Service of the Optionholder has been terminated, then the
Option will thereafter be void for all purposes.
(m) Other Plan Provisions Still Applicable. If an Option is
exercised upon the termination of Service or death of an Optionholder under
this Section 2.2, the other provisions of the Plan will continue to apply to
such exercise, including the requirement that the Optionholder or its
successor may be required to enter into a Stock Repurchase Agreement.
(n) Definition of "Service". For purposes of this Plan, unless it
is evidenced otherwise in the option agreement with the Optionholder, the
Optionholder is deemed to be in "Service" to the Company so long as such
individual renders continuous services on a periodic basis to the Company (or
to any Parent or Subsidiary Corporation) in the capacity of an employee,
director, or an independent consultant or advisor. In the discretion of the
applicable Plan Administrator, an Optionholder will be considered to be
rendering continuous services to the Company even if the type of services
change, e.g., from employee to independent consultant. The Optionholder will
be considered to be an employee for so long as such individual remains in the
employ of the Company or one or more of its Parent or Subsidiary Corporations.
II.3 Terms and Conditions of Stock Awards.
(a) Eligibility. All Eligible Persons shall be eligible to receive
Stock Awards. The Plan Administrator of each administered group shall
determine the number of shares of Stock to be awarded from time to time to any
Eligible Person in such group. Except as otherwise provided in this Plan, the
grant of a Stock Award to a person (a "Grantee") shall neither entitle such
person to, nor disqualify such person from participation in, any other grant of
options or awards by the Company, whether under this Plan or under any other
stock option or award plan of the Company.
(b) Award for Services Rendered. Stock Awards shall be
granted in recognition of an Eligible Person's services to the Company. The
grantee of any such Stock Award shall not be required to pay any consideration
to the Company upon receipt of such Stock Award, except as may be required to
satisfy any applicable Arizona corporate law, employment tax and/or income tax
withholding requirements.
(c) Conditions to Award. All Stock Awards shall be subject to
such terms, conditions, restrictions, or limitations as the applicable Plan
Administrator deems appropriate, including, by way of illustration but not by
way of limitation, restrictions on transferability, requirements of continued
employment, individual performance or the financial performance of the
Company, or payment by the recipient of any applicable employment or
withholding taxes. Such Plan Administrator may modify or accelerate the
termination of the restrictions applicable to any Stock Award under the
circumstances as it deems appropriate.
(d) Award Agreements. A Plan Administrator may require as a
condition to a Stock Award that the recipient of such Stock Award enter into an
award agreement in such form and content as that Plan Administrator from time
to time approves.
II.4 Terms and Conditions of SARs.
(a) Eligibility. All Eligible Persons shall be eligible to receive
SARs. The Plan Administrator of each administered group shall determine the
SARs to be awarded from time to time to any Eligible Person in such group. The
grant of a SAR to a person shall neither entitle such person to, nor disqualify
such person from participation in, any other grant of options or awards by the
Company, whether under this Plan or under any other stock option or award plan
of the Company.
(b) Award of SARs. Concurrently with or subsequent to the
grant of any Option to purchase one or more shares of Stock, the Plan
Administrator may award to the Optionholder with respect to each share of Stock
underlying the Option, a related SAR permitting the Optionholder to be paid any
appreciation on that Stock in lieu of exercising the Option. In addition, a
Plan Administrator may award to any Eligible Person a SAR permitting the
Eligible Person to be paid the appreciation on a designated number of shares
of the Stock, whether or not such shares are actually issued.
(c) Conditions to SAR. All SARs shall be subject to such terms,
conditions, restrictions or limitations as the applicable Plan Administrator
deems appropriate, including, by way of illustration but not by way of
limitation, restrictions on transferability, requirements of continued
employment, individual performance, financial performance of the Company, or
payment by the recipient of any applicable employment or withholding taxes.
Such Plan Administrator may modify or accelerate the termination of the
restrictions applicable to any SAR under the circumstances as it deems
appropriate.
(d) SAR Agreements. A Plan Administrator may require as a
condition to the grant of a SAR that the recipient of such SAR enter into a SAR
agreement in such form and content as that Plan Administrator from time to time
approves.
(e) Exercise. An Eligible Person who has been granted a SAR
may exercise such SAR subject to the conditions specified by the Plan
Administrator in the SAR agreement.
(f) Amount of Payment. The amount of payment to which the
grantee of a SAR shall be entitled upon the exercise of each SAR shall be equal
to the amount, if any, by which the fair market value of the specified shares
of Stock on the exercise date exceeds the fair market value of the specified
shares of Stock on the date the Option related to the SAR was granted or
became effective, or, if the SAR is not related to any Option, on the date the
SAR was granted or became effective.
(g) Form of Payment. The SAR may be paid in either cash or
Stock, as determined in the discretion of the applicable Plan Administrator and
set forth in the SAR agreement. If the payment is in Stock, the number of
shares to be paid to the participant shall be determined by dividing the
amount of the payment determined pursuant to Section 2.4(f) by the fair
market value of a share of Stock on the exercise date of such SAR. As soon
as practical after exercise, the Company shall deliver to the SAR grantee a
certificate or certificates for such shares of Stock.
(h) Termination of Employment; Death. Section 2.2(k),
applicable to Incentive Stock Options, and Section 2.2(l), applicable to all
other Options, shall apply equally to SARs issued in tandem with such Options.
Section 2.2(l) shall apply equally to SARs that are not issued in tandem with
any Options.
II.5 Other Cash Awards.
(a) In General. The Plan Administrator of each administered
group shall have the discretion to make other awards of cash to Eligible
Persons in such group ("Cash Awards"). Such Cash Awards may relate to existing
Options or to the appreciation in the value of the Stock or other Company
securities.
(b) Conditions to Award. All Cash Awards shall be subject to
such terms, conditions, restrictions or limitations as the applicable Plan
Administrator deems appropriate, and such Plan Administrator may require as a
condition to such Cash Award that the recipient of such Cash Award enter into
an award agreement in such form and content as the Plan Administrator
from time to time approves.
ARTICLE III
Miscellaneous
III.1 Capital Adjustments. The aggregate number of shares of Stock
subject to the Plan, the number of shares of Stock covered by outstanding
Options and Awards, and the price per share stated in all outstanding Options
and Awards shall be proportionately adjusted for any increase or decrease in
the number of outstanding shares of Stock of the Company resulting from a
subdivision or consolidation of shares or any other capital adjustment or the
payment of a stock dividend or any other increase or decrease in the number of
such shares effected without the Company's receipt of consideration
therefor in money, services or property.
III.2 Mergers, Etc. If the Company is the surviving corporation in any
merger or consolidation (not including a Corporate Transaction), any Option or
Award granted under the Plan shall pertain to and apply to the securities to
which a holder of the number of shares of Stock subject to the Option or Award
would have been entitled prior to the merger or consolidation. Except as
provided in Section 3.3 hereof, a dissolution or liquidation of the Company
shall cause every Option or Award outstanding hereunder to terminate.
III.3 Corporate Transaction. In the event of shareholder approval of a
Corporate Transaction, the Plan Administrator shall have the discretion and
authority, exercisable at any time, to provide for the automatic acceleration
of one or more of the outstanding Options or Awards granted by it under the
Plan. Upon the consummation of the Corporate Transaction, all Options shall,
to the extent not previously exercised, terminate and cease to be outstanding.
III.4 Change in Control.
(a) Grant Program. In the event of a Change in Control, a Plan
Administrator shall have the discretion and authority, exercisable at any time,
whether before or after the Change in Control, to provide for the automatic
acceleration of one or more outstanding Options or Awards granted by it under
the Plan upon the occurrence of such Change in Control. A Plan Administrator
may also impose limitations upon the automatic acceleration of such Options or
Awards to the extent it deems appropriate. Any Options or Awards accelerated
upon a Change in Control will remain fully exercisable until the expiration or
sooner termination of the Option term.
(b) Incentive Stock Option Limits. The exercisability of any
Options which are intended to qualify as Incentive Stock Options and which are
accelerated by the Plan Administrator in connection with a pending Corporation
Transaction or Change in Control shall, except as otherwise provided in the
discretion of the Plan Administrator and the Optionholder, remain subject to
the $100,000 Limitation and vest as quickly as possible without violating the
$100,000 Limitation.
III.5 Calculation of Fair Market Value of Stock. The fair market value of
a share of Stock on any relevant date shall be determined in accordance with
the following provisions:
(a) If the Stock is not at the time listed or admitted to trading on
any stock exchange but is traded in the over-the-counter market, the fair
market value shall be the mean between the highest bid and lowest asked
prices (or, if such information is available, the closing selling price) per
share of Stock on the date in question in the over-the-counter market, as
such prices are reported by the National Association of Securities Dealers
through its Nasdaq system or any successor system. If there are no reported
bid and asked prices (or closing selling price) for the Stock on the date in
question, then the mean between the highest bid price and lowest asked price
(or the closing selling price) on the last preceding date for which such
quotations exist shall be determinative of fair market value.
(b) If the Stock is at the time listed or admitted to trading on any
stock exchange, then the fair market value shall be the closing selling price
per share of Stock on the date in question on the stock exchange determined
by the Board to be the primary market for the Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the exchange
on the last preceding date for which such quotation exists.
(c) If the Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value shall be determined by the Board after taking into
account such factors as the Board shall deem appropriate, including one or
more independent professional appraisals.
III.6 Use of Proceeds. The proceeds received by the Company from
the sale of Stock pursuant to the exercise of Options or Awards hereunder, if
any, shall be used for general corporate purposes.
III.7 Cancellation of Options. Each Plan Administrator shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionholders, the cancellation of any or all outstanding Options
granted under the Plan by that Plan Administrator and to grant in substitution
therefore new Options under the Plan covering the same or different numbers of
shares of Stock as long as such new Options have an exercise price per share
of Stock no less than the minimum exercise price as set forth in Section 2.2(b)
hereof on the new grant date.
III.8 Regulatory Approvals. The implementation of the Plan, the
granting of any Option or Award hereunder, and the issuance of Stock upon the
exercise of any such Option or Award shall be subject to the procurement by the
Company of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the Options or Awards granted under it, and the
Stock issued pursuant to it.
III.9 Indemnification. In addition to such other rights of indemnification
as they may have, the members of a Plan Administrator shall be indemnified and
held harmless by the Company, to the extent permitted under applicable law,
for, from and against all costs and expenses reasonably incurred by them in
connection with any action, legal proceeding to which any member thereof may
be a party by reason of any action taken, failure to act under or in connection
with the Plan or any rights granted thereunder and against all amounts paid by
them in settlement thereof or paid by them in satisfaction of a judgment of any
such action, suit or proceeding, except a judgment based upon a finding of bad
faith.
III.10 Plan Not Exclusive. This Plan is not intended to be the exclusive
means by which the Company may issue options or warrants to acquire its
Stock, stock awards or any other type of award. To the extent permitted by
applicable law, any such other option, warrants or awards may be issued by
the Company other than pursuant to this Plan without shareholder approval.
III.11 Company Rights. The grants of Options shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
III.12 Assignment. The right to acquire Stock or other assets under the
Plan may not be assigned, encumbered or otherwise transferred by any
Optionholder except as specifically provided herein. Except as specifically
allowed by the Plan Administrator at the time of grant and set forth in the
documents evidencing an Option or Award, no Option or Award granted under
the Plan or any of the rights and privileges conferred thereby shall be
assignable or transferable by an Optionholder or grantee other than by will
or the laws of descent and distribution, and such Option or Award shall be
exercisable during the Optionholder's or grantee's lifetime only by the
Optionholder or grantee. The provisions of the Plan shall inure to the
benefit of, and be binding upon, the Company and its successors or assigns,
and the Optionholders, the legal representatives of their respective estates,
their respective heirs or legatees and their permitted assignees.
III.13 Securities Restrictions.
(a) Legend on Certificates. All certificates representing shares
of Stock issued under the Plan shall be endorsed with a legend reading as
follows:
The shares of Common Stock evidenced by this certificate have
been issued to the registered owner in reliance upon written representations
that these shares have been purchased solely for investment. These shares
may not be sold, transferred or assigned unless in the opinion of the Company
and its legal counsel such sale, transfer or assignment will not be in
violation of the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
(b) Private Offering for Investment Only. The Options and
Awards are and shall be made available only to a limited number of present and
future key personnel and their permitted transferees who have knowledge of the
Company's financial condition, management and its affairs. The Plan is not
intended to provide additional capital for the Company, but to encourage
ownership of Stock among the Company's key personnel or their permitted
transferees. By the act of accepting an Option or Award, each grantee or
permitted transferees agrees (i) that, any shares of Stock acquired will
be solely for investment and not with any intention to resell or redistribute
those shares and (ii) such intention will be confirmed by an appropriate
certificate at the time the Stock is acquired if requested by the Company.
The neglect or failure to execute such a certificate, however, shall not
limit or negate the foregoing agreement.
(c) Registration Statement. If a Registration Statement
covering the shares of Stock issuable under the Plan is filed under the
Securities Act of 1933, as amended, and is declared effective by the
Securities Exchange Commission, the provisions of Sections 3.13(a) and (b)
shall terminate during the period of time that such Registration Statement,
as periodically amended, remains effective.
III.14 Tax Withholding.
(a) General. The Company's obligation to deliver Stock under
the Plan shall be subject to the satisfaction of all applicable federal,
state and local income tax withholding requirements.
(b) Shares to Pay for Withholding. The Board may, in its
discretion and in accordance with the provisions of this Section 3.14(b) and
such supplemental rules as it may from time to time adopt, provide any or all
Optionholders or Grantees with the right to use shares of Stock in
satisfaction of all or part of the federal, state and local income tax
liabilities incurred by such Optionholders or Grantees in connection with the
receipt of Stock ("Taxes"). Such right may be provided to any such
Optionholder or Grantee in either or both of the following formats:
(i) Stock Withholding. An Optionholder or Grantee may
be provided with the election, which may be subject to approval by the Plan
Administrator, to have the Company withhold, from the Stock otherwise issuable,
a portion of those shares of Stock with an aggregate fair market value equal to
the percentage (not to exceed 100 percent) of the applicable Taxes designated
by the Optionholder or Grantee.
(ii) Stock Delivery. The Board may, in its discretion,
provide the Optionholder or Grantee with the election to deliver to the
Company, at the time the Option is exercised or Stock is awarded, one or more
shares of Stock previously acquired by such individual (other than pursuant
to the transaction triggering the Taxes) with an aggregate fair market value
equal to the percentage of the taxes (not to exceed 100 percent) incurred in
connection with such Option exercise or Stock Award designated by the
Optionholder or Grantee.
III.15 Governing Law. The Plan shall be governed by and all questions
hereunder shall be determined in accordance with the laws of the State of
Arizona.
ARTICLE IV
Definitions
The following capitalized terms used in this Plan shall have the meaning
described below:
"Affiliates" shall mean all "officers" (as that term is defined in Rule
16a-1(f) promulgated under the 1934 Act) and directors of the Company and
all persons who own ten percent or more of the Company's issued and
outstanding Stock.
"Award" shall mean a Stock Award, SAR or Cash Award under the Grant
Program.
"Board" shall mean the Board of Directors of the Company.
"Cash Award" shall mean an award to be paid in cash and granted under
Section 2.5 hereunder.
"Change in Control" shall mean and include the following transactions or
situations:
(i) A sale, transfer, or other disposition by the Company
through a single transaction or a series of transactions of securities of the
Company representing 30 percent or more of the combined voting power of the
Company's then outstanding securities to any "Unrelated Person" or
"Unrelated Persons" acting in concert with one another. For purposes of this
definition, the term "Person" shall mean and include any individual,
partnership, joint venture, association, trust corporation, or other entity
(including a "group" as referred to in Section 13(d)(3) of the 1934 Act).
For purposes of this definition, the term "Unrelated Person" shall mean and
include any Person other than the Company, a wholly-owned subsidiary of the
Company, or an employee benefit plan of the Company.
(ii) A sale, transfer, or other disposition through a single
transaction or a series of transactions of all or substantially all of the
assets of the Company to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(iii) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least 30 percent of the combined voting power of the Company's then outstanding
securities. For purposes of this definition, the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3 promulgated
under the 1934 Act, provided that any pledgee of voting securities is not
deemed to be the Beneficial Owner thereof prior to its acquisition of voting
rights with respect to such securities.
(iv) Any consolidation or merger of the Company with or into an
Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of the Company immediately prior to the
consolidation or merger are the Beneficial Owners of securities of the
surviving corporation representing at least 50 percent of the combined voting
power of the surviving corporation's then outstanding securities.
(v) During any period of two years, individuals who, at the
beginning of such period, constituted the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election or nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
(vi) A change in control of the Company 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 1934 Act, or any successor regulation of
similar import, regardless of whether the Company is subject to such reporting
requirement.
Notwithstanding any provision hereof to the contrary, the filing of a
proceeding for the reorganization of the Company under Chapter 11 of the
General Bankruptcy Code or any successor or other statute of similar import
shall not be deemed to be a Change of Control for purposes of this Plan.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Cronus Corporation, a Nevada corporation.
"Corporate Transaction" shall mean (a) a merger or consolidation in which
the Company is not the surviving entity, except for a transaction the principal
purposes of which is to change the state in which the Company is incorporated;
(b) the sale, transfer of or other disposition of all or substantially all of
the assets of the Company and complete liquidation or dissolution of the
Company, or (c) any reverse merger in which the Company is the surviving
entity but in which the securities possessing more than 50 percent of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger.
"Effective Date" shall mean the date that the Plan has been approved by
the shareholders as required by Section 1.3(a) hereof.
"Eligible Persons" shall mean, with respect to the Grant Program, those
persons who, at the time that the Option or Award is granted, are (i) key
personnel (including officers and directors) of the Company or Parent or
Subsidiary Corporations, or (ii) consultants or independent contractors who
provide valuable services to the Company or Parent or Subsidiary Corporations.
"Employee Committee" shall mean that committee appointed by the Board
to administer the Plan with respect to the Non-Affiliates and comprised of
one or more persons who are members of the Board.
"Exercise Date" shall be the date on which written notice of the exercise
of an Option and payment of the Option Price is delivered to the Company in
accordance with the requirements of the Plan.
"Grantee" shall mean an Eligible Person who has received an Award.
"Grant Program" shall mean the program described in Article II of this
Agreement pursuant to which certain Eligible Persons are granted Options or
Awards in the discretion of the Plan Administrator.
"Incentive Stock Option" shall mean an Option that is intended to qualify
as an "incentive stock option" under Code section 422.
"Non-Affiliates" shall mean all persons who are not Affiliates.
"Non-Employee Directors" shall mean those Directors who satisfy the
definition of "Non-Employee Director" under Rule 16b-3(b)(3)(i) promulgated
under the 1934 Act.
"$100,000 Limitation" shall mean the limitation pursuant to which the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Stock for which one or more Options granted to any person under
this Plan (or any other option plan of the Company or any Parent or Subsidiary
Corporation) may for the first time be exercisable as Incentive Stock Options
during any one calendar year shall not exceed the sum of $100,000.
"Optionholder" shall mean an Eligible Person to whom Options have been
granted.
"Optioned Shares" shall be those shares of Stock to be optioned from
time to time to any Eligible Person.
"Option Price" shall mean the exercise price per share as specified by the
Plan Administrator or by the terms of the
Plan.
"Options" shall mean options to acquire Stock granted under the Plan.
"Parent Corporation" shall mean any corporation in the unbroken chain of
corporations ending with the employer corporation, where, at each link of the
chain, the corporation and the link above owns at least 50 percent of the
combined total voting power of all classes of the stock in the corporation in
the link below.
"Plan" shall mean this stock option plan for Cronus Corporation.
"Plan Administrator" shall mean (a) either the Board, the Senior
Committee, or any other committee, whichever is applicable, with respect to the
administration of the Grant Program as it relates to Affiliates and (b)
either the Board, the Employee Committee, or any other committee, whichever is
applicable, with respect to the administration of the Grant Program as it
relates to Non-Affiliates.
"SAR" shall mean stock appreciation rights granted pursuant to Section
2.4 hereof.
"Senior Committee" shall mean that committee appointed by the Board to
administer the Grant Program with respect to the Affiliates and comprised of
two or more Non-Employee Directors.
"Service" shall have the meaning set forth in Section 2.2(n) hereof.
"Stock" shall mean shares of the Company's common stock, $0.001 par
value per share, which may be unissued or treasury shares, as the Board may
from time to time determine.
"Stock Awards" shall mean Stock directly granted under the Grant
Program.
"Subsidiary Corporation" shall mean any corporation in the unbroken
chain of corporations starting with the employer corporation, where, at each
link of the chain, the corporation and the link above owns at least 50
percent of the combined voting power of all classes of stock in the
corporation below.
EXECUTED as of the 24th day of November, 1997
CRONUS CORPORATION
By: /s/
Name: Jonathan Roberts
Its: President
ATTESTED BY:
/s/
Kevin Sherlock,
Corporate Secretary
This Proxy is being solicited by the board of directors of Cronus Corporation,
a Nevada corporation (the "Board of Directors" and the "Company,"
respectively), which is asking that you appoint Mr. Jonathan Roberts,
President of, and Chairman of the Board of Directors for, the Company, as
your proxy, with full power of substitution under the premises therein. The
Board of Directors asks that you authorize Mr. Roberts to represent you at
the annual meeting of shareholders of the company on February 2, 1998, at
11:00 a.m., Tucson, Arizona time, or any adjournment thereof, and further
asks that you authorize Mr. Roberts to vote as follows:
1. Elect as directors the following seven individuals nominated by the Board
of Directors to serve until the next annual meeting of shareholders and until
their respective successors shall have been duly elected and qualified or
until they shall earlier resign or be removed from office. To Withhold
Authority for any individual nominee, strike a line through the name below:
Mr. Jonathan Roberts, Mr. Kevin M. Sherlock, Mr. George Hennessey, Mr. Gordon
M. LeBlanc, Jr., Mr. J. Dennis Bartlett, Mr. Jim Karten, and Mr. Thomas J.
Nieman.
FOR ALL NOMINEES____ WITHHOLD AUTHORITY FOR ALL NOMINEES____
2. Adopt the Stock Option Plan set forth in form and substance as Exhibit A to
the Proxy Statement for the annual meeting:
FOR____ AGAINST____ ABSTAIN____
3. Ratify the selection of Addison Roberts & Ludwig, P.C. as the independent
Certified Public Accountants of the Company for the fiscal year 1997:
FOR____ AGAINST____ ABSTAIN____
4. Grant Mr. Roberts the Authority to act in his discretion with respect to
such other and further business as may properly come before the meeting:
FOR____ AGAINST____ ABSTAIN____
Unless otherwise indicated, this proxy will be voted FOR the above proposals.
Please sign exactly as your name appears on your stock certificate, date the
same, and indicate the number of shares of common stock of the Company
which you own.
_________________
Print Name
_________________
Address
_________________
Signature CRONUS CORPORATION
PROXY
7660 East Broadway
_________________ Suite 210
Number of Shares Tucson, Arizona 85710
_________________
Date
