<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NORTH LILY MINING COMPANY
(Name of Registrant as Specified in its Charter)
Not Applicable
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3)
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
5) Total fee paid:
-----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
- --------------------------------------------------------------------------------
NORTH LILY MINING COMPANY
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held , 1996
---------------
- --------------------------------------------------------------------------------
The Annual Meeting of the Shareholders of North Lily Mining Company (the
"Company") will be held on ______, 1996, at ___ _.M. (local time) at
______________________, for the following purposes:
(1) To elect five members of the Board of Directors to hold office until
the next annual meeting of shareholders, or until their successors are
duly elected and qualify;
(2) To consider and act upon a Plan of Recapitalization to reverse split
the outstanding Common Stock by changing each 10 issued and outstand-
ing shares into one issued and outstanding share of Common Stock;
(3) To approve and adopt the Company's 1996 Stock Option Plan;
(4) To approve and adopt the Company's 1996 Restricted Stock Plan;
(5 To amend the Company's Articles of Incorporation to change the name of
the Company to Tamarine NLMC Ltd.;
(6) To amend the Company's Articles of Incorporation to authorize 5,000,-
000 shares of Preferred Stock; and
(7) To transact such other business as properly may come before the
meeting.
Only shareholders of record at the close of business on __________, 1996
will be entitled to vote at the meeting. The transfer books of the Company will
not be closed.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON. PLEASE INDICATE
ON THE ENCLOSED PROXY WHETHER YOU PLAN TO ATTEND THE MEETING. IN ANY EVENT,
PLEASE MARK, SIGN, DATE, AND RETURN THE ENCLOSED PROXY TO INSURE YOUR SHARES ARE
REPRESENTED AT THE MEETING. YOU MAY VOTE IN PERSON IF YOU ATTEND THE MEETING
EVEN THOUGH YOU HAVE EXECUTED AND RETURNED A PROXY.
By order of the Board of Directors:
W. Gene Webb, Secretary
Denver, Colorado
March __, 1996
<PAGE>
NORTH LILY MINING COMPANY
1800 Glenarm Place, Suite 210
Denver, Colorado 80202
(303) 294-0427
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To be held ___________, 1996
INTRODUCTION
The Proxy enclosed with this Proxy Statement will be first sent or given to
shareholders on or about March __, 1996, in connection with the solicitation by
the directors of North Lily Mining Company (the "Company") of Proxies to be used
at an Annual Meeting of Shareholders to be held at __:__ _.m. (local time),
_________, 1996 at _______________________________________________________
___________________________________________________ (the "Annual Meeting").
PERSONS MAKING THE SOLICITATION
The Proxy is solicited on behalf of the directors of the Company. The
original solicitation will be by mail. Following the original solicitation,
management expects that certain individual shareholders will be further
solicited through telephonic or other oral communications from management.
Management may use specially engaged employees or paid solicitors for such
solicitation. Management intends to solicit Proxies which are held of record by
brokers, dealers, banks, or voting trustees, or their nominees, and may pay the
reasonable expenses of such record holders for completing the mailing of
solicitation materials to persons for whom they hold the shares. All solici-
tation expenses will be borne by the Company.
TERMS OF THE PROXY
The enclosed Proxy indicates the matters to be acted upon at the Annual
Meeting and provides a box corresponding to each such matter. By appropriately
marking each box, a shareholder may specify whether to confer to or to withhold
from management the authority to vote the shares represented by the Proxy. The
Proxy also confers upon management discretionary voting authority with respect
to such other business as may properly come before the Annual Meeting.
If the Proxy is executed properly and is received by management prior to
the Annual Meeting, the shares represented by the Proxy will be voted. Where a
shareholder specifies a choice with respect to the matter to be acted upon, the
shares will be voted in accordance with such specification. Any Proxy which is
executed in such a manner as not to withhold authority shall be deemed to confer
such authority.
A Proxy may be revoked at any time prior to its exercise by (1) so notify-
ing the Company in writing, (2) filing with the Company a duly executed proxy
bearing a later date, or (3) voting in person at the Annual Meeting.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
VOTING SECURITIES
The securities entitled to vote at the Annual Meeting consist of all of the
issued and outstanding shares of the Company's $.10 par value common stock (the
"Common Stock"). The close
<PAGE>
of business on _____________ 1996, has been fixed by the Board of Directors of
the Company as the record date. Only shareholders of record as of the record
date may vote at the Annual Meeting. As of the record date, there were
28,057,403 shares of Common Stock issued and outstanding.
VOTING RIGHTS AND REQUIREMENTS
Each shareholder of record as of the record date will be entitled to one
vote for each share of Common Stock held as of the record date.
QUORUM AND VOTES REQUIRED FOR APPROVAL. The presence at the Annual Meeting
of the holders of an amount of shares of each class of stock entitled to vote at
the meeting, representing the right to vote shares of Common Stock of not less
than one-third of the number of shares of Common Stock outstanding as of the
record date will constitute a quorum for transacting business. Directors will
be elected by plurality vote. The affirmative vote of the majority of
outstanding shares is necessary to amend the Articles of Incorporation. The
affirmative vote of the majority of shares represented at the meeting and
entitled to vote thereat is necessary to approve the Plan of Recapitalization,
to adopt the 1996 Stock Option Plan, to adopt the 1996 Restricted Stock Plan,
and to approve all other matters that may come before the Annual Meeting.
PRINCIPAL SECURITY HOLDERS. The following table sets forth information, as
of the record date, with respect to the beneficial ownership of the Company's
Common Stock by each person known by the Company to be the beneficial owner of
more than five percent (5%) of the outstanding Common Stock, and by directors,
nominees, and officers of the Company, and by officers and directors as a group.
AMOUNT AND NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (2)
CEDE & Co. 12,797,377 45.61%
Box 20
Bowling Green Station
New York, NY 10004
Kray & Co. 3,240,829 11.55%
One Financial Place
440 South LaSalle Street
Chicago, IL 60605
Stephen E. Flechner 860,000 (3) 2.98%
W. Gene Webb 850,000 (3) 2.94%
Theodore E. Loud 70,000 0.25%
Nick DeMare 57,300 (4) 0.20%
John R. Twohig -0- --
R. Nigel Horsley -0- --
All officers and directors
as a group (4 persons) 1,837,300 (5) 6.16%
- ---------------
(1) Information with respect to beneficial ownership is based upon information
furnished by each shareholder of contained in filings made with the
Securities and Exchange Commission. Unless otherwise indicated, the
beneficial owner has sole voting and investment power with respect to the
shares shown.
2
<PAGE>
(2) Based on 28,057,403 shares outstanding. Where the persons listed on this
table have the right to obtain additional shares of Common Stock within 60
days from _______, 1996, these additional shares are deemed to be
outstanding for the purpose of computing the percentage of class owned by
such persons, but are not deemed to be outstanding for the purpose of
computing the percentage of any other person.
(3) Includes 850,000 shares of Common Stock issuable upon exercise of presently
exercisable options.
(4) Includes 50,000 shares of Common Stock issuable upon exercise of presently
exercisable options.
(5) Includes 1,750,000 shares of Common Stock issuable upon exercise of
presently exercisable options.
CHANGES IN CONTROL
No arrangements are known to the Company, including any pledge by any
person of securities of the Company, the operation of which may, at a subsequent
date, result in a further change in control of the Company.
MATTERS TO BE ACTED UPON
PROPOSAL 1: ELECTION OF DIRECTORS
The directors of the Company are elected to serve until the next annual
shareholders' meeting or until their respective successors are elected and
qualify. Officers of the Company hold office until the meeting of the Board of
Directors immediately following the next annual shareholders' meeting or until
removal by the Board of Directors. Interim replacements for resigning directors
and officers are appointed by the Board of Directors.
The names of the nominees for directors and certain information about them
are set forth below:
NAME AGE POSITION WITH THE BUSINESS EXPERIENCE
COMPANY
Stephen E. Flechner 53 President and Chief May 1994 to present -
Executive Officer and President of the Company;
Director 1979 to 1993 - Vice President,
General Counsel & Secretary,
Gold Fields Mining Corp.,
Denver, Colorado; April 1993
to present - President of
Akiko Gold Resources Ltd.,
Vancouver, British Columbia
W. Gene Webb 57 Executive Vice May 1994 to present -
President, Corporate officer and director of
Secretary and Director the Company; September 1989 to
March 1994 - President and
director of Canadian
Industrial Minerals Corp.,
Denver, Colorado; May 1989 to
present - officer and director
of Tellis Gold Mining Company,
Vancouver, British Columbia;
March 1990 to June 1994 -
President and director of
Jerez Investment Corp.,
Denver, Colorado; September
1978 to present - President
and director of Ferret
Exploration Company, Inc.,
Denver, Colorado
3
<PAGE>
NAME AGE POSITION WITH THE BUSINESS EXPERIENCE
COMPANY
John R. Twohig 43 Vice President - January 1994 to present -
Corporate Development Chairman and Chief Executive
and Director Officer of Tamarine Ventures
Ltd., Vancouver, British
Columbia; January 1990 to
December 1994 - senior marine
consultant for international
clients, Vancouver, British
Columbia
Theodore E. Loud 60 Director 1986 to present - President of
Tel Advisors Inc. of Virginia,
Charlottesville, Virginia, a
registered investment adviser
and corporate financial
consulting company
R. Nigel Horsley 48 Director August 1995 to present - Vice
Chairman of Tamarine Ventures
Ltd., Vancouver, British
Columbia; April 1995 to August
1995 - Vice President of
Tamarine Ventures Ltd.; April
1993 to March 1995 - Vice
President, Treasurer,
Secretary and director of
International Telepresence
Corporation, Vancouver,
British Columbia; June 1991 to
March 1993 - Director of
Corporate Communications,
Xillix Technologies,
Vancouver, British Columbia;
October 1989 to June 1991 -
Consultant to B.C. Hydro
Power, Vancouver, British
Columbia; 1993 to present -
Partner, Vice President, and
Secretary to the Board of
Accuflex Products Inc., North
Vancouver, British Columbia;
1993 to present - Vice
President and Partner of
Applied Power & Propulsion,
Vancouver, British Columbia;
1985 to 1989 - Consultant for
Hill & Knowlton and Comcore
Public Affairs, Vancouver,
British Columbia
The following table sets forth, as of the date of this Proxy Statement, the
names and ages of the Company's executive officers, including all positions and
offices held by each such person. These officers are elected to hold office for
one year or until their respective successors are duly elected and qualified:
NAME AGE POSITION WITH THE BUSINESS EXPERIENCE
COMPANY
Stephen E. Flechner 53 President and Chief See table above.
Executive Officer and
Director
4
<PAGE>
W. Gene Webb 57 Executive Vice See table above.
President,Corporate
Secretary and
Director
Nick DeMare 40 Treasurer Chartered Accountant. May
1991 to present - President,
Chase Management Ltd.,
Vancouver, British Columbia;
February 1986 to April 1991 -
Vice President and Chief
Financial Officer, Ingot
Management Ltd., Vancouver,
British Columbia. Mr. DeMare
is a director and/or officer
of several publicly-traded
Canadian companies.
John R. Twohig 43 Vice President - See table above
Corporate Development
and Director
Except as otherwise indicated below, no organization by which any officer
or director previously has been employed is an affiliate, parent, or subsidiary
of the Company.
The Company does not have any standing audit, nominating, or compensation
committees of the Board of Directors.
Messrs. Flechner and Webb have been directors since May 1994. They took
action seven times by unanimous written consent during the 1995 fiscal year.
Each director participated in the written consents that occurred during the
period he was a director. Messrs. Twohig, Loud, and Horsley became directors in
March 1996. There have been no official meetings of the board of directors
since August 20, 1992.
Compliance with Section 16(a) of the Exchange Act
During the fiscal year ended December 31, 1995, there were no known
failures to file on a timely basis Forms 3, 4, and/or 5 with the Securities and
Exchange Commission as required by Section 16(a) of the Securities Exchange Act
of 1934.
EXECUTIVE COMPENSATION
The following table sets forth in summary form the compensation received
during each of the Company's last three completed fiscal years by the Chief
Executive Officer of the Company and by each other executive officer of the
Company whose total salary and bonus exceeded $100,000 in the Company's fiscal
year ended December 31, 1995.
5
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------------------------------
NAME OTHER RESTRICTED
AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL COMPEN- AWARD(S) SARS PAYOUTS COMPEN-
POSITION YEAR SALARY BONUS SATION ($) ($) (#) ($) SATION ($)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen 1995 $110,000(1) -0- -0- -0- -0- -0- -0-
E. 1994 $82,500(2) -0- -0- -0- 850,000 -0- -0-
Flechner, 1993 -0- -0- -0- -0- -0- -0- -0-
President
and Chief
Executive
Officer (2)
- ------------------------------------------------------------------------------------------
W. Gene 1995 $110,000(1) -0- -0- -0- -0- -0- -0-
Webb, 1994 $ 82,500(2) -0- -0- -0- 850,000 -0- -0-
Executive 1993 -0- -0- -0- -0- -0- -0- -0-
Vice
President
and
Corporate
Secretary
- ------------------------------------------------------------------------------------------
William E. 1995 -0- -0- -0- -0- -0- -0- -0-
Grafham, 1994 -0- -0- -0- -0- 120,000 -0- -0-
former 1993 -0- -0- -0- -0- -0- -0-
Chairman
of the
Board,
President
and Chief
Executive
Officer(3)(4)
- ------------------------------------------------------------------------------------------
Anton R. 1995 -0- -0- -0- -0- -0- -0- -0-
Hendriksz, 1994 -0- -0- -0- -0- -0- -0- -0-
former 1993 $132,505 -0- -0- -0- -0- -0- $62,500
Chairman
of the
Board
- ------------------------------------------------------------------------------------------
Thomas L. 1995 -0- -0- -0- -0- -0- -0- -0-
Crom, 1994 -0- -0- -0- -0- -0- -0- -0-
former 1993 $ 89,772 -0- -0- -0- -0- -0- $50,000
President,
Chief
Executive
Officer &
Treasurer (4)
- ------------------------------------------------------------------------------------------
George A. 1995 -0- -0- -0- -0- -0- -0- -0-
Holcomb, 1994 -0- -0- -0- -0- -0- -0- $20,834(5)
former 1993 $126,250 -0- -0- -0- -0- -0- -0-
Vice
President
of
Operations
- ----------------
</TABLE>
(1) Unpaid as at December 31, 1995. In addition, Messrs. Flechner and Webb
have each agreed to defer a portion of their salaries. See "Certain
Transactions" below.
6
<PAGE>
(2) Unpaid as at December 31, 1994. Messrs. Flechner and Webb have each agreed
to accept shares of Common Stock of the Company in settlement of their
unpaid salaries. See also"Certain Transactions" below.
(3) Mr. Grafham resigned as an officer of the Company as of May 17, 1994. On
that date, Mr. Flechner became the Chief Executive Officer of the Company.
(4) Mr. Crom resigned as of October 25, 1993. On that date, Mr. Grafham became
the Chief Executive Officer of the Company.
(5) Vacation pay paid to Mr. Holcomb.
Employment agreements with the Company's executive officers are described
below in "Employment Agreements."
The Company does not pay non-officer directors for their services as such
nor does it pay any director's fees for attendance at meetings. Directors are
reimbursed for any expenses incurred by them in their performance as directors.
STOCK OPTION PLANS
The Company adopted an Incentive Stock Option Plan (the "Plan") in 1984
under which a total of 2,500,000 shares were available for grant to provide
incentive compensation to officers and key employees of the Company.
The Plan was administered by the Board of Directors. Options could be
granted for up to 10 years at not less than the fair market value at the time of
grant except that the term could not exceed five years and the price had to be
110% of fair market value for any person who at the time of grant held more than
10% of the total voting power of the Company. Unless otherwise specified by the
Board of Directors, options were exercisable as they vested at a rate of 2.77%
per month, and terminated ten years after the date of grant. The Plan expired
october 31, 1994.
Options may be exercised by payment of the option price (i) in cash, (ii)
by tender of shares of Common Stock of the Company and which have a fair market
value equal to the option price, or (iii) by such other consideration as the
Board of Directors may approve at the time the option is granted.
At December 31, 1995, options to purchase 1,972,500 shares at $0.20 were
outstanding under the plan.
There were no individual grants of stock options or freestanding stock
appreciation rights made during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
- ---------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR END (#) FISCAL YEAR END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stephen E. Flechner -0- -0- 850,000/0 0/0
- ---------------------------------------------------------------------------------------------------------------
W. Gene Webb -0- -0- 850,000/0 0/0
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
The Company has no other long-term incentive plans.
7
<PAGE>
There are no arrangements pursuant to which directors of the Company are
compensated in their capacities as such.
EMPLOYMENT AGREEMENTS
Effective May 16, 1994, Messrs. Flechner and Webb entered into employment
agreements with the Company. The agreements provide for compensation consisting
of annual salary of $120,000; benefits which shall include health and disability
insurance, key-man life insurance, and retirement plan; an annual cash bonus,
50% of which may be taken in the Company's common stock at the election of
Messrs. Flechner and Webb; and equity grants pursuant to the Company's incentive
stock option plan and restricted stock plan. The term of the employment
agreements is five years.
8
<PAGE>
TOTAL RETURN TO STOCKHOLDERS
[GRAPH]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
12/31/90 12/31/91 12/31/92 12/31/93 12/30/94 12/29/95
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NORTH LILY MINING CO. $100.00 $ 78.57 $ 64.29 $ 42.86 $ 14.29 $ 7.14
- --------------------------------------------------------------------------------------------------
S&P 500 GOLD $100.00 $ 81.24 $ 75.88 $138.70 $112.14 $126.15
- --------------------------------------------------------------------------------------------------
NASDAQ COMPOSITE (US) $100.00 $160.84 $187.19 $214.88 $210.05 $296.81
- --------------------------------------------------------------------------------------------------
</TABLE>
S&P 500 GOLD DATA PROVIDED BY BLOOMBERG FINANCIAL MARKETS
<PAGE>
CERTAIN TRANSACTIONS
During 1994, the Company was charged management, consulting, and office
administration fees of $183,786 by private companies owned or controlled by
William E. Grafham, a former officer and director of the Company. In addition,
during 1994 these companies made disbursements on behalf of the Company. As of
December 31, 1994, $265,000, which included an outstanding balance of $82,167 as
of December 31, 1993, remained unpaid. As indicated in the table below, the
indebtedness of $265,000 was paid in 1995 with the issuance of 883,334 shares of
the Company's Common Stock.
During 1994 and 1995, , the Company was charged management, consulting, and
office administration fees of $65,264 (Cdn.$91,488) and $51,194 (Cdn.$70,400),
respectively, by private companies owned by Nick DeMare, an officer of the
Company. As of December 31, 1994, $68,448 (Cdn. $95,860), including amounts
unpaid from December 31, 1993, remained unpaid. As indicated in the table
below, indebtedness of $50,000 was paid in 1995 with the issuance of 166,667
shares of the Company's Common Stock. As of December 31, 1995, $31,079 remained
unpaid.
In order to reduce its cash requirements during 1995, the Company
negotiated with certain current and former directors and officers, related
companies, and creditors to settle $354,250 of indebtedness and unpaid amounts
through the issuance of Common Stock at an ascribed price of $0.30 per share to
the following parties:
<TABLE>
<CAPTION>
Indebtedness to be Ascribed Price Number of
Creditor Settled by Shares per Share Shares
<S> <C> <C> <C>
W.G. Ltd.(1) $265,000 $0.30 883,334
DNG Capital Corp.(2) $ 50,000 $0.30 166,667
Others $ 39,250 $0.30 130,834
Total $354,250 1,180,8351
</TABLE>
(1) A private company owned by William E. Grafham
(2) A private company owned by Nick DeMare.
All of the shares were issued in 1995.
During 1993, Mr. Anton R. Hendriksz and Mr. Thomas L. Crom, then Chairman
of the Board and President of the Company, respectively, agreed to terminate
their existing employment agreements with the Company and to provide consulting
services to International Mahogany Corp. ("Mahogany") and the Company for a 24-
month period in consideration for cash payments of $125,000 and $100,000,
respectively, and quarterly cash payments of $12,500 each over a 24-month
period. The termination and consulting payments were to be shared equally by
Mahogany and the Company. Subsequent to an initial payment in 1993 of $31,250
to Mr. Hendriksz and $25,000 to Mr. Crom (being the Company's share of one-half
of their termination payments), the Company and Mahogany have not made further
payments to Messrs. Hendriksz and Crom. However, the Company has included
$156,250 (being the Company's share of the termination and consulting
obligations) as due to former officers and directors.
The Agreement also outlined that Company stock purchase options held by
Messrs. Hendriksz and Crom would, subject to regulatory approval, be extended
for a two-year period and that the exercise price would be adjusted to then
current market levels and be allowed to be granted to Canadian companies owned
by Messrs. Hendriksz and Crom. These stock purchase options have not been
amended.
9
<PAGE>
Pursuant to a Settlement Agreement dated June 20, 1995, assignees of
Messrs. Hendriksz and Crom agreed to accept 150,000 and 125,000 shares of the
Company's Common Stock, respectively, in full settlement of all claims against
the Company.
On August 25, 1995, Turks Ltd., a private company of which W. Gene Webb is
a director, borrowed $74,532 (Cdn.$100,000) and in turn loaned the money to the
Company. The Company pledged 90,000 shares of Baja Gold Inc. stock as
collateral to secure the loan. The loan was due November 30, 1995 and interest
was charged at the rate of 8.875% per annum. Neither Turks Ltd. nor Mr. Webb
received any compensation from this transaction.
On October 3, 1995, the Turks, Ltd. loan principal described above was
repaid with proceeds from a loan made to the Company by a non-affiliated third
party. The loan was in the amount of $97,167 (Cdn.$130,000), was originally due
December 31, 1995, and accrued interest at the rate of 8% per annum. The
Company pledged 90,000 shares of Baja Gold Inc. Stock as collateral to secure
the loan. The loan was extended to January 31, 1996 and paid as of that date.
During 1994, the Company recorded $165,000 as due to officers relating to
unpaid salaries to Messrs. Flechner and Webb. The officers originally agreed
not to demand payment of this amount until January 2, 1996, at which time the
indebtedness was to be either settled with cash, if available, or the issuance
of shares of the Company, at an ascribed price of $0.30 per share. The amount
remained outstanding at December 31, 1995. In addition, effective January 1,
1995, the officers agreed to reduce their salary compensation by 10% (the "1995
Compensation") and further agreed to receive only a 75% portion of the 1995
Compensation in cash and the remaining 25% portion as deferred compensation.
The cash portion will be paid only upon the Company completing a financing and
the deferred compensation will be paid only in the event that the Company
generates operating cash flow or completes a major financing. The deferred
compensation may be either settled with cash or the issuance of the Company's
Common Stock, at a predetermined price per share, at the officer's election.
During 1995, the Company recorded $220,000 of the 1995 Compensation as accounts
payable. As at December 31, 1995, a total of $385,000 was due to Messrs.
Flechner and Webb, who have agreed not to demand payment of amounts owed to them
until January 2, 1997.
PROPOSAL 2: AUTHORIZATION TO IMPLEMENT REVERSE SPLIT
The Board of Directors has proposed, subject to shareholder approval, to
effect a 1-for-10 reverse stock split whereby every ten (10) shares of the
Company's currently outstanding shares of Common Stock will be exchanged for one
share of Common Stock. There are presently 28,057,403 shares outstanding, and
the reverse split would reduce this number to approximately 2,805,740 shares.
The reverse split will not alter the number of shares of Common Stock authorized
for issuance, which will remain at 30,000,000 shares. Messrs. John R. Twohig
and R. Nigel Horsley, officers and directors of the Company and of Tamarine
Ventures Ltd. have a substantial interest in this proposal, since approval of
the reverse split is one of the conditions precedent to consummation of the
Share Exchange with Tamarine Ventures Ltd.
SHARE EXCHANGE WITH TAMARINE VENTURES LTD.
On November 17, 1995, the Company executed an Agreement and Plan of Share
Exchange (the "Agreement") with Tamarine Ventures Ltd., a company incorporated
under the laws of British Columbia, Canada ("Tamarine"). The Agreement provides
for the issuance of one post-reverse stock split share of Common Stock of the
Company in exchange for each four common shares of Tamarine, thereby making
Tamarine a wholly-owned subsidiary of the Company (the "Share Exchange"). At
the closing of the Share Exchange, the Company would issue 2,000,000
post-reverse split shares of its Common Stock to the shareholders of Tamarine.
10
<PAGE>
The Agreement contemplates that Tamarine will acquire other businesses
and/or companies using shares of the Company's Common Stock. On November 24,
1995, Tamarine executed a Business Sale Agreement with Atlay Cat Sales and
Services Pty. Ltd of Queensland, Australia, to acquire its business, known as
Cougar Catamarans. Cougar Catamarans manufactures and sells boats ranging in
size from 7.5 to 35 meters, which include passenger ferries, pleasure boats,
scenic tour boats, fishing boats, dive boats, and patrol boats. Sales are made
to countries in the Pacific Rim: Japan, Hong Kong, China, Singapore, New
Zealand, the United States, Papua New Guinea, Tahiti, Noumea, and the Maldives.
The purchase price is $2,500,000 plus the value at closing of inventory and work
in process. Of the purchase price, $500,000 is to be made in shares of the
Company's Common Stock.
REASONS FOR THE PROPOSED REVERSE STOCK SPLIT
In addition to the reverse stock split being a condition precedent to the
consummation of the Share Exchange with Tamarine, management of the Company is
proposing the reverse stock split for the following reasons: management believes
a reverse stock split will (1) reduce the number of outstanding shares of Common
Stock and thereby make available shares of Common Stock with which to acquire
assets into the Company; and (2) help raise the trading price of the Company's
Common Stock. In discussions by the Company's executive officers with members
of the brokerage and banking industries, the Company has been advised that the
brokerage firms might be more willing to evaluate the Company's securities as a
possible investment opportunity for their clients and may be more willing to act
as a market maker in the Company's securities if the price range for the
Company's Common Stock were higher. Management believes that additional
interest by the investment community in the Company's stock, of which there can
be no assurance, is desirable.
Management of the Company also believes that existing low trading prices of
the Company's Common Stock may have an adverse impact upon the current level of
the trading market for the Common Stock. In particular, brokerage firms often
charge higher commissions for transactions involving low-priced stocks than they
would for the same dollar amount of securities with a higher per share price.
Some brokerage firms will not recommend purchases of low-priced stocks to their
clients or make a market in such stock, which tendencies may adversely affect
the liquidity for current shareholders and the Company's ability to obtain
additional equity financing.
EFFECTS OF APPROVAL OF THE REVERSE STOCK SPLIT
Theoretically, the market price of the Company's Common Stock should
increase approximately 10-fold following the proposed reverse stock split. It
is hoped that this will result in a price level which will overcome the
reluctance, policies, and practices of broker-dealers described above and
increase interest in the Company's Common Stock by investors. Shareholders
should note that the effect of the reverse stock split upon the market price for
the Company's Common Stock cannot be accurately predicted. Further, there can
be no assurance that the per share market price of the post-split Common Stock
will trade at a price 10 times the price of the pre-split Common Stock or, if it
does, that the price can be maintained at that level for any period of time.
On March 21, 1996, the closing bid and asked prices of the Company's Common
Stock were $.125 and $.1875 per share, respectively, as reported by NASDAQ. The
foregoing quotation reflects inter-dealer prices, without retail mark-up
mark-down, or commission and may not represent actual transactions.
Management, by implementing a reverse stock split, does not intend to "take
the company private" by decreasing the number of shareholders of the Company.
Management does not believe that a 1-for-10 reverse stock split would result in
any shareholders being eliminated or closed out as a result of holding less than
one share after the reverse stock split. Approximately 3,300 shareholders as of
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March 11, 1996, have a number of shares not evenly divisible by 10. As
disclosed below, the Company will round up to the nearest whole share instead of
issuing fractional shares resulting from the reverse stock split.
PROCEDURE FOR IMPLEMENTING THE REVERSE SPLIT
If this proposal is adopted by the shareholders, ten (10) shares of
pre-split Common Stock will be exchanged for each share of post-split Common
Stock. Shares of post-split Common Stock may be obtained by surrendering
certificates representing shares of pre-split Common Stock to the Company's
transfer agent, American Securities Transfer, Inc., 938 Quail Street, Suite 101,
Lakewood, Colorado 80215 (the "Transfer Agent"). To determine the number of
shares of post-split Common Stock issuable to any record holder, the total
number of shares represented by all of the certificates issued in the name of
that record holder held in each account as set forth on the records of the
Transfer Agent on the date upon which the reverse split becomes effective will
be divided by 10. Upon surrender to the Transfer Agent of the share
certificate(s) representing shares of pre-split Common Stock and the applicable
transfer fee, which presently is $15.00 per certificate payable by the holder,
the holder will receive a share certificate representing the appropriate number
of shares of post-split Common Stock. If the division described above results
in a quotient which contains a fraction, the Company will round up to the
nearest whole share instead of issuing a fractional share. Shareholders are not
required to exchange their certificates of pre-split Common Stock for post-split
Common Stock. It is anticipated that the reverse split will be effected
immediately following receipt of the necessary shareholder approval.
FEDERAL INCOME TAX EFFECTS OF THE PLAN
Holders of Common Stock will not be required to recognize any gain or loss
if the reverse stock split is effected. The tax basis of the aggregate shares
of post-split Common Stock received by present shareholders will be equal to the
basis of the aggregate shares of the pre-split Common Stock exchanged therefor.
The holding period for shares of post-split Common Stock will include the
holding period of the pre-split Common Stock when calculated for purposes of
taxation or sales under Rule 144 of the Rules and Regulations promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). Rule 144
requires that "restricted securities," as defined in Rule 144, be held at least
two years before routine sales can be made in accordance with the provisions of
the Rule. Rule 144 provides that shares issued in a reverse stock split are
deemed to have been held from the date of acquisition of the shares involved in
the reverse stock split.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that the shareholders vote "FOR" this proposal to
approve the reverse stock split. The affirmative vote of a majority of the
shares represented at the Meeting and entitled to vote is required for approval.
See "Voting Securities and Principal Holders Thereof" above.
PROPOSAL 3: ADOPTION OF 1996 STOCK OPTION PLAN
The Board is requesting that the shareholders of the Company adopt the 1996
Stock Option Plan (the "Plan") reserving an aggregate of 2,750,000 shares of the
Company's Common Stock (the "Available Shares") for issuance pursuant to the
exercise of stock options ("Options") which may be granted to employees,
officers, and directors of the Company and consultants to the Company. The Plan
also provides for annual adjustment in the number of Available Shares,
commencing December 31, 1996, to a number equal to 10% of the number of shares
outstanding on December 31 of the preceding year or 2,750,000 shares, whichever
is greater. The Plan was adopted by the Board of Directors on March 22, 1996.
The Plan is designed to (i) induce qualified persons to become
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employees, officers, or directors of the Company; (ii) reward such persons for
past services to the Company; (iii) encourage such persons to remain in the
employ of the Company or associated with the Company; and (iv) provide
additional incentive for such persons to put forth maximum efforts for the
success of business of the Company. To the extent that management personnel may
be eligible to receive Options which may be granted under the Plan, management
has an interest in obtaining approval of the Plan by the Company's shareholders.
As of December 31, 1995, eight persons were eligible to participate in the Plan.
The Plan will be administered by the Compensation Committee of the Board of
Directors (the "Committee"). Transactions under the Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "1934 Act"). In addition to determining who will be
granted Options, the Committee has the authority and discretion to determine
when Options will be granted and the number of Options to be granted. The
Committee may determine which Options may be intended to qualify ("Incentive
Stock Option") for special treatment under the Internal Revenue Code of 1986, as
amended from time to time (the "Code") or Non-Qualified Options ("Non-Qualified
Stock Options") which are not intended to so qualify. See "Federal Income Tax
Consequences" below. The Committee also may determine the time or times when
each Option becomes exercisable, the duration of the exercise period for Options
and the form or forms of the instruments evidencing Options granted under the
Plan. The Committee may adopt, amend, and rescind such rules and regulations as
in its opinion may be advisable for the administration of the Plan. The
Committee may amend the Plan without shareholder approval where such approval is
not required to satisfy any statutory or regulatory requirements.
The Plan provides that disinterested directors will receive automatic
options grants to purchase 100,000 shares (10,000 post-reverse split shares) of
the Company's Common Stock upon their initial appointment or election as
directors, and on the date of each subsequent annual shareholders' meeting,
which vest in 33-1/3% installments commencing on the first anniversary of the
grant date. Grants to employee directors and officer/directors can be either
Non-Qualified Stock Options or Incentive Stock Options, to the extent that they
do not exceed the Incentive Stock Option exercise limitations, and the portion
of an option to an employee director or officer/director that exceeds the dollar
limitations of Code Section 422 will be treated as a Non-Qualified Stock Option.
All options granted to disinterested directors will be Non-Qualified Options.
The Committee also may construe the Plan and the provisions in the
instruments evidencing options granted under the Plan to employee and officer
participants and is empowered to make all other determinations deemed necessary
or advisable for the administration of the Plan. Option grants to disinterested
directors are self-administering and not subject to the Committee's discretion.
The Committee may not adversely affect the rights of any participant under any
unexercised option or any potion thereof without the consent of such
participant. This Plan will remain in effect until it is terminated by the
Compensation Committee, except that no Incentive Stock Option will be granted
after March 22, 2006.
The Plan contains provisions for proportionate adjustment of the number of
shares for outstanding options and the option price per share in the event of
stock dividends, recapitalizations resulting in stock splits or combinations or
exchanges of shares.
Participants in the Plan may be selected by the Committee from employees
and officers of the Company and its subsidiaries and consultants to the Company
and its subsidiaries. Disinterested directors receive annual automatic option
grants, as described above. In determining the persons to whom options will be
granted and the number of shares to be covered by each option, the Committee
will take into account the duties of the respective persons, their present and
potential contributions to the success of the Company, and such other factors as
the Committee deems relevant to accomplish the purposes of the Plan.
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Only employees of the Company and its subsidiaries, as the term "employee"
is defined for the purposes of the Code will be entitled to receive Incentive
Stock Options. Incentive Stock Options granted under the Plan are intended to
satisfy all requirements for incentive stock options under Section 422 of the
Code and the Treasury Regulations thereunder.
Each option granted under the Plan will be evidenced by a written option
agreement between the Company and the optionee. The option price of any
Incentive Stock Option may be not less than 100% of the Fair Market Value per
share on the date of grant of the option; provided, however, that any Incentive
Stock Option granted under the Plan to a person owning more than ten percent of
the total combined voting power of the Common Stock will have an option price of
not less than 110% of the Fair Market Value per share on the date of grant of
the Incentive Stock Option. Each Non-Qualified Stock Option granted under the
Plan will be at a price no less than 85% of the Fair Market Value per share on
the date of grant thereof, except that the automatic stock option grants to
disinterested directors will be at a price equal to the Fair Market Value per
share on the date of grant. "Fair Market Value" per share as of a particular
date is defined in the Plan as the last sale price of the Company's Common Stock
as reported on a national securities exchange or on the NASDAQ System or, if
none, the average of the closing bid and asked prices of the Company's Common
Stock as reported by NASDAQ or, if such quotations are unavailable, the value
determined by the Committee in its discretion in good faith.
The exercise period of options granted under the Plan may not exceed ten
years from the date of grant thereof. Incentive Stock Options granted to a
person owning more than ten percent of the total combined voting power of the
Common Stock of the Company will be for no more than five years. Except in the
case of options granted to disinterested directors, who comprise the
Compensation Committee, the Committee will have the authority to accelerate or
extend the exercisability of any outstanding option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. However, no
exercise period may be extended to increase the term of the option beyond ten
years from the date of the grant.
To exercise an option, the optionee must pay the full exercise price in
cash, in shares of Common Stock having a Fair Market Value equal to the option
price or in property or in a combination of cash, shares, and property and,
subject to approval of the Committee. The Committee has the sole and absolute
discretion to determine whether or not property other than cash or Common Stock
may be used to purchase the shares of Common Stock thereunder and, if so, to
determine the value of the property received.
An option may not be exercised unless the optionee then is an employee,
officer, or director of the Company or its subsidiaries, and unless the optionee
has remained continuously as an employee, officer, or director of the Company
since the date of grant of the option. If the optionee ceases to be an
employee, officer, or director of the Company or its subsidiaries other than by
reason of death, disability, or for cause, all options granted to such optionee,
fully vested to such optionee but not yet exercised, will terminate three months
after the date the optionee ceases to be an employee, officer or director of the
Company. All options which are not vested to an optionee, under the conditions
stated in this paragraph for which employment ceases, will immediately terminate
on the date the optionee ceases employment or association.
If an optionee dies while an employee, officer or director of the Company,
or if the optionee's employment, officer, or director status terminates by
reason of disability, all options theretofore granted to such optionee, whether
or not otherwise exercisable, unless earlier terminated in accordance with their
terms, may be exercised at any time within one year after the date of death or
disability of said optionee, by the optionee or by the optionee's estate or by a
person who acquired the right to exercise such options by bequest or inheritance
or otherwise by reason of the death or disability of the optionee.
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Options granted under the Plan are not transferable other than by will or
by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act of 1974, or the rules thereunder. Options may be exercised,
during the lifetime of the optionee, only by the optionee and thereafter only by
his legal representative. An optionee has no rights as a shareholder with
respect to any shares covered by an option until the option has been exercised.
As a condition to the issuance of shares upon the exercise of an option,
the Company will require the optionee to pay to the Company the amount of the
Company's tax withholding liability required in connection with such exercise.
The Company, to the extent permitted or required by law, may deduct a sufficient
number of shares due to the optionee upon exercise of the option to allow the
Company to pay such withholding taxes. The Company is not obligated to advise
any optionee of the existence of any tax or the amount which the Company will be
so required to withhold.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is included for general
information only. Optionees are urged to consult their tax advisors to
determine the particular tax consequences applicable to them, including the
application and effect of foreign, state, and local income and other tax laws.
INCENTIVE STOCK OPTIONS. No income results to the holder of an Incentive
Stock Option upon the grant thereof or issuance of shares upon exercise thereof.
The amount realized on the sale or taxable exchange of the Option Shares in
excess of the option exercise price will be considered a capital gain, except
that, if a sale, taxable exchange, or other disposition occurs within one year
after exercise of the Incentive Stock Option or two years after the grant of the
Incentive Stock Option (generally considered to be a "disqualifying
disposition"), the optionee will realize compensation, for federal income tax
purposes, on the amount by which the lesser of (I) the fair market value on the
date of exercise or (ii) the amount realized on the sale of the shares, exceeds
the exercise price. Any appreciation on the shares between the exercise date
and the disposition will be taxed to the optionee as capital gain. The
difference between the exercise price and the fair market value of the shares
acquired at the time of exercise is a tax preference item for the purpose of
calculating the alternative minimum tax on individuals under the Code. This
preference amount will not be included again in alternative minimum taxable
income in the year the taxpayer disposes of the stock.
NON-QUALIFIED STOCK OPTIONS. No compensation will be realized by the
optionee of a Non-Qualified Stock Option at the time it is granted. Upon the
exercise of a Non-Qualified Stock Option, an optionee will realize compensation
for federal income tax purposes on the difference between the exercise price and
the fair market value of the shares acquired at the time of exercise. If the
optionee exercises a Non-Qualified Stock Option by surrendering shares of the
Company's Common Stock, the optionee will not recognize income or gain at the
time of exercise.
CONSEQUENCES TO THE COMPANY. The Company recognizes no deduction at the
time of grant or exercise of an Incentive Stock Option and recognizes no
deduction at the time of grant of a Non-Qualified Stock Option. The Company
will recognize a deduction at the time of exercise of a Non-Qualified Stock
Option on the difference between the option price and the fair market value of
the shares on the date of grant. The Company also will recognize a deduction to
the extent the optionee recognizes income upon a disqualifying disposition of
shares underlying an Incentive Stock Option.
VESTING
Unless otherwise specified in an optionee's agreement, options granted
under the Plan to officers, officer/directors, disinterested directors who are
not on the Committee, and employees will
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become vested with the optionee under the following schedule: 50% upon the first
anniversary of the option grant and 12.5% upon each of the four three-month
periods following the first anniversary.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that the shareholders vote "FOR" this proposal to
approve the 1996 Stock Option Plan. The affirmative vote of a majority of the
shares represented at the Meeting and entitled to vote is required for approval
of the 1996 Stock Option Plan. See "Voting Securities and Principal Holders
Thereof" above.
PROPOSAL 4: ADOPTION OF 1996 RESTRICTED STOCK PLAN
The Board is requesting that the shareholders of the Company adopt the 1996
Restricted Stock Plan (the "Plan") reserving an aggregate of 2,750,000 shares
(the "Available Shares") of the Company's Common Stock for issuance to
employees, officers, and directors of the Company and consultants to the
Company. The Plan also provides for annual adjustment in the number of
Available Shares, commencing December 31, 1996, to a number equal to 10% of the
number of shares outstanding on December 31 of the preceding year or 2,750,000
shares, whichever is greater. The Plan was adopted by the Board of Directors on
March 22, 1996. The Plan is designed to (i) induce qualified persons to become
employees, officers, or directors of the Company; (ii) reward such persons for
past services to the Company; (iii) encourage such persons to remain in the
employ of the Company or associated with the Company; and (iv) provide
additional incentive for such persons to put forth maximum efforts for the
success of business of the Company. To the extent that management personnel may
be eligible to receive shares which may be issued under the Plan, management has
an interest in obtaining approval of the Plan by the Company's shareholders. As
of December 31, 1995, eight persons were eligible to participate in the Plan.
Shares issued under this Plan are "restricted" in the sense that they are
subject to repurchase by the Company at cost during the vesting period.
The Plan will be administered by the Compensation Committee of the board of
Directors (the "Committee"). Transactions under the Plan are intended to comply
with all applicable conditions of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "1934 Act"). In addition to determining who will be
issued shares, the Committee has the authority and discretion to determine when
shares will be issued and the number of shares to be issued. The Committee also
may determine the purchase price of the shares issued under the Plan, the period
or periods of time during which the Company will have a right to repurchase the
shares and the terms and conditions of such repurchase, and the form or forms of
the instruments evidencing the issuance of shares pursuant to the Plan. The
Committee may adopt, amend, and rescind such rules and regulations as in its
opinion may be advisable for the administration of the Plan. The Committee may
amend the Plan without shareholder approval where such approval is not required
to satisfy any statutory or regulatory requirements.
The Plan provides that disinterested directors will receive automatic
issuances of 100,000 shares (10,000 post-reverse split shares) of the Company's
Common Stock upon their initial appointment or election as directors, and on the
date of each subsequent annual shareholders' meeting, which vest in 33-1/3%
installments commencing on the first anniversary of the issue date.
The Committee also may construe the Plan and is empowered to make all other
determinations deemed necessary or advisable for the administration of the Plan.
Issuances to disinterested directors are self-administering and not subject to
the Committee's discretion. The Committee may not adversely affect the rights
of any participant under any rights previously granted without the consent
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of such participant. This Plan will remain in effect until it is terminated by
the Compensation Committee.
The Plan contains provisions for proportionate adjustment of the number of
shares that may be issued under the Plan and the exercise price of any rights of
repurchase or of first refusal under this Plan in the event of stock dividends,
recapitalizations resulting in stock splits or combinations or exchanges of
shares.
Participants in the Plan may be selected by the Committee from employees
and officers of the Company and its subsidiaries and consultants to the Company
and its subsidiaries. Disinterested directors receive annual automatic
issuances, as described above. In determining the persons to whom shares will
be issued and the number of shares to be issued, the Committee will take into
account the duties of the respective persons, their present and potential
contributions to the success of the Company, and such other factors as the
Committee deems relevant to accomplish the purposes of the Plan.
Shares issued under the Plan will be evidenced by a written restricted
stock purchase agreement between the Company and the participant. Shares issued
under the Plan are transferable only if the transferee agrees to be bound by all
of the terms of the Plan, including the Company's right to repurchase the
shares, and only if such transfer is permissible under federal and state
securities laws. To facilitate the enforcement of the restrictions on transfer,
the Committee may require the holder of the shares to deliver the certificate(s)
for such shares to be held in escrow during the period of restriction.
FEDERAL INCOME TAX CONSEQUENCES
The federal income tax discussion set forth below is included for general
information only. Participants are urged to consult their tax advisors to
determine the particular tax consequences applicable to them, including the
application and effect of foreign, state, and local income and other tax laws.
Section 83(a) of the Internal Revenue Code provides that the receipt of
stock subject to a substantial risk of forfeiture and which is nontransferable
does not result in taxable income until the restrictions lapse. At that time,
the employee recognizes compensation income (taxable at the rate applicable to
ordinary income) in the amount of the spread between the value of the stock and
the amount, if any, the employee paid for the stock. The Company must withhold
employment taxes on this income, and generally may deduct the amount the
employee includes in income as an ordinary business expense.
VESTING
Unless otherwise specified in a participant's agreement, shares issued
under the Plan to officers, officer/directors, disinterested directors who are
not on the Committee, and employees will become vested with the participant
under the following schedule: 50% upon the first anniversary of the date of
issuance and 12.5% upon each of the four three-month periods following the first
anniversary.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that the shareholders vote "FOR" this proposal to
approve the 1996 Restricted Stock Plan. The affirmative vote of a majority of
the shares represented at the Meeting and entitled to vote is required for
approval of the 1996 Restricted Stock Plan. See "Voting Securities and
Principal Holders Thereof" above.
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PROPOSAL 5: NAME CHANGE
The Company proposes to amend Article I of its Articles of Incorporation to
change its name to Tamarine NLMC Ltd., anticipating consummation of the Share
Exchange with Tamarine Ventures Ltd. A copy of Article I as it would read
following adoption of this proposal is included as Exhibit A to this Proxy
Statement. See Proposal 2: Authorization to Implement Reverse Split. Should the
Share Exchange not be consummated the Company would not file the amendment for
the name change, even if this proposal is adopted.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that the shareholders vote "FOR" this proposal to
approve the name change of the Company. The affirmative vote of a majority of
the outstanding shares entitled to vote is required for approval. See "Voting
Securities and Principal Holders Thereof" above.
PROPOSAL 6: AUTHORIZATION OF PREFERRED STOCK
The Company proposes to amend Article IV of its Articles of Incorporation
to authorize 5,000,000 shares of Preferred Stock, no par value per share. A copy
of Article IV as it would read following adoption of this proposal is included
as Exhibit A to this Proxy Statement. The board of directors would be given the
authority to determine the terms of the Preferred Stock, including dividend
rates, conversion prices, voting rights, redemption prices, maturity dates, and
other rights and preferences. No further authorization by holders of the Common
Stock for the issuance of the Preferred Stock is to be obtained.
Although no offering of Preferred Stock is contemplated in the proximate
future, the current Board of Directors believes that it is desirable to have
shares of Preferred Stock available for issuance. Current management has had
many discussions with other parties while attempting to acquire assets and/or
businesses into the Company. Shares of Preferred Stock would represent another
means to acquire assets and/or businesses. The terms of the Preferred Stock
could be negotiated on a transaction-by-transaction basis. It is unlikely that
further authorization for the issuance of the securities by a vote of holders of
the Common Stock will be solicited prior to such issuance. None of the
directors or executive officers of the Company has any substantial interest,
direct or indirect, in this proposal.
RECOMMENDATION AND VOTE REQUIRED
The Board recommends that the shareholders vote "FOR" this proposal to
approve the authorization of the Preferred Stock. The affirmative vote of a
majority of the outstanding shares entitled to vote is required for approval.
See "Voting Securities and Principal Holders Thereof" above.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand served as the independent accountants for the Company for
the year ended December 31, 1995. Management of the Company intends to select
such firm as the Company's independent accountants for the fiscal year ending
December 31, 1996.
A representative of Coopers & Lybrand is not expected to be present at the
Annual Meeting.
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OTHER MATTERS
Except for the matters referred to in the accompanying Notice of Annual
Meeting, management does not intend to present any matter for action at the
Annual Meeting and knows of no matter to be presented that is a proper subject
for action by the shareholders at the meeting. However, if any other matters
should properly come before the meeting, it is intended that votes will be cast
pursuant to the authority granted by the enclosed Proxy in accordance with the
best judgment of the person or persons acting under the Proxy.
ANNUAL REPORT
The Company's Annual Report to Shareholders is being mailed with this Proxy
Statement. It does not contain all the information contained in the Company's
Form 10-K for the year ended December 31, 1995, as filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
UPON WRITTEN REQUEST AND PAYMENT OF A REASONABLE FEE TO COVER THE COMPANY'S
EXPENSES, THE COMPANY WILL FURNISH ANY PERSON WHO IS A SHAREHOLDER OF THE
COMPANY, AS OF ________, 1996, A COPY OF THE FORM 10-K AND ANY EXHIBIT TO THE
FORM 10-K LISTED IN ITEM 14 THEREOF. ANY SUCH WRITTEN REQUEST MAY BE ADDRESSED
TO THE CORPORATE SECRETARY, NORTH LILY MINING COMPANY, 1800 GLENARM PLACE, SUITE
210, DENVER, COLORADO 80202. THE WRITTEN REQUEST SHALL INCLUDE A GOOD FAITH
REPRESENTATION THAT, AS OF _____________, 1996, THE PERSON MAKING THE REQUEST
WAS THE BENEFICIAL OWNER OF COMMON STOCK OF THE COMPANY ENTITLED TO VOTE AT THE
ANNUAL MEETING.
INCORPORATION BY REFERENCE
The Company hereby incorporates by reference the financial statements and
section entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the Annual Report to Shareholders which
is being mailed with this Proxy Statement.
SHAREHOLDER PROPOSALS
Any shareholder proposing to have any appropriate matter brought before the
next annual meeting of shareholders must submit such proposal in accordance with
the proxy rules of the Securities and Exchange Commission. Such proposals
should be sent to the Corporate North Lily Mining Company, 1800 Glenarm Place,
Suite 210, Denver, Colorado 80202, for receipt no later than December 31, 1996.
By order of the Board of Directors:
Stephen E. Flechner, President
Denver, Colorado
March __, 1996
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EXHIBIT A
If the proposal to change the name of the Company is approved by the
shareholders, Article I of the Company's Articles of Incorporation would be
amended to state as follows:
ARTICLE I
NAME
The name of the Corporation is Tamarine NLMC Ltd.
If the proposal to authorize Preferred Stock is approved by the
shareholders, Article IV of the Company's Articles of Incorporation would be
amended to state as follows:
ARTICLE IV
CAPITAL STOCK
SECTION 1. CLASSES AND SHARES AUTHORIZED. The authorized
capital stock of the corporation shall be 5,000,000 shares of
Preferred Stock, no par value, and 30,000,000 shares of Common Stock,
$.10 par value.
SECTION 2. PREFERRED STOCK.
Shares of Preferred Stock may be divided into such series as may
be established from time to time by the Board of Directors. The Board
of Directors from time to time may fix and determine the relative
rights and preferences of the shares of any series so established.
SECTION 3. COMMON STOCK.
(a) After the corporation shall have complied with all the
requirements, if any, with respect to the setting aside of sums as
sinking funds or redemption or purchase accounts, then, and not
otherwise, the holders of the Common Stock shall be entitled to
receive such dividends as may be declared from time to time by the
Board of Directors of the corporation and paid out of funds legally
available therefor.
(b) In the event of voluntary or involuntary liquidation,
distribution, or sale of assets, dissolution, or winding-up of the
corporation, the holders of the Common Stock shall be entitled to
receive all of the remaining assets of the corporation, tangible and
intangible, of whatever kind available for distribution to
stockholders, ratably in proportion to the number of shares of the
Common Stock held by them respectively.
(c) Except as may otherwise be required by law, each holder of
the Common Stock shall have one vote in respect of each share of the
Common Stock held by him on all matters voted upon by the
stockholders.
SECTION 4. GENERAL PROVISIONS. The capital stock of the
corporation may be issued for money, property, services rendered,
labor done, cash advanced to or on behalf of the corporation, or for
any other assets of value in accordance with an action of the Board of
Directors, whose judgment as to the value of the assets received in
return for said stock shall be conclusive, and said stock, when
issued, shall be fully paid and nonassessable.
A-1
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NORTH LILY MINING COMPANY 1996 STOCK OPTION PLAN
1. PURPOSE; EFFECTIVENESS OF THE PLAN.
(a) The purpose of this Plan is to advance the interests of the Company
and its stockholders by helping the Company obtain and retain the
services of employees, officers, consultants, and directors, upon
whose judgment, initiative and efforts the Company is substantially
dependent, and to provide those persons with further incentives to
advance the interests of the Company.
(b) This Plan will become effective on the date of its adoption by the
Board, provided the Plan is approved by the stockholders of the
Company (excluding holders of shares of Stock issued by the Company
pursuant to the exercise of options granted under this Plan) within
twelve months before or after that date. If the Plan is not so
approved by the stockholders of the Company, any options granted under
this Plan will be rescinded and will be void. This Plan will remain
in effect until it is terminated by the Board or the Committee (as
defined hereafter) under section 9 hereof, except that no ISO (as
defined herein) will be granted after the tenth anniversary of the
date of this Plan's adoption by the Board. This Plan will be governed
by, and construed in accordance with, the laws of the State of Utah.
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan) will
govern the construction of this Plan, and of any stock option agreements
entered into pursuant to this Plan:
(a) "10% Stockholder" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions set forth
in Section 424(d) of the Code at the time he or she is granted an
Option, stock possessing more than ten percent (10%) of the total
combined voting power or value of all classes of stock of the Company
and/or of its subsidiaries;
(b) "1933 Act" means the federal Securities Act of 1933, as amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Called for under an Option," or words to similar effect, means
issuable pursuant to the exercise of an Option;
(e) "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of
the Code as enacted at the time of this Plan's adoption by the Board
and as subsequently amended, or to any substantially similar successor
provisions of the Code resulting from recodification, renumbering or
otherwise);
(f) "Committee" means a committee, known as the Compensation Committee, of
two or more Disinterested Directors, appointed by the Board, to
administer and interpret this Plan; provided that the term "Committee"
will refer to the Board during such times as no Committee is appointed
by the Board;
(g) "Company" means North Lily Mining Company, a Utah corporation;
<PAGE>
(h) "Disability" has the same meaning as "permanent and total disability,"
as defined in Section 22(e)(3) of the Code;
(i) "Disinterested Director" means a member of the Board who is not during
the period of one year prior to his or her service as an administrator
of the Plan, or during the period of such service, granted or awarded
Stock, options to acquire Stock, or similar equity securities of the
Company under this Plan or any similar plan of the Company, other than
the grant of a Formula Option pursuant to section 6(m) of this Plan;
(j) "Eligible Participants" means persons who, at a particular time, are
employees, officers, consultants, or directors of the Company or its
subsidiaries;
(k) "Fair Market Value" means, with respect to the Stock and as of the
date an ISO or a Formula Option is granted hereunder, the market price
per share of such Stock determined by the Committee, consistent with
the requirements of Section 422 of the Code and to the extent
consistent therewith, as follows:
(i) If the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value will be equal to the
closing price reported by the applicable composite-transactions
report for such date;
(ii) If the Stock was traded over-the-counter on the date in
question and was classified as a national market issue, then
the Fair Market Value will be equal to the last-transaction
price quoted by the NASDAQ system for such date;
(iii) If the Stock was traded over-the-counter on the date in
question but was not classified as a national market issue,
then the Fair Market Value will be equal to the average of the
last reported representative bid and asked prices quoted by the
NASDAQ system for such date; and
(iv) If none of the foregoing provisions is applicable, then the
Fair Market Value will be determined by the Committee in good
faith on such basis as it deems appropriate.
(l) "Formula Option" means an NSO granted to members of the Committee
pursuant to section 6(m) hereof;
(m) "ISO" has the same meaning as "incentive stock option," as defined in
Section 422 of the Code;
(n) "Just Cause Termination" means a termination by the Company of an
Optionee's employment by and/or service to the Company (or if the
Optionee is a director, removal of the Optionee from the Board by
action of the stockholders or, if permitted by applicable law and the
bylaws of the Company, the other directors), in connection with the
good faith determination of the Company's board of directors (or of
the Company's stockholders if the Optionee is a director and the
removal of the Optionee from the Board is by action of the
stockholders, but in either case excluding the vote of the Optionee if
he or she is a director or a stockholder) that the Optionee has
engaged in any acts involving dishonesty or moral turpitude or in any
acts that materially and adversely affect the business, affairs or
reputation of the Company or its subsidiaries;
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(o) "NSO" means any option granted under this Plan whether designated by
the Committee as a "non-qualified stock option," a "non-statutory
stock option" or otherwise, other than an option designated by the
Committee as an ISO, or any option so designated but which, for any
reason, fails to qualify as an ISO pursuant to Section 422 of the Code
and the rules and regulations thereunder;
(p) "Option" means an option granted pursuant to this Plan entitling the
option holder to acquire shares of Stock issued by the Company
pursuant to the valid exercise of the option;
(q) "Option Agreement" means an agreement between the Company and an
Optionee, in form and substance satisfactory to the Committee in its
sole discretion, consistent with this Plan;
(r) "Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of the
Option Stock called for under such Option;
(s) "Option Stock" means Stock issued or issuable by the Company pursuant
to the valid exercise of an Option;
(t) "Optionee" means an Eligible Participant to whom Options are granted
hereunder, and any transferee thereof pursuant to a Transfer
authorized under this Plan;
(u) "Plan" means this 1996 Stock Option Plan of the Company;
(v) "QDRO" has the same meaning as "qualified domestic relations order" as
defined in Section 414(p) of the Code;
(w) "Stock" means shares of the Company's Common Stock, $.10 par value;
(x) "Subsidiary" has the same meaning as "Subsidiary Corporation" as
defined in Section 424(f) of the Code;
(y) "Transfer," with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift,
attachment or levy of such Option Stock, including without limitation
an assignment for the benefit of creditors of the Optionee, a transfer
by operation of law, such as a transfer by will or under the laws of
descent and distribution, an execution of judgment against the Option
Stock or the acquisition of record or beneficial ownership thereof by
a lender or creditor, a transfer pursuant to a QDRO, or to any decree
of divorce, dissolution or separate maintenance, any property
settlement, any separation agreement or any other agreement with a
spouse (except for estate planning purposes) under which a part or all
of the shares of Option Stock are transferred or awarded to the spouse
of the Optionee or are required to be sold; or a transfer resulting
from the filing by the Optionee of a petition for relief, or the
filing of an involuntary petition against such Optionee, under the
bankruptcy laws of the United States or of any other nation.
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3. ELIGIBILITY.
The Company may grant Options under this Plan only to persons who are
Eligible Participants as of the time of such grant. Subject to the
provisions of sections 4(d), 5 and 6 hereof, there is no limitation on the
number of Options that may be granted to an Eligible Participant.
4. ADMINISTRATION.
(a) COMMITTEE. The Committee, if appointed by the Board, will administer
this Plan. If the Board, in its discretion, does not appoint such a
Committee, the Board itself will administer this Plan and take such
other actions as the Committee is authorized to take hereunder;
provided that the Board may take such actions hereunder in the same
manner as the Board may take other actions under the Company's
Articles of incorporation and bylaws generally.
(b) AUTHORITY AND DISCRETION OF COMMITTEE. The Committee will have full
and final authority in its discretion, at any time and from time to
time, subject only to the express terms, conditions and other
provisions of the Company's Articles of incorporation, bylaws and this
Plan, and the specific limitations on such discretion set forth
herein:
(i) to select and approve the persons who will be granted Options
under this Plan from among the Eligible Participants, and to
grant to any person so selected one or more Options to purchase
such number of shares of Option Stock as the Committee may
determine;
(ii) to determine the period or periods of time during which Options
may be exercised, the Option Price and the duration of such
Options, and other matters to be determined by the Committee in
connection with specific Option grants and Options Agreements
as specified under this Plan;
(iii) to interpret this Plan, to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other
determinations necessary or advisable for the operation and
administration of this Plan; and
(iv) to delegate all or a portion of its authority under subsections
(i) and (ii) of this section 4(b) to one or more directors of
the Company who are executive officers of the Company, but only
in connection with Options granted to Eligible Participants who
are not subject to the reporting and liability provisions of
Section 16 of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, and subject to such
restrictions and limitations (such as the aggregate number of
shares of Option Stock called for by such Options that may be
granted) as the Committee may decide to impose on such delegate
directors.
(c) LIMITATION ON AUTHORITY. Notwithstanding the foregoing, or any other
provision of this Plan, the Committee will have no authority:
(i) to grant Options to any of its members, whether or not approved
by the Board; and
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(ii) to determine any matters, or exercise any discretion, in
connection with the Formula Options under section 6(m) hereof,
to the extent that the power to make such determinations or to
exercise such discretion would cause one or more members of the
Committee no longer to be "Disinterested Directors" within the
meaning of section 2(i) above.
(d) DESIGNATION OF OPTIONS. Except as otherwise provided herein, the
Committee will designate any Option granted hereunder either as an ISO
or as an NSO. To the extent that the Fair Market Value (determined at
the time the Option is granted) of Stock with respect to which all
ISOs are exercisable for the first time by any individual during any
calendar year (pursuant to this Plan and all other plans of the
Company and/or its subsidiaries) exceeds $100,000, such option will be
treated as an NSO. Notwithstanding the general eligibility provisions
of section 3 hereof, the Committee may grant ISOs only to persons who
are employees of the Company and/or its subsidiaries.
(e) OPTION AGREEMENTS. Options will be deemed granted hereunder only upon
the execution and delivery of an Option Agreement by the Optionee and
a duly authorized officer of the Company. Options will not be deemed
granted hereunder merely upon the authorization of such grant by the
Committee.
5. SHARES RESERVED FOR OPTIONS.
(a) OPTION POOL. The aggregate number of shares of Option Stock that may
be issued pursuant to the exercise of Options granted under this Plan
initially will not exceed Two Million Seven Hundred Fifty Thousand
(2,750,000) (the "Option Pool"), provided that such number
automatically shall be adjusted annually on January 1 to a number
equal to 10% of the number of shares of Stock of the Company
outstanding on December 31 of the immediately preceding year, or
2,750,000 shares, whichever is greater, and provided further that such
number will be increased by the number of shares of Option Stock that
the Company subsequently may reacquire through repurchase or
otherwise. Shares of Option Stock that would have been issuable
pursuant to Options, but that are no longer issuable because all or
part of those Options have terminated or expired, will be deemed not
to have been issued for purposes of computing the number of shares of
Option Stock remaining in the Option Pool and available for issuance.
(b) ADJUSTMENTS UPON CHANGES IN STOCK. In the event of any change in the
outstanding Stock of the Company as a result of a stock split, reverse
stock split, stock dividend, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made
in:
(i) the aggregate number of shares of Option Stock in the Option
Pool that may be issued pursuant to the exercise of Options
granted hereunder;
(ii) the Option Price and the number of shares of Option Stock
called for in each outstanding Option granted hereunder; and
(iii) other rights and matters determined on a per share basis under
this Plan or any Option Agreement hereunder. Any such
adjustments will be made only by the Board, and when so made
will be effective, conclusive and binding for all purposes with
respect to this Plan and all Options then outstanding. No such
adjustments will be required by reason of the issuance or sale
by the Company
5
<PAGE>
for cash or other consideration of additional shares of its
Stock or securities convertible into or exchangeable for shares
of its Stock.
6. TERMS OF STOCK OPTION AGREEMENTS.
Each Option granted pursuant to this Plan will be evidenced by an agreement
(an "Option Agreement") between the Company and the person to whom such
Option is granted, in form and substance satisfactory to the Committee in
its sole discretion, consistent with this Plan. Without limiting the
foregoing, each Option Agreement (unless otherwise stated therein) will be
deemed to include the following terms and conditions:
(a) COVENANTS OF OPTIONEE. At the discretion of the Committee, the person
to whom an Option is granted hereunder, as a condition to the granting
of the Option, must execute and deliver to the Company a confidential
information agreement approved by the Committee. Nothing contained in
this Plan, any Option Agreement or in any other agreement executed in
connection with the granting of an Option under this Plan will confer
upon any Optionee any right with respect to the continuation of his or
her status as an employee of, consultant or independent contractor to,
or director of, the Company or its subsidiaries.
(b) VESTING PERIODS. Unless the Option Agreement executed by an Optionee
expressly otherwise provides and except as set forth herein, the right
to exercise an Option granted hereunder will be subject to the
following Vesting Periods, subject to the Optionee continuing to be an
Eligible Participant and the occurrence of any other event (including
the passage of time) that would result in the cancellation or
termination of the Option:
(i) no portion of the Option will be exercisable prior to the first
anniversary of the date of grant set forth in the Option
Agreement;
(ii) upon and after such first anniversary of such date of grant,
the Optionee may purchase up to fifty percent (50%) of the
Total Award Option Stock; and
(iii) the Option will become exercisable on a cumulative basis as to
twelve and one-half (12.5%) of the Total Award Option Stock, at
the end of every period of three (3) months that elapses after
such first anniversary, so that the Option will have become
fully exercisable, subject to the Optionee's remaining an
Eligible Participant, on the second anniversary of such date of
grant.
(c) EXERCISE OF THE OPTION.
(i) MECHANICS AND NOTICE. An Option may be exercised to the extent
exercisable (1) by giving written notice of exercise to the
Company, specifying the number of full shares of Option Stock
to be purchased and accompanied by full payment of the Option
Price thereof and the amount of withholding taxes pursuant to
subsection 6(c)(ii) below; and (2) by giving assurances
satisfactory to the Company that the shares of Option Stock to
be purchased upon such exercise are being purchased for
investment and not with a view to resale in connection with any
distribution of such shares in violation of the 1933 Act;
provided, however, that in the event the Option Stock called
for under the Option is registered under the 1933 Act, or in
the event resale of such Option Stock without such registration
would otherwise be permissible, this second
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<PAGE>
condition will be inoperative if, in the opinion of counsel for
the Company, such condition is not required under the 1933 Act,
or any other applicable law, regulation or rule of any
governmental agency.
(ii) WITHHOLDING TAXES. As a condition to the issuance of the
shares of Option Stock upon full or partial exercise of an NSO
granted under this Plan, the Optionee will pay to the Company
in cash, or in such other form as the Committee may determine
in its discretion, the amount of the Company's tax withholding
liability required in connection with such exercise. For
purposes of this subsection 6(c)(ii), "tax withholding
liability" will mean all federal and state income taxes, social
security tax, and any other taxes applicable to the
compensation income arising from the transaction required by
applicable law to be withheld by the Company.
(d) PAYMENT OF OPTION PRICE. Each Option Agreement will specify the
Option Price with respect to the exercise of Option Stock thereunder,
to be fixed by the Committee in its discretion, but in no event will
the Option Price for an ISO granted hereunder be less than the Fair
Market Value (or, in case the Optionee is a 10% Stockholder, one
hundred ten percent (110%) of such Fair Market Value) of the Option
Stock at the time such ISO is granted, and in no event will the Option
Price for an NSO granted hereunder be less than the 85% of Fair Market
Value. The Option Price will be payable to the Company in United
States dollars in cash or by check or, such other legal consideration
as may be approved by the Committee, in its discretion.
(i) For example, the Committee, in its discretion, may permit a
particular Optionee to pay all or a portion of the Option
Price, and/or the tax withholding liability set forth in
subsection 6(c)(ii) above, with respect to the exercise of an
Option either by surrendering shares of Stock already owned by
such Optionee or by withholding shares of Option Stock,
provided that the Committee determines that the fair market
value of such surrendered Stock or withheld Option Stock is
equal to the corresponding portion of such Option Price and/or
tax withholding liability, as the case may be, to be paid for
therewith.
(ii) If the Committee permits an Optionee to pay any portion of the
Option Price and/or tax withholding liability with shares of
Stock with respect to the exercise of an Option (the
"Underlying Option") as provided in subsection 6(d)(i) above,
then the Committee, in its discretion, may grant to such
Optionee (but only if Optionee remains an Eligible Participant
at that time) additional NSOs, the number of shares of Option
Stock called for thereunder to be equal to all or a portion of
the Stock so surrendered or withheld (a "Replacement Option").
Each Replacement Option will be evidenced by an Option
Agreement. Unless otherwise set forth therein, each
Replacement Option will be immediately exercisable upon such
grant (without any Vesting Period) and will be coterminous with
the Underlying Option. The Committee, in its sole discretion,
may establish such other terms and conditions for Replacement
Options as it deems appropriate.
(e) TERMINATION OF THE OPTION. Except as otherwise provided herein, each
Option Agreement will specify the period of time, to be fixed by the
Committee in its discretion, during which the Option granted therein
will be exercisable, not to exceed ten years from the date of grant
(the "Option Period"); provided that the Option Period will not exceed
five years from the date of grant in the case of an ISO granted to a
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10% Stockholder. To the extent not previously exercised, each Option
will terminate upon the expiration of the Option Period specified in
the Option Agreement; provided, however, that each such Option will
terminate, if earlier:
(i) three months after the date that the Optionee ceases to be an
Eligible Participant for any reason, other than by reason of
death or disability or a Just Cause Termination;
(ii) twelve months after the date that the Optionee ceases to be an
Eligible Participant by reason of such person's death or
disability; or
(iii) immediately as of the date that the Optionee ceases to be an
Eligible Participant by reason of a Just Cause Termination.
In the event of a sale or all or substantially all of the assets of
the Company, or a merger or consolidation or other reorganization in
which the Company is not the surviving corporation, or in which the
Company becomes a subsidiary of another corporation (any of the
foregoing events, a "Corporate Transaction"), then notwithstanding
anything else herein, the right to exercise all then outstanding
Options will vest immediately prior to such Corporate Transaction and
will terminate immediately after such Corporate Transaction; provided,
however, that if the Board, in its sole discretion, determines that
such immediate vesting of the right to exercise outstanding Options is
not in the best interests of the Company, then the successor
corporation must agree to assume the outstanding Options or substitute
therefor comparable options of such successor corporation or a parent
or subsidiary of such successor corporation.
(f) OPTIONS NONTRANSFERABLE. No Option will be transferable by the
Optionee otherwise than by will or the laws of descent and
distribution, or in the case of an NSO, pursuant to a QDRO. During
the lifetime of the Optionee, the Option will be exercisable only by
him or her, or the transferee of an NSO if it was transferred pursuant
to a QDRO.
(g) QUALIFICATION OF STOCK. The right to exercise an Option will be
further subject to the requirement that if at any time the Board
determines, in its discretion, that the listing, registration or
qualification of the shares of Option Stock called for thereunder upon
any securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory authority, is
necessary or desirable as a condition of or in connection with the
granting of such Option or the purchase of shares of Option Stock
thereunder, the Option may not be exercised, in whole or in part,
unless and until such listing, registration, qualification, consent or
approval is effected or obtained free of any conditions not acceptable
to the Board, in its discretion.
(h) ADDITIONAL RESTRICTIONS ON TRANSFER. By accepting Options and/or
Option Stock under this Plan, the Optionee will be deemed to
represent, warrant and agree as follows:
(i) SECURITIES ACT OF 1933. The Optionee understands that the
shares of Option Stock have not been registered under the 1933
Act, and that such shares are not freely tradeable and must be
held indefinitely unless such shares are either registered
under the 1933 Act or an exemption from such registration is
available. The Optionee understands that the Company is under
no obligation to register the shares of Option Stock.
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(ii) OTHER APPLICABLE LAWS. The Optionee further understands that
Transfer of the Option Stock requires full compliance with the
provisions of all applicable laws.
(iii) INVESTMENT INTENT. Unless a registration statement is in
effect with respect to the sale of Option Stock obtained
through exercise of Options granted hereunder: (1) Upon
exercise of any Option, the Optionee will purchase the Option
Stock for his or her own account and not with a view to
distribution within the meaning of the 1933 Act, other than as
may be effected in compliance with the 1933 Act and the rules
and regulations promulgated thereunder; (2) no one else will
have any beneficial interest in the Option Stock; and (3) he or
she has no present intention of disposing of the Option Stock
at any particular time.
(i) COMPLIANCE WITH LAW. Notwithstanding any other provision of this
Plan, Options may be granted pursuant to this Plan, and Option Stock
may be issued pursuant to the exercise thereof by an Optionee, only
after there has been compliance with all applicable federal and state
securities laws, and all of the same will be subject to this
overriding condition. The Company will not be required to register or
qualify Option Stock with the Securities and Exchange Commission or
any State agency, except that the Company will register with, or as
required by local law, file for and secure an exemption from such
registration requirements from, the applicable securities
administrator and other officials of each jurisdiction in which an
Eligible Participant would be granted an Option hereunder prior to
such grant.
(j) STOCK CERTIFICATES. Certificates representing the Option Stock issued
pursuant to the exercise of Options will bear all legends required by
law and necessary to effectuate this Plan's provisions. The Company
may place a "stop transfer" order against shares of the Option Stock
until all restrictions and conditions set forth in this Plan and in
the legends referred to in this section 6(k) have been complied with.
(k) NOTICES. Any notice to be given to the Company under the terms of an
Option Agreement will be addressed to the Company at its principal
executive office, Attention: Corporate Secretary, or at such other
address as the Company may designate in writing. Any notice to be
given to an Optionee will be addressed to the Optionee at the address
provided to the Company by the Optionee. Any such notice will be
deemed to have been duly given if and when enclosed in a properly
sealed envelope, addressed as aforesaid, registered and deposited,
postage and registry fee prepaid, in a post office or branch post
office regularly maintained
(l) OTHER PROVISIONS. The Option Agreement may contain such other terms,
provisions and conditions, including such special forfeiture
conditions, rights of repurchase, rights of first refusal and other
restrictions on Transfer of Option Stock issued upon exercise of any
Options granted hereunder, not inconsistent with this Plan, as may be
determined by the Committee in its sole discretion.
(m) FORMULA OPTIONS. On the date on which the Board appoints, or the
stockholders of the Company elect, a person who is not an employee of
the Company as a member of the Board for the first time, such director
will be granted a Formula Option to purchase 100,000 shares of Stock.
Immediately after the completion of each annual meeting of the
stockholders of the Company, each member of the Board who is not an
employee of the Company will be awarded a Formula Option to purchase
100,000 shares of Stock. Formula Options will have an Option Price
equal to the Fair Market Value of the
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Stock as of the date of such grant. Formula Options shall vest in
33-1/3% increments on each one year anniversary of the date of grant,
until a Formula Option becomes exercisable in full on the third
anniversary of the date of grant. Except as otherwise specifically
provided in this section 6(m), all other terms of this Plan will apply
to all Formula Options granted pursuant to this section 6(m).
7. PROCEEDS FROM SALE OF STOCK.
Cash proceeds from the sale of shares of Option Stock issued from time to
time upon the exercise of Options granted pursuant to this Plan will be
added to the general funds of the Company and as such will be used from
time to time for general corporate purposes.
8. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS.
Subject to the terms and conditions and within the limitations of this
Plan, and except with respect to Formula Options, the Committee may modify,
extend or renew outstanding Options granted under this Plan, or accept the
surrender of outstanding Options (to the extent not theretofore exercised)
and authorize the granting of new Options in substitution therefor (to the
extent not theretofore exercised). Notwithstanding the foregoing, however,
no modification of any Option will, without the consent of the holder of
the Option, alter or impair any rights or obligations under any Option
theretofore granted under this Plan.
9. AMENDMENT AND DISCONTINUANCE.
The Board or the Committee may amend, suspend or discontinue this Plan at
any time or from time to time; provided that no action of the Board or the
Committee will cause ISOs granted under this Plan not to comply with
Section 422 of the Code unless the Board or the Committee specifically
declares such action to be made for that purpose and provided further, that
the provisions of section 6(m) hereof may not be amended more often than
once during any six (6) month period, other than to comport with changes in
the Code, the Employee Retirement Income Security Act, or the rules and
regulations thereunder. Moreover, no such action may alter or impair any
Option previously granted under this Plan without the consent of the holder
of such Option. The Board or the Committee may amend the Plan without
shareholder approval where such approval is not required to satisfy any
statutory or regulatory requirements.
10. PLAN COMPLIANCE WITH RULE 16B-3.
With respect to persons subject to Section 16 of the Securities Exchange
Act of 1934, transactions under this plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act.
To the extent any provision of the plan or action by the plan
administrators fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the plan administrators.
11. COPIES OF PLAN.
A copy of this Plan will be delivered to each Optionee at or before the
time he or she executes an Option Agreement.
***
Date Plan Adopted by Board of Directors: March 22, 1996
Date Plan Approved by Stockholders: , 1996
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NORTH LILY MINING COMPANY 1996 RESTRICTED STOCK PLAN
1. PURPOSE; EFFECTIVENESS OF THE PLAN.
(a) The purpose of this Plan is to advance the interests of the Company
and its stockholders by helping the Company obtain and retain the
services of employees, officers, consultants, and directors, upon
whose judgment, initiative and efforts the Company is substantially
dependent, and to provide those persons with further incentives to
advance the interests of the Company.
(b) This Plan will become effective on the date of its adoption by the
Board, provided this Plan is approved by the stockholders of the
Company (excluding shares of Stock issued by the Company pursuant
to this Plan) within twelve (12) months before or after that date.
If this Plan is not so approved by the stockholders of the Company
within such period of time, any agreements entered into under this
Plan, and any issuances of Stock thereunder, will be rescinded and
will be void. This Plan will remain in effect until it is terminated
by the Board or the Committee under section 8 hereof. This Plan will
be governed by, and construed in accordance with, the laws of the State
of Utah.
2. CERTAIN DEFINITIONS.
Unless the context otherwise requires, the following defined terms
(together with other capitalized terms defined elsewhere in this Plan) will
govern the construction of this Plan, and of any agreements entered into
pursuant to this Plan:
(a) "1933 Act" means the federal Securities Act of 1933, as amended;
(b) "1934 Act" means the federal Securities Exchange Act of 1934, as
amended;
(c) "Board" means the Board of Directors of the Company;
(d) "Code" means the Internal Revenue Code of 1986, as amended (references
herein to Sections of the Code are intended to refer to Sections of
the Code as enacted at the time of this Plan's adoption by the Board
and as subsequently amended, or to any substantially similar successor
provisions of the Code resulting from recodification, renumbering or
otherwise);
(e) "Committee" means a committee, known as the Compensation Committee, of
two or more Disinterested Directors, appointed by the Board, to
administer and interpret this Plan; provided that the term "Committee"
will refer to the Board during such times as no Committee is appointed
by the Board;
(f) "Company" means North Lily Mining Company, a Utah corporation;
(g) "Disinterested Director" means a member of the Board who is not during
the period of one year prior to his or her service as an administrator
of the Plan, or during the period of such service, granted or awarded
Stock, options to acquire Stock, or similar equity securities of the
Company under this Plan or any similar plan of the Company, other than
a Formula Award pursuant to section 6(j) of this Plan or as otherwise
permitted by Rule 16b-3(c)(ii) under the 1934 Act;
(h) "Eligible Participants" means persons who, at a particular time, are
employees, officers, consultants or directors of the Company or its
subsidiaries;
<PAGE>
(i) "Formula Award" means an issuance of Restricted Stock to members of the
Committee pursuant to section 6(j) hereof;
(j) "Holder" means an Eligible Participant to whom any Restricted Stock is
issued hereunder, and any transferee thereof pursuant to a Transfer
authorized under this Plan;
(k) "Plan" means this 1996 Restricted Stock Plan of the Company;
(l) "Purchase Price" means the price per share at which an Eligible
Participant may purchase Restricted Stock hereunder, pursuant to an
Restricted Stock Purchase Agreement.
(m) "Restricted Stock" means Stock issued or issuable by the Company
pursuant to this Plan;
(n) "Restricted Stock Purchase Agreement" means an agreement between the
Company and an Eligible Participant to evidence the terms and
conditions of the issuance of Restricted Stock hereunder;
(o) "Stock" means shares of the Company's Common Stock, $.10 par value;
(p) "subsidiary" has the same meaning as "Subsidiary Corporation" as
defined in Section 424(f) of the Code;
(q) "Termination Event" means, with respect to any Holder of Restricted
Stock, any event that results in such Holder no longer being an
Eligible Participant hereunder for any reason whatsoever (whether by
reason of such Holder's death, disability, voluntary resignation,
involuntary termination, or any other reason).
(r) "Transfer," with respect to Restricted Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift,
attachment or levy of such Restricted Stock, including without
limitation an assignment for the benefit of creditors of the Holder, a
transfer by operation of law, such as a transfer by will or under the
laws of descent and distribution, an execution of judgment against the
Restricted Stock or the acquisition of record or beneficial ownership
thereof by a lender or creditor, a transfer pursuant to a qualified
domestic relations order, or to any decree of divorce, dissolution or
separate maintenance, any property settlement, any separation
agreement or any other agreement with a spouse (except for estate
planning purposes) under which a part or all of the shares of
Restricted Stock are transferred or awarded to the spouse of the Holder
or are required to be sold; or a transfer resulting from the filing by
the Holder of a petition for relief, or the filing of an involuntary
petition against such Holder, under the bankruptcy laws of the United
States or of any other nation.
3. ELIGIBILITY.
The Company may issue Restricted Stock under this Plan only to persons who
are Eligible Participants as of the time of such issuance. Subject to the
provisions of section 5, there is no limitation on the amount of Restricted
Stock that may be issued to an Eligible Participant.
2
<PAGE>
4. ADMINISTRATION.
(a) COMMITTEE. The Committee, if appointed by the Board, will administer
this Plan. If the Board, in its discretion, does not appoint such a
Committee, the Board itself will administer this Plan and take such
other actions as the Committee is authorized to take hereunder;
provided that the Board may take such actions hereunder in the
same manner as the Board may take other actions under the Company's
Articles of incorporation and bylaws generally.
(b) AUTHORITY AND DISCRETION OF COMMITTEE. The Committee will have full
and final authority in its discretion, at any time and from time to
time, subject only to the express terms, conditions and other
provisions of the Company's Articles of incorporation, bylaws and
this Plan:
(i) to select and approve the persons to whom Restricted Stock will
be issued under this Plan from among the Eligible Participants,
including the number of shares of Restricted Stock so issued to
each such person;
(ii) to determine the Purchase Price of Restricted Stock issued under
this Plan, the period or periods of time during which the Company
will have a right to repurchase such Restricted Stock and the
terms and conditions of such repurchase, and other matters to be
determined by the Committee in connection with specific issuances
of Restricted Stock and Restricted Stock Purchase Agreements as
provided in this Plan;
(iii) to interpret this Plan, to prescribe, amend and rescind rules
and regulations relating to this Plan, and to make all other
determinations necessary or advisable for the operation and
administration of this Plan; and
(iv) to delegate all or a portion of its authority under subsections
(i) and (ii) of this section 4(b) to one or more directors of the
Company who are executive officers of the Company, but only in
connection with the issuance of Restricted Stock to Eligible
Participants who are not subject to the reporting and liability
provisions of Section 16 of the 1934 Act and the rules and
regulations thereunder, and subject to such restrictions and
limitations (such as the aggregate number of shares of Restricted
Stock that may be issued) as the Committee may decide to impose
on such delegate directors.
(c) LIMITATION ON AUTHORITY. Notwithstanding the foregoing, or any other
provision of this Plan, the Committee will have no authority:
(i) to approve the issuance of Restricted Stock to any of its
members, whether or not approved by the Board; and
(ii) to determine any matters, or exercise any discretion, in
connection with the Formula Awards under section 6(j) hereof, to
the extent that the power to make such determinations or to
exercise such discretion would cause one or more members of the
Committee no longer to be "Disinterested Directors".
(d) RESTRICTED STOCK PURCHASE AGREEMENTS. Restricted Stock will be issued
hereunder only upon the execution and delivery of an Restricted Stock
Purchase Agreement by the
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<PAGE>
Holder and a duly authorized officer of the Company. Restricted Stock
will not be deemed issued merely upon the authorization of such
issuance by the Committee.
5. SHARES RESERVED FOR RESTRICTED STOCK.
(a) RESTRICTED STOCK POOL. The aggregate number of shares of Restricted
Stock that may be issued pursuant to this Plan initially will not
exceed Two Million Seven Hundred Fifty Thousand (2,750,000) (the
"Restricted Stock Pool"), provided that such number automatically shall
be adjusted annually on January 1 to a number equal to 10% of the
number of shares of Stock of the Company outstanding on December 31 of
the immediately preceding year, or 2,750,000 shares, whichever is
greater, and provided further that such number will be increased by the
number of shares of Restricted Stock that the Company subsequently may
reacquire through repurchase or otherwise.
(b) ADJUSTMENTS UPON CHANGES IN STOCK. In the event of any change in the
outstanding Stock of the Company as a result of a stock split, reverse
stock split, stock dividend, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made
in:
(i) the aggregate number of shares of Restricted Stock in the
Restricted Stock Pool that may be issued pursuant to this Plan;
(ii) the exercise price of any rights of repurchase or of first
refusal under this Plan; and
(iii) other rights and matters determined on a per share basis
under this Plan or any Restricted Stock Purchase Agreement
hereunder.
Any such adjustments will be made only by the Board, and when so made
will be effective, conclusive and binding for all purposes with respect
to this Plan. If there is any other change in the number or kind of
the outstanding shares of Stock of the Company, or of any other
security into which that Stock has been changed or for which it hasbeen
exchanged, and if the Board, in its sole discretion, determines that
this change requires any adjustment in the restrictions onTransfer,
rights of repurchase, or rights of first refusal inRestricted Stock
then subject to this Plan, such an adjustment will bemade in accordance
with the determination of the Board. No such adjustments will be
required by reason of the issuance or sale by the Company for cash or
other consideration of additional shares of its Stock or securities
convertible into or exchangeable for shares of its Stock.
6. TERMS OF RESTRICTED STOCK PURCHASE AGREEMENTS.
Each issuance of Restricted Stock pursuant to this Plan will be evidenced
by an Restricted Stock Purchase Agreement between the Company and the
Eligible Participant to whom such Restricted Stock is to be issued, in form
and substance satisfactory to the Committee in its sole discretion,
consistent with this Plan. Each Restricted Stock Purchase Agreement will
specify the Purchase Price with respect to the Restricted Stock to be sold
to the Holder thereunder, to be fixed by the Committee in its discretion.
The Purchase Price will be payable to the Company in United States dollars
in cash or by check or, such other legal consideration as may be approved
by the Committee, in its discretion. Without limiting the foregoing, each
Restricted Stock Purchase Agreement (unless otherwise stated therein) will
be deemed to include the following terms and conditions:
4
<PAGE>
(a) COVENANTS OF HOLDER. At the discretion of the Committee, the person to
whom Restricted Stock is issued hereunder, as a condition to such
issuance, must execute and deliver to the Company, a confidential
information agreement approved by the Committee. Nothing contained in
this Plan, any Restricted Stock Purchase Agreement or in any other
agreement executed in connection with the issuance of Restricted Stock
under this Plan will confer upon any Holder any right with respect to
the continuation of his or her status as an employee of, consultant or
independent contractor to, or director of the Company, and its
subsidiaries.
(b) VESTING PERIODS; COMPANY REPURCHASE RIGHT.
(i) Unless the Restricted Stock Purchase Agreement executed by a
Holder expressly otherwise provides and except as set forth
herein, as of the date issued, all of the shares of Restricted
Stock issued pursuant to the agreement (the "Total Award Shares")
will be deemed "Unvested" and will become "Vested" for purposes
of subsection 6(b)(ii) according to the following schedule:
(1) no portion of the Total Award Shares will be deemed
"Vested" prior to the first anniversary of the date on
which the Restricted Stock was issued to the Holder (the
"Issue Date");
(2) upon and after such first anniversary of the Issue Date,
fifty percent (50%) of the Total Award Shares will be have
become fully "Vested," subject to the Holder's remaining
an Eligible Participant; and
(3) the remaining Restricted Stock will become "Vested" on a
cumulative basis as to twelve and one-half (12.5%) of the
Total Award Shares, at the end of every period of three
(3) months that elapses after such first anniversary of
the Issue Date, so that the Total Award Shares will have
become fully "Vested," subject to the Holder's remaining
an Eligible Participant, on the second anniversary of
such Issue Date.
(ii) SCOPE OF REPURCHASE RIGHT. Upon the occurrence of any
Termination Event with respect to any Holder of Restricted Stock,
the Company will have an assignable right (but not an
obligation), to repurchase any Unvested shares of Restricted
Stock owned by such Holder at the time of such Termination
Event for a repurchase price per share equal to the Holder's
(or in the case of Restricted Stock that has been Transferred,
the original Holder's) original cost per share, subject to
appropriate adjustment pursuant to section 5(b).
(iii) MECHANICS AND NOTICE. Within thirty (30) days after any such
Termination Event, the Holder of any Unvested Restricted
Stock will provide to the Company a notice of the occurrence of
such Termination Event. Within ninety (90) days of the receipt
of such notice, the Company will exercise its right, if at all,
by informing the Holder in writing of the Company's intention to
do so, and specifying a closing date within such ninety (90) day
period. The Unvested Stock will be repurchased at the Company's
principal executive offices on that date. The repurchase price
will be paid in cash or cancellation of indebtedness (if any) at
that time. If the Company (or its assignee) fails to exercise
its purchase rights as provided under this section 6(b), then at
the end of the ninety (90) day period referred to herein, all
Unvested Restricted Stock of the
5
<PAGE>
Holder immediately will become Vested Restricted Stock for all
purposes hereunder.
(c) RESTRICTIONS ON TRANSFER OF RESTRICTED STOCK.
(i) GENERAL RULE ON PERMISSIBLE TRANSFER OF RESTRICTED STOCK.
Restricted Stock may be Transferred only in accordance with the
specific limitations on the Transfer of Restricted Stock imposed
by applicable state or federal securities laws and set forth
below, and subject to certain undertakings of the transferee
(subsection 6(c)(iii)). All Transfers of Restricted Stock not
meeting the conditions set forth in this section 6(c) are
expressly prohibited.
(ii) EFFECT OF PROHIBITED TRANSFER. Any prohibited Transfer of
Restricted Stock is void and of no effect. Should such a
Transfer purport to occur, the Company may refuse to carry out
the Transfer on its books, attempt to set aside the Transfer,
enforce any undertaking or right under this subsection 6(c), or
exercise any other legal or equitable remedy.
(iii) REQUIRED UNDERTAKING. Any Transfer that would otherwise be
permitted under the terms of this Plan is prohibited unless
the transferee executes such documents as the Company may
reasonably require to ensure that the Company's rights under
an Restricted Stock Purchase Agreement and this Plan are
adequately protected with respect to the Restricted Stock so
Transferred. Such documents may include, without limitation,
an agreement by the transferee to be bound by all of the
terms of this Plan, and of the applicable Restricted Stock
Purchase Agreement, as if the transferee were the original
Holder of such Restricted Stock.
(iv) ESCROW. To facilitate the enforcement of the restrictions on
Transfer set forth in this Plan, the Committee may, at its
discretion, require the Holder of shares of Restricted Stock to
deliver the certificate(s) for such shares with a stock power
executed in blank by Holder and Holder's spouse, to the Secretary
of the Company or his or her designee, to hold said
certificate(s) and stock power(s) in escrow and to take all such
actions and to effectuate all such Transfers and/or releases as
are in accordance with the terms of this Plan. The certificates
may be held in escrow so long as the shares of Restricted Stock
whose ownership they evidence are subject to any right of
repurchase or of first refusal under this Plan or under an
Restricted Stock Purchase Agreement. Each Holder acknowledges
that the Secretary of theCompany (or his or her designee) is so
appointed as the escrow holder with the foregoing authorities as
a material inducement to the issuance of shares of Restricted
Stock under this Plan, that the appointment is coupled with an
interest, and that it accordingly will be irrevocable. The
escrow holder will not be liable to any party to an Restricted
Stock Purchase Agreement (or to any other party) for any actions
or omissions unless the escrow holder is grossly negligent
relative thereto. The escrow holder may rely upon any letter,
notice or other document executed by any signature purported to
be genuine.
(d) ADDITIONAL RESTRICTIONS ON TRANSFER. By accepting Restricted Stock
under this Plan, the Holder will be deemed to represent, warrant and
agree as follows:
6
<PAGE>
(i) SECURITIES ACT OF 1933. The Holder understands that the shares
of Restricted Stock have not been registered under the 1933 Act,
and that such shares are not freely tradeable and must be held
indefinitely unless such shares are either registered under the
1933 Act or an exemption from such registration is available.
(ii) OTHER APPLICABLE LAWS. The Holder further understands that each
Transfer of the Restricted Stock requires full compliance with
the provisions of all applicable laws.
(iii) INVESTMENT INTENT. Unless a registration statement is in
effect with respect to the sale and issuance of the
Restricted Stock to the Holder hereunder: (1) the Holder is
purchasing the Restricted Stock for his or her own account
and not with a view to distribution within the meaning of the
1933 Act, other than as may be effected in compliance with
the 1933 Act and the rules and regulations promulgated
thereunder; (2) no one else will have any beneficial interest
in the Restricted Stock; and (3) Holder has no present
intention of disposing of the Restricted Stock at any
particular time.
(e) COMPLIANCE WITH LAW. Notwithstanding any other provision of this Plan,
Restricted Stock may be issued pursuant to this Plan only after there
has been compliance with all applicable federal and state securities
laws, and such issuance will be subject to this overriding condition.
The Company will not be required to register or qualify Restricted
Stock with the Securities and Exchange Commission or any State agency,
except that the Company will register with, or as required by local
law, file for and secure an exemption from such registration
requirements from, the applicable securities administrator and other
officials of each jurisdiction in which an Eligible Participant would
be issued Restricted Stock hereunder prior to such issuance.
(f) STOCK CERTIFICATES. Certificates representing the Restricted Stock
issued pursuant to this Plan will bear all legends required by law and
necessary to effectuate this Plan's provisions. The Company may place
a "stop transfer" order against shares of the Restricted Stock until
all restrictions and conditions set forth in this Plan and in the
legends referred to in this section 6(f) have been complied with.
(g) MARKET STANDOFF. To the extent requested by the Company and any
underwriter of securities of the Company in connection with a firm
commitment underwriting, no Holder of any shares of Restricted Stock
will sell or otherwise Transfer any such shares not included in such
underwriting, or not previously registered pursuant to a registration
statement filed under the 1933 Act, during the one hundred twenty (120)
day period following the effective date of the registration statement
filed with the Securities and Exchange Commission in connection with
such offering.
(h) NOTICES. Any notice to be given to the Company under the terms of an
Restricted Stock Purchase Agreement will be addressed to the Company at
its principal executive office, Attention: Corporate Secretary, or at
such other address as the Company may designate in writing. Any notice
to be given to a Holder will be addressed to the Holder at the address
provided to the Company by the Holder. Any such notice will be deemed
to have been duly given if and when enclosed in a properly sealed
envelope, addressed as aforesaid, registered and deposited, postage and
registry fee prepaid, in a post office or branch post office regularly
maintained by the United States Postal Service.
7
<PAGE>
(i) OTHER PROVISIONS. The Restricted Stock Purchase Agreement may contain
such other terms, provisions and conditions, including such special
forfeiture conditions, rights of repurchase, rights of first refusal
and other restrictions on Transfer of Restricted Stock issued
hereunder, not inconsistent with this Plan, as may be determined by the
Committee in its sole discretion.
(j) FORMULA AWARDS. On the date on which the Board appoints, or the
stockholders of the Company elect, a person who is not an employee of
the Company as a member of the Board for the first time, such director
will be issued 100,000 shares of Restricted Stock. Immediately after
the completion of each annual meeting of the stockholders of the
Company, each member of the Board who is not an employee of the Company
will be issued 100,000 shares of Restricted Stock. Such Restricted
Stock (the issuance of which will be referred to herein as a "Formula
Award") will have a Purchase Price equal to the Fair Market Value of
the Stock as of the date of such issuance. Formula Awards shall vest
in 33-1/3% increments on each one year anniversary of the date of
issue, until a Formula Award becomes exercisable in full on the third
anniversary of the date of issue. Except as otherwise specifically
provided in this section 6(j), all other terms of this Plan will apply
to all Formula Awards made pursuant to this section 6(j). For purposes
of this section 6(j), "Fair Market Value" means, with respect to the
Restricted Stock issued under a Formula Award, the market price per
share of the Company's Stock as follows:
(i) if the Stock was traded on a stock exchange on the date in
question, then the Fair Market Value will be equal to the closing
price reported by the applicable composite-transactions report
for such date;
(ii) if the Stock was traded over-the-counter on the date in question
and was classified as a national market issue, then the Fair
Market Value will be equal to the last-transaction price quoted
by the NASDAQ system for such date;
(iii) if the Stock was traded over-the-counter on the date in
question but was not classified as a national market issue,
then the Fair Market Value will be equal to the average of
the last reported representative bid and asked prices quoted
by the NASDAQ system for such date; and
(iv) if none of the foregoing provisions is applicable, then the Fair
Market Value will be determined by the Committee in good faith on
such basis as it deems appropriate.
7. PROCEEDS FROM SALE OF STOCK.
Cash proceeds from the sale of shares of Restricted Stock issued from time
to time pursuant to this Plan will be added to the general funds of the
Company and as such will be used from time to time for general corporate
purposes.
8. AMENDMENT AND DISCONTINUANCE.
The Board or the Committee may amend, suspend or discontinue this Plan at
any time or from time to time; provided that no such action of the Board or
the Committee shall alter or impair any rights previously granted to
Holders under the Plan without the consent of such affected Holders (or
their successors or assignees); and provided further that the provisions of
section
8
<PAGE>
6(j) hereof may not be amended more often than once during any six (6)
month period, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules and regulations thereunder.
The Board or the Committee may amend the Plan without shareholder approval
where such approval is not required to satisfy any statutory or regulatory
requirements.
9. PLAN COMPLIANCE WITH RULE 16B-3.
With respect to persons subject to the liability and reporting requirements
of Section 16 of 1934 Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of this Plan or action by the
Plan administrators fails so to comply, it shall be deemed null and void,
to the extent permitted by law and deemed advisable by the Plan
administrators.
10. COPIES OF PLAN.
A copy of this Plan will be delivered to each Holder at or before the time
he or she executes an Restricted Stock Purchase Agreement.
***
Date Plan Adopted by Board of Directors: March 22, 1996
Date Plan Approved by Stockholders: , 1996
9
<PAGE>
PROXY
NORTH LILY MINING COMPANY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held ____________________ 1996
The undersigned hereby constitutes and appoints Stephen E. Flechner and W. Gene
Webb the true and lawful attorneys and proxies of the undersigned each with full
power of substitution and appointment, for and in the name, place, and stead of
the undersigned to act for and to vote all of the undersigned's shares of common
stock of North Lily Mining Company (the "Company") at the Annual Meeting of
Shareholders to be held on __________, 1996, at ____ _.m., _______ Standard
Time, at ___
___________________________________________________________________, and at any
and all adjournments thereof, for the purpose of considering and acting upon:
1. ELECTION OF DIRECTORS / /FOR all nominees listed below / /WITHHOLD
(except as marked to the AUTHORITY to
contrary below) vote for all
nominees listed
below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE MARK
THE BOX NEXT TO THE NOMINEE'S NAME BELOW.)
/ /S. Flechner / /R. Horsley / /T. Loud / /J. Twohig / /W. Webb
2. PROPOSAL TO APPROVE THE REVERSE STOCK SPLIT
/ /FOR / /AGAINST / /ABSTAIN
3. PROPOSAL TO ADOPT 1996 STOCK OPTION PLAN
/ /FOR / /AGAINST / /ABSTAIN
4. PROPOSAL TO ADOPT 1996 RESTRICTED STOCK PLAN
/ /FOR / /AGAINST / /ABSTAIN
5. PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO CHANGE NAME OF CORPORATION
/ /FOR / /AGAINST / /ABSTAIN
6. PROPOSAL TO AMEND ARTICLES OF INCORPORATION TO AUTHORIZE PREFERRED STOCK
/ /FOR / /AGAINST / /ABSTAIN
7. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN, THEN THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3, 4, 5, AND 6.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished therewith.
Dated and signed , 1996.
------------------------ ------------------------------
------------------------------
SIGNATURE(S) OF SHAREHOLDER(S)
(Signature(s) should agree
with the name(s) stenciled
hereon. Executors,
administrators, trustees,
guardians, and attorneys
should indicate when signing.
Attorneys should submit powers
of attorney.
PLEASE SIGN AND RETURN THIS PROXY IN THE ENVELOPE PROVIDED. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
PROXIES MUST BE SIGNED AND DATED IN ORDER TO BE VALID.
10
