SILVERADO MINES LTD.
Form of Proxy
-------------
This proxy is solicited on behalf of the Board of Directors of Silverado
Mines Ltd. (the "Company"), for the Annual General Meeting of the
Shareholders of the Company to be held on May 21, 1997(the "Meeting").
The undersigned, a registered Shareholder of the Company, hereby appoints Garry
L. Anselmo, or failing him, Michael W. Hogen, or instead of either of the
foregoing, _________________________ _________________________ or failing him or
her, _________________________ as proxy of the undersigned, with full power of
substitution, to attend, act and vote in respect of all shares registered in the
name of the undersigned at the Meeting and at any and all adjournments thereof.
Without limiting the general powers hereby conferred, the said proxy is
directed, in respect of the following matters to give effect to the following
choices as indicated by check marks or X's:
1. Proposal One - To Elect Directors
This proposal, if enacted, would elect each of the following persons as a
Director of the Company for the ensuing year:
Garry L. Anselmo
Vote For [ ] Withhold From Voting [ ]
K. Maxwell Fleming
Vote For [ ] Withhold From Voting [ ]
James F. Dixon
Vote For [ ] Withhold From Voting [ ]
2. Proposal Two - To Appoint Auditors
This proposal, if enacted, would appoint KPMG as Auditors for the Company
for the ensuing year at a remuneration to be fixed by the Board of
Directors.
Vote For [ ] Withhold From Voting [ ]
3. Proposal three - To change the name of the Company to Silverado Gold Mines
Ltd.
This proposal, if enacted, would change the name of the Company by adding
the word "Gold" to its name.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
4. Proposal Four - To amend the Company's Memorandum of Incorporation to
effect a subdivision of the Company's Common Shares.
This proposal, if enacted, would effect a "Forward Stock Split" of the
Company's Common Shares. (Enactment of this proposal is contingent upon
Shareholder approval of Proposal Five).
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
5. Proposal Five - To Increase the Authorized Capital of the Issuer
This proposal, if enacted, would increase the authorized Capital of the
Company from Seventy-Five Million (75,000,000) Common Shares to One Hundred
Million (100,000,000) Common Shares.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
6. Proposal Six - To Approve Garry L. Anselmo's Change in Control Compensation
This proposal, if enacted, would approve an Employment Severance Agreement
with Garry L. Anselmo for leaving the Company following a Change in Control
for $4,000,000.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
7. Proposal Seven - To amend the Company's Articles of Incorporation to add
new Parts 20 and 21
This proposal, if enacted, amends the Company's Articles to add a new Part
20 involving business combinations and a new Part 21 involving tender
offers.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
<PAGE>
8. Proposal Eight - To amend the Company's Articles to repeal and replace Part
6 and to add a new Part 22
This proposal, if enacted, to amend the Company's Articles to repeal and
replace Part 6 and to add a new Part 22.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
9. Proposal Nine - To amend the Company's 1994 Stock Option Plan and all stock
option agreements outstanding with Officers and Directors of the Company
This proposal, if enacted, would amend the Company's 1994 Stock Option Plan
and all stock option agreements outstanding with Officers and Directors of
the Company to provide that in the event of a Change in Control of the
Company, all then outstanding options would immediately become vested and
exercisable at the lower of the stated option price or the Change in
Control Price.
Vote For [ ] Vote Against [ ] Withhold From Voting [ ]
10. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting.
If no direction is made, this Proxy will be voted FOR the nominees listed
above and FOR Proposals Two through Nine
NOTES:
A. The signature below must conform to the name of the Shareholder(s) as
registered. To be valid, a proxy must be dated and signed by the
Shareholder(s) or his Attorney authorized in writing. Executors,
Administrators, Trustees or other Personal Representatives signing on
behalf or a registered Shareholder(s) should so indicate when signing.
Where shares are held jointly, either owner may sign. Where the shares are
held by a company, a duly authorized Officer or Attorney of the company
must sign. If the proxy is executed by the Personal Representative for an
individual Shareholder(s) or by an Officer or Attorney of a corporate
Shareholder(s), not under its corporate seal, the instrument empowering the
Personal Representative, Officer or Attorney as the case may be, or a
notarial certified copy thereof, must accompany the proxy.
B. A proxy, to be effective, must be deposited at the office of the Company's
Registrar and Transfer Agent, Montreal Trust Company of Canada, 510 Burrard
Street, Vancouver, British Columbia, V6C 3G9, not less than 48 hours
(excluding Saturdays, Sundays and holidays) before the time for holding the
Meeting or any adjournment thereof.
C. Reference is specifically made to the accompanying Proxy Statement and
Information Circular for further information and instructions.
D. If the date is not completed in the space provided, this proxy shall be
deemed to bear the date on which it was mailed to the Shareholders.
Dated this Day of _______________________, 1997. (Please insert date of
execution).
--------------------------------------
Signature of the Shareholder
--------------------------------------
Name of the Shareholder (please print)
--------------------------------------
Address of Shareholder
--------------------------------------
City, Province/State
--------------------------------------
Postal Code
<PAGE>
SILVERADO MINES LTD.
505 - 1111 West Georgia Street Vancouver, B.C. V6E 4M3
Tel: (604) 689-1535
Notice of Annual General Meeting of Shareholders
------------------------------------------------
Notice is hereby given that the Annual General Meeting of Shareholders (the
"Meeting") of Silverado Mines Ltd. (the "Company") will be held at 2800 Park
Place, 666 Burrard Street, Vancouver, British Columbia, on Wednesday, May 21,
1997, at the hour of 9:00 a.m. (Vancouver time), for the following purposes:
1. To elect three Directors to serve until the 1998 Annual General Meeting of
Shareholders or until their successors are elected.
2. To appoint Auditors and to authorize the Directors to fix remuneration.
3. To consider and vote upon a proposal to amend the Company's Memorandum of
Incorporation to change the name of the Company to "Silverado Gold Mines
Ltd." (This is a Special Resolution which requires the affirmative vote of
not less than three-quarters of the votes cast in person or by proxy at the
Meeting).
4. To consider and vote upon a proposal to amend the Company's Memorandum of
Incorporation to effect a "Forward Stock Split" or "Subdivision" of the
Company's Common Shares. (this is a Special Resolution which requires the
affirmative vote of not less than three-quarters of the votes cast in
person or by proxy at the Meeting).
5. To consider and vote upon a proposal to amend the Company's Memorandum of
Incorporation to increase the number of authorized Common Shares from
75,000,000 to 100,000,000 shares. (This is an Ordinary Resolution which
requires the affirmative vote of a simple majority of the votes cast in
person or by proxy at the Meeting).
6. To consider and vote upon a proposal to approve an Employment Severance
Agreement with Garry L. Anselmo, the Company's President, pursuant to which
he will be paid (US) $4,000,000 in the event he leaves the employ of the
Company following a "Change in Control" of the Company. (This is an
Ordinary Resolution which requires the affirmative vote of a simple
majority of the votes cast in person or by proxy at the Meeting).
7. To consider and vote upon a proposal to amend the Company's Articles to add
a new Part 20 involving business combinations and a new Part 21 involving
tender offers. (This is a Special Resolution which requires the affirmative
vote of not less than three-quarters of the votes cast in person or by
proxy at the Meeting).
<PAGE>
8. To consider and vote upon a proposal to amend the Company's Articles to
repeal and replace Part 6 and to add a new Part 22. (This is a Special
Resolution which requires the affirmative vote of not less than
three-quarters of the votes cast in person or by proxy at the Meeting).
9. To amend the Company's 1994 Stock Option Plan and all stock option
agreements outstanding with Officers and Directors of the Company to
provide that in the event of a Change in Control of the Company, all then
outstanding options would immediately become vested and exercisable at the
lower of the stated option price or the change in control price. (This is
an Ordinary Resolution which requires the affirmative vote of a simple
majority of the votes cast in person or by proxy at the Meeting).
10. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
The Board of Directors has fixed April 15, 1997 as the Record Date for
determining the Shareholders who are entitled to receive notice of and vote
at the Meeting. Shareholders who are unable to attend the Meeting in person
are requested to read, complete, sign and mail the enclosed Form of Proxy
in accordance with the instructions set out in the Proxy Form and in the
Proxy Statement and Information Circular accompanying this Notice. Please
advise the Company of any change in your mailing address.
DATED at Vancouver, British Columbia this April 7, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael W. Hogen
- --------------------------------------
Michael W. Hogen
Secretary
<PAGE>
SILVERADO MINES LTD.
Proxy Statement and Information Circular
----------------------------------------
Except as otherwise stated, the information contained herein is stated as of
March 20, 1997. This Proxy Statement and Information Circular (the "Proxy
Statement") and accompanying Form of Proxy are expected to be mailed to
registered Shareholders on or about April 17, 1997.
Solicitation of Proxies
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors ("Management") of Silverado Mines Ltd. (the "Company")
for use at the Annual General Meeting of Shareholders of the Company (the
"Meeting") to be held on Wednesday, May 21, 1997, and any adjournment thereof,
at the time and place and for the purposes set forth in the accompanying Notice
of Meeting. While it is expected that the solicitation will be primarily by
mail, proxies may be solicited personally or by telephone by the regular
employees of the Company. All costs of solicitation by Management will be borne
by the Company.
The Company has also made arrangements with brokerage houses and other
intermediaries to send proxies and proxy materials at the Company's expense to
unregistered Shareholders of the Company.
Appointment and Revocation of Proxies
The persons named as Proxy Holder in the accompanying Form of Proxy are
Directors of the Company and were designated by the Management of the Company. A
Shareholder wishing to appoint some other person (who need not be a Shareholder)
to represent him or her at the Meeting has the right to do so, either by
striking out the names of those persons named in the accompanying Form of Proxy
and inserting the desired person's name in the blank space provided in the Form
of Proxy, or by completing another Form of Proxy. A proxy will not be valid
unless the completed proxy form is received at the office of the Company's
Transfer Agent and Registrar, Montreal Trust Company of Canada, 510 Burrard
Street, Vancouver, British Columbia, V6C 3B9 not less than 48 hours (excluding
Saturdays, Sundays and holidays) before the time for holding the Meeting or any
adjournment thereof.
A Shareholder who has given a proxy may revoke it by an instrument in writing
executed by the Shareholder or by his or her Attorney authorized in writing or,
where the Shareholder is a corporation, by a duly authorized Officer or Attorney
of that corporation, and delivered to the said office of Montreal Trust Company
of Canada, at any time up to and including the last business day preceding the
day of the Meeting, or any adjournment thereof, or to the Chairman of the
Meeting on the day of the Meeting, or in any other manner provided by law. A
revocation of a proxy does not affect any matter on which a vote has been taken
prior to the revocation.
<PAGE>
Voting of Proxies
Shares represented by properly executed proxies in favor of persons designated
in the enclosed Form of Proxy will be voted FOR the nominees for election as
Directors (Proposal One), FOR the appointment of Auditors at a remuneration
established by the Board (Proposal Two) and FOR Proposals Three through Nine or
withheld from voting if so indicated on the Form of Proxy.
The shares represented by proxies will, on any poll where a choice with respect
to any matter to be acted upon has been specified in the Form of Proxy, be voted
in accordance with the specification made. If no choice is specified with
respect to any matter referred to herein, it is intended on a ballot to vote
such shares in favor of each such matter.
Executed proxies marked "Withhold from Voting" will not be considered as votes
cast "For" or "Against" a proposal. If a broker or other record holder or
nominee indicates on a proxy that it does not have authority to vote on a
particular proposal, those shares will not be voted "For" or "Against" such
proposal.
The enclosed Form of Proxy when properly completed and delivered and not revoked
confers discretionary authority upon the person appointed proxy thereunder to
vote with respect to amendments or variations of matters identified in the
Notice of Meeting, and with respect to other matters which may properly come
before the Meeting. In the event that amendments or variations to matters
identified in the Notice of Meeting are properly brought before the Meeting or
any further or other business is properly brought before the Meeting, it is the
intention of persons designated in the enclosed Form of Proxy to vote in
accordance with their best judgment on such matters or business. At the time of
the printing of this Proxy Statement, the Management of the Company knows of no
such amendment, variation or other matter which may be presented to the Meeting.
Voting Securities; Quorum
The shares of Common Stock of the Company are entitled to one vote each, and the
number outstanding as at April 4, 1997 is 64,071,493 shares of Common Stock
without par value. Only Shareholders of record by 4:30 p.m. (Vancouver time) on
April 15, 1997, who either personally attend the Meeting or who have completed
and delivered a Form of Proxy in the manner and subject to the provisions
described herein, shall be entitled to receive notice of and to vote or to have
their shares voted at the Meeting.
The presence in person or by proxy of at least two persons entitled to vote is
necessary to convene the Meeting.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, as of April 4, as to the Beneficial
Ownership of shares of the Company's only outstanding class of securities, its
Common Stock, by each person or group who, to the knowledge of the Company at
that date, was a Beneficial Owner of 5% or more of the outstanding shares of
Common Stock; by each Director and Executive Officer required to be named in the
Summary Compensation Table; and by all Directors and Executive Officers as a
group. The table does not include information regarding shares of Common Stock
held in the names of certain depositories / clearing agencies and nominees for
various brokers and individuals.
Percentage of
Amount of Nature Outstanding
Name and Address of Beneficial Owner of Beneficial Owner Voting Shares
- ------------------------------------ ------------------- -------------
Garry L. Anselmo 2,884,681 (1) 4.5%
Suite 505 - 1111 West Georgia Street
Vancouver, BC V6E 4M3
K. Maxwell Fleming 351,000 (2) 0.5%
North Vancouver, BC
James F. Dixon 475,000 (3) 0.7%
West Vancouver, BC
All Directors and Executive Officers as 3,710,681 5.8%
a group (3 persons)
J.P. Tangen 200,002 (4) 0.3%
Delta, BC
Tri-Con Group 1,884,614 (5) 2.9%
Suite 505 - 1111 West Georgia Street
Vancouver, BC V6E 4M3
(1) Comprised of 1,557 shares held by Tri-Con Mining Ltd., of which Garry
Anselmo owns 75%, 1,883,057 shares held by Tri-Con Mining Inc., a
wholly-owned subsidiary of Tri-Con Mining Ltd. ("Tri-Con Group"), and 67
shares and Director's options for 1,000,000 shares held directly by Mr.
Anselmo.
(2) Includes Director's options for 350,000 shares.
(3) Includes Director's options for 400,000 shares.
(4) Includes Director's options for 200,000 shares. Mr. Tangen was an Executive
Officer of the Company until February 28, 1997 and a Director until March
14, 1997.
(5) Tri-Con Group holds all shares under note (1), save 67 shares and 1,000,000
Director's options shares held by Mr. Anselmo.
<PAGE>
United States Dollars
All dollar amounts listed in this Proxy Statement are stated in United States
dollars.
Compensation of Directors and Executive Officers
Summary Compensation Table
- --------------------------
The following table discloses compensation paid during the three fiscal years
ended November 30, 1996 to all individuals who served as the Company's CEO or in
a similar capacity during the fiscal year ended November 30, 1996 and the
Company's four most highly compensated Executive Officers, other than the CEO,
who were serving as Executive Officers at November 30, 1996 and whose total
compensation exceeded $100,000, if any:
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards(4)
------------------- ----------------------
Name and Securities Underlying All Other
Principal Position Year Salary ($) Bonus ($) Other ($) Options/SARs (#) Compensation
- ------------------ ---- ---------- --------- --------- ---------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
J.P. Tangen(1) 1996 $ 263,000 $ -0- $ -0- -0- $ -0-
CEO & President 1995 $ 202,249 $ -0- $ -0- 200,000 $ -0-
1994 $ 15,600 (2) $ -0- $ -0- -0- $ -0-
Garry L. Anselmo(1)(3) 1996 $ -0- $ -0- $ -0- -0- $ -0-
Chairman, C.O.O., 1995 $ -0- $ -0- $ -0- 1,000,000 $ -0-
CEO and President 1994 $ -0- $ -0- $ -0- -0- $ -0-
<FN>
(1) Mr. Tangen served as the Company's President and CEO from November 1, 1994
until February 28, 1997. Those positions had been held by Mr. Anselmo who
was elected Chairman and Chief Operating Officer effective November 1,
1994. Mr. Anselmo again assumed the offices of President and CEO at no
salary effective March 1, 1997.
(2) Mr. Tangen's salary was specified as $10,000 per month, net of withholding
and other taxes, resulting in an annual salary equal to $120,000 plus taxes
due on that net amount. During the months of November 1994 through May 1995
and the month of August 1995, Mr. Tangen was compensated through Silverado
Mines (U.S.), Inc., a wholly-owned U.S. subsidiary of the Company, of which
he was also President and CEO. During the remaining months of fiscal 1995,
Mr. Tangen was paid directly by the Company.
(3) Mr. Anselmo is employed and compensated by Tri-Con Mining Ltd., which
provides management and mining exploration and development services to the
Company.
(4) Includes options exercisable at $0.88 to purchase 1,000,000 shares granted
to Mr. Anselmo and 200,000 shares granted to Mr. Tangen.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants and Exercises
At the Annual General Meeting held on May 15, 1995, the Shareholders approved
the adoption of the Company's 1994 Stock Option Plan and the grant, pursuant to
that Plan, of options exercisable at $0.88 per share to purchase 1,000,000 and
200,000 Common Shares, respectively, to Garry L. Anselmo and J.P. Tangen, and
50,000 options exercisable at $0.88 per share to each of the Company's two
independent Directors.
In addition, on December 12, 1995 and 1996 under the same plan the Company's two
non-employee Directors received additional grants of options to purchase 50,000
shares each per year, exercisable at $0.53 per share for the 1995 options and
$0.53 per share for the 1996 options.
<TABLE>
<CAPTION>
Employee SARs/Options Percent of Total Exercise (Base) Expiration Year End
Name Granted (#) SARs/Options (%) Price ($/share) Date Value
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
G.L. Anselmo 1,000,000 71.4 $0.88 Dec. 11, 2004 0
J.P. Tangen 200,000 14.3 $0.88 Dec. 11, 2004 0
K.M. Fleming 50,000 10.0 $0.88 Dec. 11, 2004 0
100,000 $0.53 Dec. 11, 2004 0
J.F. Dixon 50,000 10.0 $0.88 Dec. 11, 2004 0
100,000 $0.53 Dec. 11, 2004 0
</TABLE>
Long-Term Incentive Plans and Defined Benefit Plans. Except as described above
and below, the Company does not have any long-term incentive plan, pension plan,
or other compensatory plan for its Executive Officers.
Performance Graph
The following line graph compares the yearly percentage change of the cumulative
total Shareholder return, assuming reinvestment of dividends for (a) the Common
Stock, (b) the Nasdaq Market Index, and (c) the value of an index comprised of
the common stock of 96 companies in the mining industry. The comparison shown in
the graph is for the Company's fiscal years ended November 30, 1991, 1992,
1993,1994, 1995 and 1996. The cumulative total Shareholder return on the
Company's Common Stock was measured by dividing the difference between the
Company's share price at the end and the beginning of the measurement period by
the share price at the beginning of the measurement period, the calculation of
the cumulative Shareholder return on the Common stock did not include dividends.
[GRAPHIC OMITTED]
1991 1992 1993 1994 1995 1996
------- ------- ------- ------- ------- -------
SILVERADO MINES LTD. 100.00 419.90 1519.51 659.82 359.88 419.90
INDUSTRY INDEX 100.00 64.28 111.83 120.30 140.07 151.32
BROAD MARKET 100.00 107.41 127.85 137.69 174.57 216.60
Compensation of Directors
Directors of the Company receive no fees on an annual or per meeting basis, but
the Company has periodically granted to Directors Options to purchase Common
Shares. In accordance with the formula plan provisions of the Company's 1994
Stock Option Plan, on December 12 of each year 50,000 options, exercisable at
the current market price of the Common Stock, are automatically granted to each
"disinterested" Director.
Employment Contracts and Termination and Change in Control Arrangements
Mr. J.P. Tangen was employed as the Company's President and CEO commencing
November 1, 1994 through February 28, 1997, pursuant to an employment contract
providing for a salary of $10,000 per month, net of taxes. Mr. Tangen's
employment contract provides that he will be entitled to receive a termination
payment equal to one year's salary in the event his employment is terminated for
any reason other than his willful misconduct. In May 1995 the Board of Directors
adopted and is submitting for approval at the 1997 Annual General Meeting, an
agreement to compensate Garry L. Anselmo, Chairman, in the event he leaves the
Company following a Change in Control (as defined in the Agreement) of the
Company. Mr. Anselmo abstained from voting on the agreement. See Proposal Six,
below.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended November 30, 1996, the Company's Compensation
Committee took action by unanimous written consent 11 times. K. Maxwell Fleming
and James F. Dixon are the Board Members on the Compensation Committee. During
the 1996 fiscal year, two of the Company's four Directors served as Executive
Officers. Neither of those Executive Officer / Directors, Garry L. Anselmo and
J.P. Tangen, participated in deliberations concerning Executive Officer
compensation.
Mr. Anselmo, a Director of the Company has served as Chairman since its
inception. He assumed the title of Chief Operating Officer on November 1, 1994.
Prior thereto and since March 1, 1997 he has served as the Company's President
and Chief Executive Officer as well. Mr. Anselmo is President, a Director, and a
Principal Shareholder of Tri-Con Mining Ltd. ("Tri-Con"), which provides
management and mining exploration and development services to the Company.
Tri-Con is compensated pursuant to a Management and Mining Exploration and
Development Agreement between the Company and Tri-Con. Tri-Con owns 100% of the
shares of Tri-Con Mining, Inc. and Tri-Con Mining (Alaska) Inc. These companies
(the "Tri-Con Group") carry on business as mining exploration and development
contractors, and have been employed by the Company under contract since 1972 to
carry out all its field work programs and to provide most Administrative and
Management services. Services of Officers and Directors of the Tri-Con Group who
are also Officers and Directors of the Company are not charged.
Because Mr. Anselmo is a Shareholder, Director and Officer of Tri-Con, and
because the Tri-Con Group conducts exploration and development work on its own
behalf, opportunities for conflict of interest among these companies may arise
with respect to allocation of resources, efforts and expenses. Accordingly, all
arrangements between the Company and the Tri-Con Group are submitted for
approval to the Directors of the Company who are not affiliated with Tri-Con.
The Company believes that its arrangements with the Tri-Con Group are at least
as favorable to the Company as could be obtained from unrelated parties having
similar capability. The aggregate amount charged by the Tri-Con Group for
services during the fiscal year ended November 30, 1996, was $1,471,734, which
was $163,493 in excess of costs incurred by Tri-Con to provide those services.
J.P. Tangen served as President and CEO of the Company from November 1, 1994
until February 28, 1997 and as a Director until March 14, 1997. During the
fiscal year ended November 30, 1996, Mr. Tangen did not participate in
deliberations concerning Executive Officer compensation. The employment contract
between the Company and Mr. Tangen, which establishes Mr. Tangen's compensation
and benefits, was considered and approved by the Board of Directors prior to Mr.
Tangen's election as a Director and Officer.
<PAGE>
Proposal Number One
Election of Directors
The Directors of the Company are elected annually and hold office until the next
Annual General Meeting of Shareholders or until their successors are appointed.
Unless authority to do so is withheld, the persons designated in the
accompanying Form of Proxy intend to vote for the nominees listed below.
Management does not contemplate that any of these nominees will be unable or
unwilling to serve as a Director. If for any reason, any of them shall be unable
or unwilling to serve, it is intended that the proxies given pursuant to this
solicitation will be voted for a substitute nominee or nominees selected by
Management unless authority to vote the proxies in the election of Directors is
withheld.
Pursuant to Section 135 of the British Columbia Company Act, Advance Notice of
the Meeting was published in The Vancouver Province newspaper on March 20, 1997
inviting written nominations for Directors. No such nominations have been
received by the Company.
The number of Directors is presently fixed at three. The persons named in the
following table are Management's nominees to the Board.
<TABLE>
<CAPTION>
Name and Position Date First
with the Company Age Appointed Principal Occupation
- -------------------------- ----- --------------- ----------------------------------
<S> <C> <C> <C>
Garry L. Anselmo(1) 53 May 4, 1973 President, Chief Executive Officer,
President, CEO, COO Chairman of the Board and Chief
& Director Operating Officer of the Company
K. Maxwell Fleming(1)(2) 59 July 24, 1979 Self-Employed Chartered
Director Accountant
James F. Dixon(1)(2) 47 May 6, 1988 Barrister & Solicitor,
Director Shandro, Dixon & Edgson
- -------------------------- ----- --------------- ----------------------------------
<FN>
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation Committee.
</FN>
</TABLE>
Mr. Anselmo is President, Chairman of the Board of Directors, Chief Executive
and Operating Officer of the Company and of its wholly owned subsidiary,
Silverado Mines (U.S.), Inc. ("Silverado (US)"). From May 1973 until November
1994 he served as the Company's President and Chief Executive Officer, assuming
those positions again effective February 28, 1997. From November, 1994 through
present he has served as Chairman and Chief Operating Officer. Mr. Anselmo
founded Tri-Con Mining Ltd. ("Tri-Con"), a private mining exploration and
development services company in 1968 and is currently a Shareholder, Director
and President of Tri-Con. He is also Chairman and a Director of Tri-Con's United
States operating subsidiaries, Tri-Con Mining, Inc. and Tri-Con Mining (Alaska),
Inc. (see: "Compensation Committee Interlocks and Insider Participation"
herein).
Mr. Fleming is a Director of the Company and a member of its Audit and
Compensation Committees. He also serves as a Director of Silverado (US). Mr.
Fleming is a Chartered Accountant.
Mr. Dixon is a Director of the Company and a member of its Audit and
Compensation Committees. He also serves as a Director of Silverado (US). He has
been engaged in the private practice of law since 1973 and has been a partner
with Shandro Dixon Edgson, Barristers & Solicitors, of Vancouver, BC since 1985.
Proposal Number Two
Appointment of Auditors
Unless such authority is withheld, the persons named in the accompanying Form of
Proxy intend to vote for the reappointment of KPMG, Chartered Accountants of
Vancouver, British Columbia, as Auditors of the Company to hold office until the
next Annual General Meeting of Shareholders and for the authorization of the
Directors to fix their remuneration. KPMG has served as Auditors of the Company
since 1981. A representative of KPMG is expected to be present at the Meeting
and will be given the opportunity to make a statement and to respond to
appropriate questions.
Proposal Number Three
Change of the Company's Name
The Board of Directors is asking the Shareholders to consider and vote upon a
proposal to amend the Company's Memorandum of Incorporation to change the name
of the Company to "Silverado Gold Mines Ltd." Management believes that this
change in the Company's name will more closely identify the Company with its
primary business, gold mining. On many occasions in the past potential investors
as well as other interested members of the public have expressed surprise that
the Company is in the gold mining business and not in the silver mining
business. While the Company also has a significant silver prospect in British
Columbia at French Peak which could result in the Company's presence in the
silver mining business one day, nonetheless, Silverado is a gold mining company
at this time, and Management believes "gold" should be a part of the Company's
name. Consistent with this name change, the Company recently changed its NASDAQ
trading symbol from "SLVRF" to "GOLDF" for the purpose of making it easier for
new investors to remember the symbol and to access the Company's share price.
Management is strongly of the view that the future price of gold will escalate
and that as potential investors in gold stocks are seeking out companies in
which to invest, it will be easier to find Silverado if the word "gold" is
generally associated with the name of the Company.
This change in name will result in a change in the "CUSIP" number (used to
identify, and necessary for trading publicly traded securities) assigned to the
Company's Common Stock. Due to the change in the Company's name and the CUSIP
number assigned to the Common Stock, Shareholders will be required to exchange
their Common Stock certificates bearing the current CUSIP number for "New Common
Stock certificates" bearing the new CUSIP number. New Common Stock certificates
may be obtained by surrendering the current Common Stock certificates to the
Company's Transfer Agent, Montreal Trust Company, 510 Burrard Street, Vancouver,
British Columbia V6C 3B9. Until August 1, 1997 the Company will pay the Transfer
Agent's charges for issuing New Common Stock certificates in exchange for the
Company's Current Common Stock certificates. After August 1, 1997 Shareholders
will be required to pay the charge of $3.00 per certificate for each New Common
Stock certificate issued in exchange for currently outstanding Common Stock
certificates.
The Board of Directors unanimously recommends a vote "FOR" the approval of the
Amendment.
Approval of Proposal Three is a Special Resolution which requires the
affirmative vote of not less than three-quarters of the votes cast by the
Shareholders voting at the Meeting.
Proposal Number Four
To Amend the Company's Memorandum of Incorporation to Subdivide each 13
Common Shares into 14 Common Shares.
At the Annual General Meeting, the Shareholders of the Company will consider and
vote upon the adoption of a special resolution to amend the Company's Memorandum
of Incorporation to provide that each 13 Common Shares be subdivided into 14
Common Shares. Such exchange will produce what is commonly known as a "Forward
Stock Split".
The proposed Forward Stock Split will have the effect of causing those who are
Shareholders as of May 21, 1997 (the date of the Annual General Meeting, which
will be the "Effective Date" of the forward stock split if Proposal Four is
approved by Shareholders) to receive one additional Common Share for each 13
Common Shares owned on that date.
As of April 4, 1997, there were 64,071,493 Common Shares issued and outstanding,
held by approximately 13,500 Shareholders. Therefore, the average number of
Common Shares held by each Shareholder was approximately 4,746. Immediately
following the Effective Date there would be 69,000,069 Common Shares outstanding
held by 13,500 Shareholders, increasing the average number of Common Shares held
by each Shareholder to 5,111 Common Shares, an average increase of 365 Common
Shares per Shareholder.
Management believes that increasing the number of Common Shares held by each
Shareholder would promote liquidity in the Company's Common Shares by (a)
increasing the Common Shares available in the public "float" and (b) encouraging
holders of relatively small lots of Common Shares to trade some of those Common
Shares in the public market. Based upon discussions with Shareholders over the
course of the past ten years, Management believes that many of the Company's
current Shareholders acquired relatively small holdings in the Company which
they have held for investment over the long term, and that they are unwilling to
sell the Common Shares constituting their initial investment. By increasing the
number of Common Shares such Shareholders hold, Management hopes that they will
be more amenable to trade a portion of their holdings, increasing the number of
Common Shares available in the market to be purchased by new investors. In this
manner, the Company hopes that the public market for its Common Shares will
become more liquid.
Since all Shareholders will be affected, the forward stock split will not cause
a dilution of the percentage of aggregate equity ownership, voting rights,
earnings or net book value of Shareholders, except for those Shareholders who
hold a number of Common Shares not divisible by 13, who will have their pro rata
ownership reduced by 1/13th to 12/13ths of one share. The per share earnings and
net book value of the Company's Common Shares will be reduced, since there will
be more Common Shares outstanding. However, the Board of Directors does not
believe that the reduction in per share earnings and net book value will
adversely affect the market price of the Common Shares as Management believes
that market interest in the Common Shares is stimulated more by an interest in
holding gold stocks for appreciation, than by dividends, earnings, or net book
value per share.
The forward stock split will increase the number of Common Shares issuable upon
exercise of outstanding options, warrants or similar rights, and the Company's
outstanding 8% Convertible Callable Debentures. As of April 4, 1997, there were
9,154,750 Common Shares reserved for issuance upon exercise of these securities.
If the forward stock split is approved, an additional 704,212 Common Shares will
be required to be reserved for this purpose.
Due to the additional Common Shares issuable if the forward stock split is
approved, and for other corporate purposes, the Board of Directors is proposing
that Shareholders approve an amendment to the Company's Memorandum of
Incorporation to increase the number of authorized Common Shares. See Proposal
Number Five, below. If Proposal Number Five is not approved, Management believes
there will not be sufficient Common Shares available for the Company to effect
the forward stock split without unreasonably restricting the number of Common
Shares available for other corporate purposes. Therefore, enactment of Proposal
Number Four is contingent upon Shareholder approval of Proposal Number Five.
Enactment of Proposal Number Four will require Shareholders to exchange
outstanding certificates for new certificates. If Proposal Number Four is
enacted, the Company will issue a press release and file with the Securities and
Exchange Commission a Current Report on Form 8-K to advise Shareholders that the
forward stock split has been approved. Shareholders will be instructed to
surrender their outstanding certificate or certificates to the Company's
Transfer Agent in exchange for certificates representing the increased number of
Common Shares into which those Common Shares outstanding on the Effective Date
have been reclassified as a result of the forward stock split. No fractional
Common Shares will be issued. Shareholders who hold a number of Common Shares
not divisible by 13 may, at the time they forward their certificates for
exchange, request cash payment for any fractional share resulting from the
subdivision. The Company will pay to Shareholders requesting payment the amount
equal to (a) the fraction resulting from the subdivision (which may be from
1/13th to 12/13ths of a share), multiplied by (b) the closing sale price of a
Common Share as reported by Nasdaq on the trading day prior to the Effective
Date. For example, if the closing sale price were 40 cents per share, a
Shareholder would receive a total payment of 3 to 37 cents.
The Board of Directors unanimously recommends a vote "FOR" the approval of
Proposal Number Four.
Approval of Proposal Four is a Special Resolution which requires the affirmative
vote of at least three quarters of the votes cast in person or by proxy at the
Meeting. The enactment of Proposal Four is contingent upon Shareholder approval
of Proposal Five.
<PAGE>
Proposal Number Five
To increase the number of authorized Common Shares from 75,000,000 to
100,000,000 shares.
At the Annual General Meeting, the Shareholders of the Company will consider and
vote upon the adoption of an ordinary resolution to amend the Company's
Memorandum of Incorporation (the "Amendment") to increase the number of
authorized shares of the Company's Common Stock from Seventy-Five Million
(75,000,000) to One Hundred Million (100,000,000).
On April 4, 1997, there were 64,071,493 shares of Common Stock issued and
outstanding. This number does not include 2,979,750 shares reserved for issuance
under outstanding options to purchase shares of Common Stock, 1,975,000 shares
of Common Stock reserved for issuance under options authorized but not yet
granted pursuant to existing stock option plans, 3,200,000 shares reserved for
issuance under warrants in connection with private placements completed in 1996
and 1997, and 1,000,000 shares of Common Stock issuable upon the conversion of
the Company's outstanding 8% Convertible Callable Debentures. There were also
1,100,000 shares reserved for potential property acquisition. As of such date,
therefore, there were only 673,757 unreserved shares of Common Stock available
for issuance. If Proposal Number Four is approved, additional shares will be
issued to effect the Forward Stock Split and additional shares will be reserved
pursuant to anti-dilution provisions of outstanding convertible securities.
The Board of Directors has deemed it advisable and in the best interests of the
Company and its Shareholders to amend the Memorandum of the Company to provide
that the authorized number of shares of Common Stock be increased another
25,000,000 to 100,000,000. The Board of Directors determined that the previous
increase is not sufficient to accomplish the Company's objectives, as described
below.
The purpose of such increase in the authorized number of shares of Common Stock
is to place the Company in a position where it will continue to have a
sufficient number of shares of authorized and unissued Common Stock available to
be issued for or in connection with such corporate purposes as may, from time to
time, be considered advisable by the Board of Directors, including:
a. the issuance of Common Stock in connection with any desirable acquisitions
which may be presented to the Company;
b. the payment of stock dividends, if the Board of Directors should deem it
advisable;
c. the issuance of Common Stock upon exercise of options granted under the
Company's various stock option plans;
d. the issuance of Common Stock upon the conversion of the Company's
outstanding Debentures or other securities convertible into Common Stock
which may be outstanding from time to time; and
e. the issuance of Common Stock in connection with an offering to raise
capital for the Company.
<PAGE>
Implementation of this Proposal would provide the Company with increased
flexibility in the future to utilize the Common Stock for the above purposes as
a means to finance future growth of the Company without the delay and expense
incident to the holding of a special Meeting of Shareholders to consider any
specific issuance. Implementation of the Proposal may also help to mitigate the
uncertainties and risks of disruption of existing and potential business
relationships, including banking arrangements with parties who may in the future
become concerned about changes in control of the Company. The Company may be
less able to attract business partners willing to make long term plans and
commitments if the Company is perceived to be vulnerable to a takeover or there
is uncertainty as to the Company's plans and objectives. The Company is not
presently aware of any plans to attempt to acquire the Company.
Certain Effects of Authorized But Unissued Stock.
- -------------------------------------------------
Since holders of Common Stock have no preemptive rights, any issuance of newly
authorized shares of Common Stock (other than in connection with stock dividends
and stock splits) would cause a dilution of the percentage of equity ownership,
voting rights and net earnings and net book value per share of all existing
Shareholders.
One of the effects of the existence of unissued and unreserved Common Stock may
be to enable the Board of Directors of the Company to issue shares to persons
friendly to current Management which could render more difficult or discourage
an attempt to obtain control of the Company by means of a Merger, Tender Offer,
Proxy Contest or otherwise, and thereby protect the continuity of Management.
Such additional shares also could be used to dilute the stock ownership of
persons seeking to obtain control of the Company.
Although the Amendment might have such effect, the Amendment has been proposed
by the Board of Directors for the reasons set forth above and not for
anti-takeover reasons. The Company is not aware of any present effort to
accumulate shares of Common Stock or to attempt to change control of the
Company. The Company has no present intent to issue additional shares of Common
Stock either to the current principal Shareholders, the Directors, the Executive
Officers, or any other person or entity except under the Company's stock option
plans or pursuant to the conversion of outstanding Debentures, or to issue any
material amount of shares in connection with any acquisition to any other person
or entity.
The Board of Directors unanimously recommends a vote "FOR" the approval of the
Amendment.
Approval of Proposal Five is an Ordinary Resolution which requires the
affirmative vote of a simple majority of the votes cast in person or by proxy at
the Meeting.
<PAGE>
GENERAL DISCUSSION RELATING TO PROPOSALS SIX THROUGH NINE
The unanimous decision of the Board of Directors to recommend approval of
Proposals Six through Nine is to a great extent based upon the Board's belief
that the Company's potential value, and the value of its mining properties, is
not adequately reflected in its current share price. For this reason, Management
believes that a larger mineral resource company might seek to acquire voting
control of the Company in order to "strip" the Company's properties, resulting
in a "shell" company, or one with greatly reduced assets, which would decrease
the value of the Company to its other Shareholders.
One of the classic problems associated with valuing the assets of a mining
company is assigning worth to its undeveloped properties. Because of the long
lead time associated with bringing a mining property into production and global
fluctuations of prices for commodities such as precious metals, even if the
amount of metal in the ground can be accurately assessed and the cost of
recovery effectively approximated, the value of the property in question is
invariably elusive. Further, the vagaries of mining, including costs of
governmental regulation and dependability of the labor force, frequently result
in a practice by mining companies of understating the actual value of a property
until the resource is exhausted and production is complete. While the Company
has attempted to assign as true a value to its numerous properties as it
reasonably can, those values necessarily are subject to readjustment in
retrospect. The range of values which such uncertainty requires may result in an
effort by a resource development company to absorb the Company by acquiring
stock at the low end of its trading cycle, then vending the individual
properties independently to entities which it controls, thereby realizing a
substantial appreciation through the subsequent development of the property, all
to the substantial detriment of the Company's present Shareholders.
For nearly 24 years the Company has been slowly and deliberately accumulating
potentially rich mineral properties throughout Alaska and British Columbia. The
current portfolio consists of a number of highly attractive assets. The
Company's focus on the Fairbanks Mining District, in particular, has been
vindicated in the past two years by the flurry of attention by major mining
companies in that area, and most specifically by the release of aerial survey
data by the State of Alaska in January 1995 featuring the anomalous geophysical
features of the immediate environs. The Company strongly believes that these
properties are of immense value but recognizes that this value could never be
objectively established prior to mining. A raiding resource development company,
appreciating the value of these properties, could easily deprive the
Shareholders of the Company of the ultimate value of these assets under
circumstances in which resistance would be impossible. The proposals which
follow will not prevent a corporate raid, but they will ensure that Management
will have an adequate opportunity to evaluate take-over proposals and negotiate
the best possible deal for the Shareholders.
Management is not aware of any proposed, threatened or contemplated takeover or
accumulation of Company shares by any party. However, as a long-term strategy,
the Board of Directors believes it is in the best interest of the Company and
its Shareholders to adopt the measures proposed in Proposals Six through Nine in
order to provide a means for Management to effectively deal with an "unfriendly
acquisition" by encouraging potential acquirers to negotiate directly with the
Board of Directors. Management believes the Board of Directors are in the best
position to negotiate on behalf of all Shareholders, evaluate the adequacy of
any potential offer, and protect Shareholders against potential abuses during
any takeover process, such as partial and two-tiered tender offers, which do not
treat all Shareholders fairly and equally. Management believes that the measures
set forth in Proposals Six through Nine will allow the Board adequate time and
flexibility to negotiate on behalf of the Shareholders and enhance the Board's
ability to negotiate the highest possible bid from a potential acquirer, develop
alternatives which may better maximize Shareholder values, preserve the
long-term value of the Company for the Shareholders, and ensure that all
Shareholders are treated fairly and equally.
The effect of these proposals is to increase the likelihood that a potential
purchaser will seek to negotiate directly with the Board of Directors and
Management in order to gain control of the Company or its assets. These
proposals, in addition to the existence of authorized but unissued Common Shares
(as to which existing Shareholders have no preemptive or other such rights), may
have the effect, either alone or in combination with each other, of making more
difficult or discouraging an acquisition of the Company deemed undesirable by
the Board of Directors. Shareholders should be aware that adoption of these
proposals will make changes in the Board of Directors and the transactions
described in the proposals more difficult to effect, even if such changes and
transactions are favored by some or a majority of the Shareholders. To ensure
that the measures may not be circumvented, each of Proposals Six through Nine
will provide that they cannot be amended or repealed without approval of the
holders of at least 66 2/3 % of the outstanding voting stock.
These measures may not be used by Management to arbitrarily rebuff and decline
all offers. The Board has a fiduciary duty to the Company's Shareholders to
evaluate the merits of any unsolicited offer to acquire the Company, and that
duty would be violated if the Board used any of these measures to entrench
existing Management without regard to the merits of an acquisition offer being
made. The existence of anti-takeover measures does not alter the fiduciary
obligations of the Directors.
Proposals Six through Nine are designed to help ensure the fair treatment of the
Shareholders of the Company in takeover situations, and are not intended to
prevent or discourage tender offers for the Company in which Shareholders have
the opportunity to receive substantially the same price for all of their shares.
These measures are not intended to prevent a takeover on terms that are fair and
equitable to all Shareholders. The Board of Directors will have the flexibility
to permit an acquisition that it determines, in the exercise of its fiduciary
duties, adequately reflects the value of the Company and to be in the best
interests of all Shareholders. The Board of Directors believes that rather than
deterring good-faith negotiations between a potential acquirer and the Board,
these measures will assist the Board to maximize the price paid to Shareholders
in the event the Company is acquired. For the reasons discussed above the Board
of Directors unanimously recommends that Shareholders vote "FOR" Proposals Six
through Nine.
Proposal Number Six
To approve an employment severance agreement with Garry L. Anselmo, the
Company's President, pursuant to which he will be paid $4,000,000 in the event
he leaves the employ of the Company following a "Change in Control" of the
Company.
Since the Company's founding in 1972, Garry L. Anselmo has served as the
Chairman of its Board of Directors, and, until 1994, he also served as President
and Chief Executive Officer. Mr. Anselmo again assumed the responsibilities of
President and Chief Executive Officer effective March 1, 1997. In these various
capacities he has brought the Company to its present status. During this period,
Mr. Anselmo has placed his personal assets at risk repeatedly as necessary to
provide security for loans or other funding to the Company. Mr. Anselmo has
never drawn a salary or other form of compensation from the Company. Although he
has been compensated by Tri-Con Mining Ltd. ("Tri-Con"). During the life of
Silverado, Tri-Con has never charged the Company for any time spent or work
performed either in office or in the field by Mr. Anselmo on behalf of the
Company. In addition, Mr. Anselmo has occasionally authorized the advance of
Tri-Con funds to the Company, and Tri-Con was the last creditor from the
Company's unprofitable years to be repaid. Now that the Company has demonstrated
an ability to produce gold at a profit it appears that corporate profitability
will ensue. Because the Company holds valuable assets in the Fairbanks, Alaska,
Mining District which is the focus of significant pre-production activity by
major gold mining companies, as well as elsewhere, Management believes the
Company's Shareholders are at risk of being victimized by a hostile take-over
attempt. While the Board of Directors of the Company, including the Chairman,
have an obligation to consider any offer to acquire the assets of the Company
and to act in the best interest of the Shareholders, not all take-over attempts
are fair.
By approving this proposal, the Shareholders of the Company will simultaneously
achieve two objectives: first, it will ensure that Mr. Anselmo is adequately
compensated for his many years of dedicated and loyal service; and second, it
will ensure that any take-over attempt will be initiated only by an entity which
is prepared to make a significant dollar commitment to the effort. The Board of
Directors, at a meeting held on May 11, 1995, voted unanimously to approve a
Severance Agreement for Mr. Anselmo in the amount of $6,000,000. Mr. Anselmo did
not participate in the deliberations and did not vote on the Severance Agreement
at the Board meeting. In addition, Mr. Anselmo will abstain from voting his
shares on this proposal at the Annual General Meeting. In the past year the
Board, at Mr. Anselmo's request, have agreed to reduce the severance amount to
$4,000,000.
This Severance Agreement will only be implemented in the case of a "Change in
Control" of the Company, as that term is defined in Proposal Nine, below,
coupled with the termination of Mr. Anselmo's employment with the Company
without his consent following such a Change in Control. In the event of a
friendly Change in Control, the Severance Agreement will presumably not be
triggered because either Mr. Anselmo will not be terminated (or he will retire,
in which case he will have consented to his termination) or the requisite
consent of a majority of the Board of the Directors will have been obtained.
The Board of Directors unanimously recommends a vote "FOR" Proposal Six.
Approval of Proposal Six is an Ordinary Resolution which requires the
affirmative vote of a simple majority of the votes cast in person or by proxy at
the Meeting.
<PAGE>
Proposal Number Seven
To amend the Company's Articles of Incorporation to add new Parts 20 and 21
The Board of Directors is proposing the following Special Resolution:
"Resolved, as a Special Resolution, the Company's Articles be altered by the
addition of new Parts 20 and 21, as follows:
Part 20 Certain Business Combinations
- -------------------------------------
20.1 The Company may not consummate a "Business Combination" with any
"Interested Shareholder" for a period of three years following the date
that such Shareholder became an Interested Shareholder unless the Business
Combination:
a. (i) is approved by the holders of a majority of the outstanding voting
stock of the Company held by Shareholders other than Interested
Shareholders; or
(ii) is approved by a majority of the Board of Directors who are not
Interested Shareholders and who were members of the Board of Directors
prior to the time that the Interested Shareholder became an Interested
Shareholder; and
b. is made at a price per share which is no less than the higher of (I)
the price offered in any tender offer, as defined by rules of the
Securities and Exchange Commission ("SEC"), in which any Interested
Shareholder participated, or (ii) the average of the closing sale
price of the Company's Common Stock as reported by NASDAQ during the
period of six years immediately preceding the business combination.
A "Business Combination" means merger, asset sale, acquisition,
disposition, or any other transaction involving assets or
consideration with a value equal to at least 10% of the Company's net
worth, determined by the Company's most recent audited balance sheet.
An "Interested Shareholder" means a person who:
a. announces or publicly discloses a plan or intention to become the
beneficial owner of voting stock of the Company representing ten
percent or more of the Company's outstanding voting stock; or
b. at any time within the three year period immediately prior to the
date in question beneficially owned ten percent or more of the
Company's outstanding voting stock; or
c. is an affiliate or associate (within the meaning of those terms
in the Company Act of British Columbia) of the foregoing.
20.2 This Part 20 may not be repealed, amended or modified except with the
approval of the greater of
a) 75% of votes cast in person or by proxy at the Meeting; or b) the
holders of a majority of the Company's outstanding voting shares held
by Shareholders other than Interested Shareholders.
Part 21 Equal Treatment of Shareholders
- ---------------------------------------
21.1 No bidder shall make a tender offer to Shareholders unless:
a. the tender offer is open to all Shareholders of the class of
securities subject to the tender offer; and
b. the consideration paid to any Shareholder pursuant to the tender offer
is the highest consideration paid to any other Shareholder during such
tender offer.
21.2 This part 21 may not be repealed, amended or modified except with the
approval of the greater of:
a. 75% of votes cast in person or by proxy at the Meeting; or
b. the holders of a majority of the Company's outstanding voting shares
held by Shareholders other than Interested Shareholders.
Proposal Seven is designed to discourage a tender offer followed by a
second-step freeze out merger (i.e. a tender offer in which a lower price is
offered for shares not immediately tendered or those above a certain percentage
of outstanding shares, with the intent of freezing out by merger any
Shareholders who refuse the lower tender offer price) by requiring that any
potential purchaser, in order to be able to consummate a second-step merger,
must comply with the specified procedure. The effect of this is to increase the
likelihood that a potential purchaser will seek to negotiate directly with the
Board and Management in order to get the required approval of the Members or the
Board of Directors and to decrease the likelihood that any person would attempt
to take control of the Company by means of an unsolicited tender offer followed
by a second-step merger. The majority vote requirement would not apply to: (1)
any Business Combination that did not involve an Interested Shareholder; and (2)
any Business Combination which was approved by a majority of the Board of
Directors who are unaffiliated with the Interested Shareholder and who were
Members of the Board prior to the time that the Interested Shareholder became an
Interested Shareholder. Any Business Combination involving an Interested
Shareholder must meet the "fair price" guidelines.
This Proposal also would not allow a bidder to make a tender offer to only
residents of one country. Although some protection against discriminatory offers
is already provided under the U.S. securities laws, this new Part 21 would
prevent all such discriminatory offers with respect to the Company's Common
Stock.
As set forth above under "General Discussion Relating to Proposals Six through
Nine," Management believes that measures such as this may better maximize the
value of Shareholders' investment in the Company and ensure that all
Shareholders are treated fairly and equally. Proposal Seven would also have the
effect of giving the holder of a minority of the total shares outstanding and
entitled to vote a veto power over a merger which a majority of Shareholders may
believe is desirable and beneficial, unless the Board of Directors voted in
favor of such a merger.
Both Parts 20 and 21 include a provision prohibiting amendment by less than a)
75% of the votes cast at a meeting, or b) a majority of the outstanding shares,
excluding shares held by Interested Shareholders, to prevent its nullification
by holders of a lesser percentage of shares who might repeal this provision and
proceed to approve such a Business Combination or a tender offer.
The Board of Directors unanimously recommends a vote "FOR" Proposal Seven.
Approval of Proposal Seven is a Special Resolution which requires the
affirmative vote of not less than three-quarters of the votes cast at the
Meeting.
Proposal Number Eight
To amend the Company's Articles to repeal and replace Part 6 and to
add a new Part 22
The Board of Directors is proposing the following Special Resolution:
"Resolved, as a Special Resolution, that the Company's Articles be altered by
repealing the existing sections 6.1 and 6.2, and replacing them with the
following, and by the addition of the following new Part 22:
Part 6 Purchase and Redemption of Shares
- ----------------------------------------
6.1 Subject to Part 22, the Company may purchase any of its shares unless the
special rights and restrictions attached thereto otherwise provide.
6.2 Subject to Part 22, if the Company proposes to redeem some but not all of
the shares of any class, the Directors may, subject to the special rights
and restrictions attached to such class of shares, decide the manner in
which the shares to be redeemed are to be selected.
Part 22 Certain Company Purchases of Stock
- ------------------------------------------
22.1 The Company may not purchase any shares of the Company's voting stock, or
any securities which are convertible into shares of the Company's voting
stock, from any "Interested Shareholder" for a period of three years
following the date that such Shareholder became an Interested Shareholder
unless the purchase of such shares:
a. (i) is approved by the holders of a majority of the outstanding voting
stock of the Company held by Shareholders other than Interested
Shareholders; or
(ii) is approved by a majority of the Board of Directors who are not
Interested Shareholders and who were members of the Board of Directors
prior to the time that the Interested Shareholder became an Interested
Shareholder; and
b. is made at a price per share which is not in excess of the average of
the closing bid price of the Company's Common Stock as reported by
NASDAQ during the period of six years immediately preceding the date
the Interested Shareholder became an Interested Shareholder.
<PAGE>
22.2 An "Interested Shareholder" means a person who:
a. announces or publicly discloses a plan or intention to become the
beneficial owner of voting stock of the Company representing ten
percent or more of the Company's outstanding voting stock; or
b. at any time within the three year period immediately prior to the date
in question beneficially owned ten percent or more of the Company's
outstanding voting stock; or
c. is an affiliate or associate (within the meaning of those terms in the
Company Act of British Columbia) of the foregoing.
22.3 This Part 22 shall not apply to any convertible security outstanding prior
to the date of the adoption of this Part 22 nor to any security issued
pursuant to any stock option or bonus plan or other compensatory plan or
arrangement which is in effect on the date this Part 22 is approved by the
Shareholders of the Company.
22.4 This Part 22 may not be repealed, amended or modified except with the
approval of a majority of the Company's outstanding voting stock held by
Shareholders other than Interested Shareholders."
This proposal is intended to discourage parties who might attempt to acquire a
number of shares not sufficient to trigger the application to that party of the
SEC's tender offer rules, but sufficient to approach Management of the Company
with the threat of mounting a take-over unless the Company re-purchases those
shares at a premium price. This Proposal would ensure that a premium price could
not be paid to any Interested Shareholder in connection with a purchase of
Common Stock, and that such a purchase could not take place unless the requisite
approval of the Members or Board of Directors is obtained. If such approval is
obtained, the purchase price by the Company of any stock would be limited to the
six year average of the closing bid price as reported by NASDAQ. This Proposal
reduces the possibility of the Company's assets being raided by such threats by
limiting the dollar amount to be expended in such a repurchase, absent the
requisite approval of the Members or the Board of Directors.
The Board of Directors unanimously recommends a vote "FOR" Proposal Eight.
Approval of Proposal Eight is a Special Resolution which requires the
affirmative vote of not less than three-quarters of the votes cast at the
Meeting.
<PAGE>
Proposal Number Nine
To amend the Company's 1994 Stock Option Plan and all stock option
agreements outstanding with Officers and Directors of the Company
At the Annual General Meeting the Shareholders will consider and vote upon an
amendment to the Company's 1994 Stock Option Plan and amendments to all stock
option agreements outstanding with the Company's Officers and Directors
(collectively, the "Amendments"). The Amendments provide that in the event of a
Change in Control of the Company (as defined below), all then outstanding
options would immediately become vested and exercisable at the lower of the
stated option price or the Change in Control Price (as defined below).
The Amendments define "Change in Control" as:
(i) the acquisition, directly or indirectly, by a person (other than the
Company, one of its subsidiaries, or a Company employee benefit plan or
trustee thereof) of securities representing 20% or more of the combined
voting power of the Company's then outstanding securities entitled to vote
generally in the election of Directors; or
(ii) approval by the Shareholders of any Business Combination without obtaining
approval by a majority of the Board of Directors prior to the consummation
of the Business Combination.
The Amendments define "Business Combination" as a merger, asset sale,
acquisition, disposition or other transaction:
(i) involving assets or consideration with a value equal to 10% of the
Company's net worth, as determined by the Company's most recent audited
balance sheet;
(ii) resulting in the voting securities of the Company outstanding immediately
prior thereto no longer representing more than 50% of the voting power of
the Company's securities immediately after the transaction; or
(iii)resulting in a change in the composition of the Board of Directors of the
Company such that fewer than a majority of the Directors are Incumbent
Directors.
"Incumbent Directors" means Directors who were elected prior to a Change in
Control. The "Change in Control Price" shall be the lower of the following:
(i) the lowest closing bid price of the Company's Common Stock as reported by
NASDAQ at any time within the 60-day period immediately preceding the date
of the Change in Control; or
(ii) the lowest price paid or offered per share of the Company's Common Stock in
any bonafide transaction or bona fide offer related to the Change in
Control for the 60-day period immediately preceding the date of the Change
in Control.
The purpose of these provisions regarding events of acceleration is to protect
the rights of participants under the Company's 1994 Stock Option Plan and
Officers and Directors pursuant to other stock option agreements to exercise
outstanding stock options and to receive the underlying stock in the event of a
Change in Control of the Company. These provisions are also intended to deter a
hostile take-over of the Company which is not deemed by the Board of Directors
to be fair to all Shareholders by permitting the Board to increase the ownership
of Company shares by persons deemed to be friendly to Management.
The Board of Directors unanimously recommends a vote "FOR" Proposal Nine
Approval of Proposal Nine is an Ordinary Resolution which requires the
affirmative vote of a simple majority of the votes cast in person or by proxy at
the Meeting.
Other Matters Management of the Company knows of no other matters to come before
the Meeting other than those referred to in the Notice of Annual General Meeting
accompanying this Proxy Statement. However, if any other matters properly come
before the Meeting, it is the intention of the persons named in the Form of
Proxy accompanying this Proxy Statement to vote the same in accordance with
their best judgment of such matters.
Proposals by Shareholders for the 1998 Annual General Meeting
Shareholder proposals to be included in the Company's Proxy Statement and Form
of Proxy relating to the Meeting and to be presented at the 1998 Annual General
Meeting must be received at the Company's executive offices by December 18,
1997.
Annual Report
The 1996 Annual Report for the year ended November 30, 1996 will accompany this
Proxy Statement.
A copy of the Company's Annual Report on Form 10-K as filed with the Securities
and Exchange Commission may also be obtained without charge from the Company.
Directors' Approval
The contents of and the sending of the Notice of Meeting and Proxy Statement
have been approved by the Directors of the Company.
Dated at Vancouver, British Columbia, this April 7, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Michael W. Hogen
- --------------------------------------
Michael W. Hogen
Secretary
