<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:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14.a11(c) or Rule 14a-12
PEGASUS GOLD INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / 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:
N/A
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
------------------------------------------------------------------------
(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):
N/A
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
------------------------------------------------------------------------
(5) Total fee paid:
N/A
------------------------------------------------------------------------
/ / 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:
N/A
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
------------------------------------------------------------------------
(3) Filing Party:
N/A
------------------------------------------------------------------------
(4) Date Filed:
N/A
------------------------------------------------------------------------
<PAGE>
PEGASUS GOLD INC.
1600 - 925 WEST GEORGIA STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 3L2
March 24, 1997
DEAR SHAREHOLDER:
You are cordially invited to attend the 1997 Annual General Meeting of
Shareholders, which will be held in the Gazebo Room of the Pan Pacific Hotel,
300-999 Canada Place, Vancouver, British Columbia, Canada, on Wednesday, April
30, 1997, at 10:30 a.m.
You will be asked to vote on the election of three directors and the
approval of the selection of auditors for 1997. You will also be asked to
approve the adoption of the 1997 Stock Plan, a new stock-based incentive
compensation plan for directors and executive officers that will replace the
current stock option plans. In addition, reports on operations and other matters
of interest will be presented at the meeting. Please refer to the Notice of
Meeting and the Proxy Statement and Information Circular, which are enclosed.
Your Board of Directors respectfully recommends that you cast your vote in
favor of each proposal.
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE MEETING WHETHER OR
NOT YOU ARE PERSONALLY ABLE TO ATTEND. YOU ARE, THEREFORE, URGED TO SIGN, DATE,
AND MAIL THE ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE AS PROMPTLY AS
POSSIBLE. A proxy solicitation effort is planned to help ensure maximum
shareholder representation at this important annual meeting. Thank you for your
cooperation and we look forward to your attendance at the meeting.
Sincerely,
[SIGNATURE]
Werner G. Nennecker,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
PEGASUS GOLD INC.
1600 - 925 WEST GEORGIA STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 3L2
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1997
NOTICE IS HEREBY GIVEN that the 1997 Annual General Meeting of Shareholders
of PEGASUS GOLD INC. (the "Company") will be held in the Gazebo Room of the Pan
Pacific Hotel, 300-999 Canada Place, Vancouver, British Columbia, Canada, on
Wednesday, April 30, 1997, at 10:30 a.m. (PDT), (the "Annual Meeting") for the
following purposes:
(1) To receive the report of the directors, the audited consolidated
financial statements of the Company, and the report of the auditors for
the fiscal year ended December 31, 1996.
(2) To elect three directors to hold office for a term of three years each
or until their respective successors are elected and qualified.
(3) To appoint auditors for the ensuing year and to authorize the directors
to fix the remuneration to be paid to the auditors.
(4) To approve the adoption of the 1997 Stock Plan.
(5) To consider and transact such other business as may properly be brought
before the meeting or any adjournment thereof.
The Company's Board of Directors has fixed the close of business on March
25, 1997, as the record date for determination of shareholders entitled to
notice of the Annual Meeting and to vote at the Annual Meeting.
Registered shareholders who are individuals may attend and vote at the
meeting in person or by proxy, and shareholders which are corporations may
attend and vote at the meeting by proxy or by a duly authorized representative.
BY ORDER OF THE BOARD,
[SIGNATURE]
Robert A. Lonergan
SECRETARY
Spokane, Washington, U.S.A.
March 24, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. YOU CAN SPARE YOUR
COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY RETURNING YOUR PROXY CARD
PROMPTLY.
<PAGE>
PEGASUS GOLD INC.
1600 - 925 WEST GEORGIA STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 3L2
PROXY STATEMENT AND INFORMATION CIRCULAR
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
GENERAL.................................................................................................. 3
SOLICITATION OF PROXIES.................................................................................. 3
APPOINTMENT AND REVOCATION OF PROXIES.................................................................... 3
VOTING SECURITIES........................................................................................ 4
EXERCISE OF DISCRETION BY PROXIES........................................................................ 4
ANNUAL REPORT............................................................................................ 4
PRINCIPAL HOLDERS OF VOTING SECURITIES................................................................... 4
ELECTION OF DIRECTORS.................................................................................... 5
COMPENSATION OF EXECUTIVE OFFICERS....................................................................... 11
FIVE-YEAR TOTAL RETURN GRAPH............................................................................. 17
REMUNERATION OF DIRECTORS AND SENIOR OFFICERS............................................................ 18
PROPOSAL TO APPROVE THE ADOPTION OF THE 1997 STOCK PLAN.................................................. 18
CORPORATE GOVERNANCE..................................................................................... 21
APPOINTMENT AND REMUNERATION OF AUDITORS................................................................. 25
PROPOSALS BY SHAREHOLDERS FOR 1998 ANNUAL GENERAL MEETING................................................ 26
EXHIBIT 1 - 1997 STOCK PLAN
</TABLE>
2
<PAGE>
PEGASUS GOLD INC.
1600 - 925 WEST GEORGIA STREET
VANCOUVER, BRITISH COLUMBIA
CANADA V6C 3L2
PROXY STATEMENT AND INFORMATION CIRCULAR
GENERAL
Except as otherwise stated, the information contained herein is stated as of
March 10, 1997. The Proxy Statement and Information Circular and the
accompanying Instrument of Proxy are expected to be mailed to shareholders on or
before April 4, 1997.
Advance notice of the Annual General Meeting of Shareholders of Pegasus Gold
Inc. to be held April 30, 1997 (the "Annual Meeting") was published, pursuant to
Section 135 of the British Columbia Company Act, in the March 5, 1997 edition of
THE PROVINCE newspaper and delivered to certain regulatory authorities as
required by the regulations under such Act.
All dollar amounts in this Proxy Statement and Information Circular, unless
otherwise indicated, are stated in U.S. dollars.
SOLICITATION OF PROXIES
THE ACCOMPANYING PROXY IS SOLICITED BY THE BOARD OF DIRECTORS AND MANAGEMENT
OF PEGASUS GOLD INC. (the "Company") for use at the Annual Meeting and any
adjournments thereof.
All costs of this solicitation will be borne by the Company. In addition to
the use of the mails, proxies may be solicited by officers, directors, and
regular employees of the Company personally or by telephone or by special mail,
and such persons will receive no compensation therefor other than their regular
salaries. The Company will also make arrangements with brokerage houses and
other custodians, nominees, and fiduciaries to send proxies and proxy materials
to their principals, and will reimburse them for their reasonable out-of-pocket
expenses. The Company also intends to use the services of D.F. King & Co., Inc.
to assist in the solicitation of proxies. The charge for proxy solicitation
services rendered to the Company is estimated to be $7,000 plus expenses.
APPOINTMENT AND REVOCATION OF PROXIES
The individuals named in the accompanying Instrument of Proxy are the
President and Secretary of the Company, respectively. A SHAREHOLDER HAS THE
RIGHT TO APPOINT SOME OTHER PERSON (WHO NEED NOT BE A SHAREHOLDER) TO REPRESENT
THE SHAREHOLDER AT THE ANNUAL MEETING, EITHER BY INSERTING SUCH PERSON'S NAME IN
THE BLANK SPACE PROVIDED IN THE INSTRUMENT OF PROXY OR BY COMPLETING ANOTHER
INSTRUMENT OF PROXY.
IN ORDER TO BE VALID, AN INSTRUMENT OF PROXY MUST BE SIGNED, DATED, AND
DEPOSITED WITH EITHER MONTREAL TRUST COMPANY OF CANADA, 510 BURRARD STREET,
FOURTH FLOOR, VANCOUVER, BRITISH COLUMBIA, CANADA V6C 3B9 (CANADIAN RESIDENT
SHAREHOLDERS), OR THE COMPANY'S EXECUTIVE OFFICE AT SUITE 1500, 601 WEST FIRST
AVENUE, SPOKANE, WASHINGTON, U.S.A. 99204 (U.S. RESIDENT SHAREHOLDERS) NO LATER
THAN 48 HOURS BEFORE THE TIME OF THE ANNUAL MEETING (EXCLUDING SATURDAYS,
SUNDAYS, AND HOLIDAYS) OR ANY ADJOURNMENTS THEREOF, OR WITH THE CHAIRMAN OF THE
MEETING BEFORE THE MEETING OR THE ADJOURNED MEETING COMMENCES.
3
<PAGE>
Any shareholder executing an Instrument of Proxy retains the right to revoke
it at any time prior to it being exercised. In addition to revocation in any
other manner provided by law, a proxy may be revoked by a subsequent instrument
of proxy in writing executed by the shareholder or by the shareholder's attorney
authorized in writing or, where the shareholder is a corporation, by a duly
authorized officer or attorney of the corporation, and delivered to the
registered office of the Company, 1600 - 925 West Georgia Street, Vancouver,
British Columbia, Canada V6C 3L2, at any time up to and including the last
business day preceding the day of the Annual Meeting, or any adjournment
thereof, or to the Chairman of the Annual Meeting on the day of such meeting, or
any adjournment thereof. A revocation of a proxy does not affect any matter on
which a vote has been taken before the revocation.
VOTING SECURITIES
As of the close of business on March 10, 1997, the Company had outstanding
41,173,774 Common Shares without par value (the "Common Shares"), with each
share carrying the right to one vote. Any shareholder of record at the close of
business on March 25, 1997, who either personally attends the Annual Meeting or
has completed and delivered an Instrument of Proxy in the manner and subject to
the provisions described above, will be entitled to vote or to have shares voted
at the meeting or any adjournment thereof.
EXERCISE OF DISCRETION BY PROXIES
If a poll is taken, the persons named in the enclosed Instrument of Proxy
will vote (or withhold from voting) the shares in respect of which they are
appointed in accordance with the direction of the shareholders appointing them,
where the instructions in such Instrument of Proxy are certain. IN THE ABSENCE
OF SUCH DIRECTION, SUCH SHARES WILL BE VOTED IN FAVOR OF EACH OF THE NOMINEES
FOR ELECTION AS A DIRECTOR AND IN FAVOR OF EACH OTHER MATTER SHOWN ON THE
INSTRUMENT OF PROXY.
The Instrument of Proxy enclosed, when properly signed, confers
discretionary authority with respect to amendments of the matters identified in
the notice of meeting and any other matters that may properly be brought before
the Annual Meeting. At the time of printing this Proxy Statement and Information
Circular, management and the Board of Directors of the Company are not aware
that any such amendments or other matters are to be presented for action at the
meeting.
ANNUAL REPORT
The Annual Report of the Company for the fiscal year ended December 31, 1996
accompanies this Proxy Statement and Information Circular. The consolidated
financial statements of the Company, the accompanying notes and report of the
independent auditors, the selected financial data for each of the last five
years, and management's discussion and analysis of financial condition and
results of operations are included in the Annual Report.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information regarding the beneficial
ownership of the outstanding Common Shares of the Company, as of February 28,
1997, by each person known to the Company to own beneficially more than 5
percent of such Common Shares, and by each director, each nominee for
4
<PAGE>
director, and each officer named in the summary compensation table set out under
the heading "Compensation Summary" below. Except as otherwise indicated, each
named beneficial owner has voting and investment power with respect to the
shares set forth opposite the owner's name.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
COMMON COMMON
SHARES(1) SHARES(2)
-------------- ------------
<S> <C> <C>
Mercury Asset Management........................................... 2,925,800(3) 6.9%
Ontario Teachers' Retirement System................................ 2,363,600 5.6%
Lawrence I. Bell................................................... 6,333 *
Peter M.D. Bradshaw................................................ -- *
Douglas R. Cook.................................................... 26,333 *
Michael A. Grandin................................................. 5,333 *
Peter R. Kutney.................................................... 43,000 *
Werner G. Nennecker................................................ 376,108 *
Lindsay D. Norman.................................................. 17,000 *
Anthony J. Petrina................................................. 11,400 *
Fred C. Schulte.................................................... 17,500 *
Phillips S. Baker, Jr.............................................. 184,845 *
Terry D. Bauer..................................................... 132,238 *
James P. Geyer..................................................... 81,800 *
Robert A. Lonergan................................................. 66,825 *
Trevor S. Schultz.................................................. -- *
Allan M. Park...................................................... -- *
Directors and Executive Officers as a Group(4)..................... 1,196,182 2.8%
</TABLE>
- ------------------------
* Less than 1%
(1) Includes Common Shares subject to options exercisable within 60 days of
February 28, 1997 as follows: Mr. Bell: 5,333 shares; Mr. Cook: 24,333
shares; Mr. Grandin: 4,333 shares; Mr. Kutney: 42,000 shares; Mr. Nennecker:
371,234 shares; Dr. Norman: 16,000 shares; Mr. Petrina: 10,400 shares; Mr.
Schulte: 16,500 shares; Mr. Baker: 177,400 shares; Mr. Bauer: 131,850
shares; Mr. Geyer 81,800 shares; and Mr. Lonergan: 66,825 shares.
(2) Based on 41,167,674 Common Shares outstanding as of February 28, 1997.
(3) Based on representations made by a representative of Mercury Asset
Management.
(4) Includes the executive officers listed and three other executive officers.
ELECTION OF DIRECTORS
Under the Articles of the Company, as amended, the number of directors shall
not be less than five nor more than eleven. Presently, the Board of Directors
(the "Board") has nine members. It is proposed that Peter M.D. Bradshaw, Douglas
R. Cook, and Peter R. Kutney be elected at the Annual Meeting. Each director of
the Company elected at this meeting will have a three-year term that will expire
at the 2000 Annual General Meeting, unless the position is vacated earlier.
Pursuant to the Articles, the election of directors is on a rotational basis so
that, as nearly as possible, the terms of office of one-third of the directors
expire at each annual general meeting. Under the Company Act (British Columbia),
a majority of the directors must be Canadian residents.
The Articles provide that the Board of Directors may, between annual
meetings, increase the size of the Board to no more than eleven directors or
decrease the size of the Board to no less than five directors. On February 20,
1997, the Board appointed Peter M.D. Bradshaw to fill the vacancy on the Board
created
5
<PAGE>
by the resignation of Paul H. Atkinson, who resigned as a director effective
October 22, 1996. Fred C. Schulte succeeded Lindsay D. Norman as Chairman of the
Board on August 1, 1996.
Each position on the Board is filled by the nominee receiving a plurality of
the votes cast with respect to such position. Abstentions from voting will have
the practical effect of voting against the nominee because it is one less vote
for approval. "Broker non-votes" will have no effect because they are not
considered "shares present" for voting purposes. Each nominee has consented in
writing to serve as a director if elected. However, if any nominee is unable to
serve, the persons named in the accompanying Instrument of Proxy will vote for a
substitute in their discretion. Proxies cannot be voted for more than three
persons. MANAGEMENT OF THE COMPANY RECOMMENDS A VOTE FOR PETER M.D. BRADSHAW,
DOUGLAS R. COOK, AND PETER R. KUTNEY.
NOMINATED DIRECTORS
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, DIRECTOR TERM
RECENT BUSINESS EXPERIENCE AGE SINCE EXPIRES
- ----------------------------------------------------------------------------------------- --- ----------- -----------
<S> <C> <C> <C>
PETER M.D. BRADSHAW(1) .................................................................. 58 1997 1997
Resident of Vancouver, British Columbia, Canada. Mr. Bradshaw has been Chairman,
President and Chief Executive Officer of First Point Minerals Corporation, an
international minerals exploration company, since June 1996. He was Senior Vice President
from August 1995 to June 1996, and Vice President from August 1986 until August 1995 of
Orvana Minerals Corp., a gold mining company. From 1977 to August 1986, Mr. Bradshaw held
various management positions with Placer Dome Limited, an international mining company.
Prior to that he held management positions at Barrington Research Limited, a mineral
exploration service company. Mr. Bradshaw holds a Doctorate of Economic Geology from
Durham University in the United Kingdom.
DOUGLAS R. COOK(2)(3)(5) ................................................................ 71 1991 1997
Resident of Reno, Nevada, U.S.A. Since 1986, Mr. Cook has been President of Cook
Ventures, Inc., a geological consulting company. From 1985 to 1986, he was Senior Vice
President and a director of Freeport McMoRan Gold Company and from 1974 to 1986, Mr. Cook
was President of Freeport Exploration Company. Mr. Cook is Chairman of Atlas Corporation,
Denver, Colorado, and a director of Archangel Diamond Corporation, Vancouver, British
Columbia, Canada. Mr. Cook holds a Doctorate of Science in Mining Geology from Colorado
School of Mines and a Masters of Applied Science degree from the University of Toronto.
PETER R. KUTNEY(2)(3)(4) ................................................................ 63 1984 1997
Resident of Calgary, Alberta, Canada. Mr. Kutney has been self-employed as an oil and gas
consultant since March 1984. From April 1984 to December 1986, he was Chairman of Canu
Resources, Ltd., a precious metals mining company. From January 1981 to November 1983,
Mr. Kutney was President, and from December 1983 until March 1984, Chairman and Chief
Executive Officer, of Wharf Resources Ltd., a gold mining company. From 1978 to October
1983, he was Chairman and Chief Executive Officer of Coseka Resources Ltd., an oil and
gas company. Mr. Kutney is a director of Vintage Resources Inc. and Shamrock Resources
Inc.
</TABLE>
6
<PAGE>
INCUMBENT DIRECTORS
The terms of office of the following directors do not expire at the Annual
Meeting and, accordingly, such directors are not being proposed at this time as
nominees for re-election:
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, DIRECTOR TERM
RECENT BUSINESS EXPERIENCE AGE SINCE EXPIRES
- ----------------------------------------------------------------------------------------- --- ----------- -----------
<S> <C> <C> <C>
LINDSAY D. NORMAN(1)(2)(4) .............................................................. 59 1987 1999
Resident of Butte, Montana, U.S.A. Dr. Norman has been President of Montana Tech since
July 1, 1986. Prior to that, Dr. Norman was Vice President and Technical Director of The
Chase Manhattan Bank in New York City (1984-1986), a Vice President of Jones & Laughlin
(LTV) Steel Corp. (1981-1984), and Director of the U.S. Bureau of Mines (1979-1981).
Prior to that, he held management, planning and research positions with the Bureau of
Mines and E.I. duPont DeNemours & Co.
FRED C. SCHULTE(3)(4)(5) ................................................................ 50 1993 1999
Resident of Chicago, Illinois, U.S.A. Mr. Schulte has been the President and Chief
Executive Officer of Elgin National Industries, Inc. since 1988. Prior to joining Elgin,
Mr. Schulte held a number of key management and executive positions with Santa Fe
Southern Pacific Corporation, most recently as Vice-President, Executive Department.
MICHAEL A. GRANDIN(1)(2) ................................................................ 52 1996 1999
Resident of Calgary, Alberta, Canada. Mr. Grandin has been Vice Chairman and Director of
Midland Walwyn Capital Inc., an independent integrated investment firm, since October
1996. Prior to that, Mr. Grandin was the President and Chief Executive Officer of Sceptre
Resources Ltd. since 1994. Prior to that, Mr. Grandin was Senior Vice President and Chief
Financial Officer of PanCanadian Petroleum Ltd. from 1990 to 1994 and a Managing Director
of ScotiaMcLeod Inc. from 1986 to 1990. Prior to that, Mr. Grandin held a number of key
management and executive positions at Dome Petroleum Ltd. and other companies.
LAWRENCE I. BELL(1)(5) .................................................................. 58 1995 1998
Resident of Vancouver, British Columbia, Canada. Since 1993, Mr. Bell has been the
President and Chief Executive Officer of Shato Holdings Ltd., a holding company for food
(manufacture and retail) and real estate interests. Prior to joining Shato, Mr. Bell held
numerous key management and executive positions including Chairman and President of the
Westar Group Ltd., a diversified holding company (1991 to 1992), and Chairman and CEO of
B.C. Hydro, a British Columbia government-owned utility (1987 to 1991). Mr. Bell also has
held positions as Deputy Minister in various departments of the British Columbia
Government.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATION, DIRECTOR TERM
RECENT BUSINESS EXPERIENCE AGE SINCE EXPIRES
- ----------------------------------------------------------------------------------------- --- ----------- -----------
WERNER G. NENNECKER(4) .................................................................. 42 1992 1998
Resident of Veradale, Washington, U.S.A. Mr. Nennecker joined the Company in September
1992, as Senior Vice President and Chief Operating Officer. In November 1992, Mr.
Nennecker assumed the position of President and Chief Executive Officer and became a
Director of the Company. Prior to joining the Company, Mr. Nennecker worked 18 years in
the mining industry with Ranchers Exploration and Santa Fe Pacific Gold Corporation. Most
recently, he held the positions of Executive Vice-President of Santa Fe Pacific Minerals
Corporation and President of Santa Fe Pacific Gold Corporation. Mr. Nennecker is a
director of USMX, Inc. and Intermin Resource Corporation Ltd.
<S> <C> <C> <C>
ANTHONY J. PETRINA(3)(4)(5) ............................................................. 60 1994 1998
Resident of Vancouver, British Columbia, Canada. Mr. Petrina is a Registered Professional
Mining Engineer. Mr. Petrina retired in October 1992 from Placer Dome, Inc., an
international mining company. Since 1974, Mr. Petrina held various senior management
positions with Placer Dome, including President and Chief Executive Officer, Executive
Vice President, Vice President, Operations and Assistant Vice President, Operations. Mr.
Petrina is a director of Metall Mining Corporation and Miramar Mining Corporation.
</TABLE>
- ------------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Environmental Committee.
(4) Member of Executive Committee.
(5) Member of Nominating Committee.
8
<PAGE>
There are no family relationships between any of the nominees, directors or
officers of the Company.
During the fiscal year ended December 31, 1996, the Board of Directors met
on a total of eight occasions. Each director attended more than 75 percent of
the aggregate number of meetings of the Board and the committees of which he was
a member.
The Audit Committee reviews with the auditors the scope of the audit and the
financial statements. This committee is also responsible for recommending to the
Board a firm of independent auditors to act as the Company's independent
auditors. During the year ended December 31, 1996, the Audit Committee met four
times.
The Compensation Committee, which met five times during 1996, is responsible
for formulating the Company's compensation policies and for administering the
1987 Stock Option Plan and the 1989 Non-Employee Directors' Stock Option Plan,
and granting awards under the proposed 1997 Stock Plan. None of the members of
the Committee are current employees, former employees, or former officers of the
Company.
The Environmental Committee oversees the development and implementation of
the Company's environmental policies and periodically reviews operating
procedures to ensure compliance with applicable local, state, and federal
environmental law. The Committee met four times in 1996.
The Executive Committee, which met two times during 1996, has been delegated
the authority to act on behalf of the Board on matters which have been
previously introduced to the entire Board and for which the Board has given its
approval in principle. It also has plenary authority to act on behalf of the
Board on matters having a value of less than $10,000,000.
The Nominating Committee, which was established in February 1996 and met
once during the remainder of the year, is responsible for considering nominees
for appointment for election to the Board and making recommendations to the
Board in connection therewith. The Committee will consider proposals for
nominations to the Board from shareholders, provided such proposals are made in
writing to the Secretary or Assistant Secretary of the Company and contain
sufficient background information concerning the nominee to enable a proper
judgment to be made as to his or her qualifications. The Committee also will
review the contributions of each director prior to each annual general meeting
and consider each director's suitability for continuing in his position for the
balance of his term.
DIRECTORS' FEES AND OPTIONS
Each director who is not an employee of the Company receives an annual
director's fee of $15,000 and an annual meeting fee of $20,000 regardless of the
number of board or committee meetings scheduled. Mr. Schulte, the Chairman of
the Board, receives an additional annual fee of $21,000. Committee chairmen of
the Audit, Compensation and Environmental Committees (other than Mr. Schulte)
are paid an additional $5,000 annually. Directors are reimbursed for their
travel and other expenses incurred in attending Board and committee meetings.
The 1989 Non-Employee Directors' Stock Option Plan (the "Directors' Plan")
provides for yearly grants of stock options to each member of the Board of
Directors who is not a full-time employee of the Company or its subsidiaries.
The exercise price of stock options granted is the closing price of the Common
Shares on the American Stock Exchange as reported on the date of grant. The
options vest on the date of grant and, subject to insider trading rules, are
immediately exercisable. The options expire ten years after the date granted or
at such earlier date as may be provided by the Directors' Plan. Payment to the
Company of the exercise price of the options may be in cash, Common Shares of
the Company, or a combination thereof. If a non-employee director terminates
service on the Board through voluntary resignation, retirement, or disability,
previously granted options will continue to be exercisable for a period of 60
days commencing on the termination date. In the event of the death of a
director, an unexercised option may be exercised by the option holder's legal
representatives within six months of the date of death.
9
<PAGE>
If a director is removed from the Board for cause, as defined in the Directors'
Plan, all unexercised options terminate immediately.
The Directors' Plan is administered by the Compensation Committee, which is
authorized to interpret the Directors' Plan but has no authority or discretion
with respect to the selection of directors eligible to receive options, the
number of shares reserved under the Directors' Plan, the shares subject to each
grant, or the exercise price of options granted thereunder, which matters are
addressed in the Directors' Plan itself. The Board of Directors may suspend,
amend (with the approval of The Toronto Stock Exchange and the Montreal
Exchange), or terminate the Directors' Plan at any time. However, the Directors'
Plan provides that any amendments to increase the number of shares subject to
the Directors' Plan or the number of shares to be granted to directors, change
provisions related to exercise price, change the period during which options may
be granted, change the eligibility of directors to receive options, or otherwise
materially increase the benefits under the Directors' Plan require shareholder
approval.
On April 24, 1996, each eligible director was granted an option to acquire
4,000 Common Shares at a price of $13.50 per share. During the 30-day period
preceding the option grant dates, the closing price of the Common Shares on the
American Stock Exchange varied from a low of $13.50 per share to a high of
$15.50 per share.
The Directors' Plan terminates on June 1, 1997. The proposed 1997 Stock
Plan, if approved by the shareholders, will replace the Directors' Plan
respecting future stock-based awards to Company directors.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Under the securities laws of the United States, the Company's directors and
executive officers, and any persons holding more than 10 percent of the
Company's Common Shares, are required to report their initial ownership of the
Company's Common Shares and any subsequent changes in that ownership to the
Securities and Exchange Commission (the "Commission") and the American Stock
Exchange. Specific due dates for these reports have been established and the
Company is required to disclose in this Proxy Statement and Information Circular
any failure to file by these dates. No Company officer or director has failed to
timely file any such reports in 1996. In making these disclosures, the Company
has relied solely on written representations of its directors and executive
officers and copies of the reports that they have filed with the Commission.
10
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION SUMMARY
The following table provides certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries for the fiscal
year ended December 31, 1996 to or on behalf of the Company's Chief Executive
Officer and each of the six other most highly compensated executive officers of
the Company (four of which remained executive officers at the end of the
Company's last fiscal year and all of which are hereafter referred to as the
"Named Executive Officers"). The table also discloses their compensation for the
years 1994 and 1995 if they were executive officers during those years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(1) ($)(2) (#) ($)(3)
- ----------------------------------- --------- ---------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Werner G. Nennecker 1996 $ 350,000 $ 158,620 $ 499 172,400 $ 8,029
President, Chief Executive Officer 1995 353,719 300,000 -- 154,300 7,240
and Director 1994 323,632 160,000 8,852 63,400 7,298
Phillips S. Baker, Jr. 1996 175,233 45,873 -- 72,700 6,185
Vice President, Finance and Chief 1995 165,700 87,302 3,578 76,600 6,171
Financial Officer 1994 153,942 102,994 9,440 22,800 4,858
Robert A. Lonergan(4) 1996 164,667 45,915 22,216 67,800 8,062
Vice President, General Counsel 1995 75,602 43,450 8,570 42,100 720
and Corporate Secretary
James P. Geyer(5) 1996 163,800 39,017 -- 71,100 7,027
Vice President, Operations 1995 137,323 87,895 -- 43,600 6,566
Terry D. Bauer(6) 1996 144,067 40,295 -- 61,600 7,427
Vice President, Environmental and 1995 138,300 68,854 -- 53,100 6,376
Governmental Affairs 1994 100,733 66,041 -- 39,400 5,326
Trevor S. Schultz(7) 1996 283,852 -- 27,213 37,600 519,468
Vice President, Chief Operating 1995 104,604 58,537 1,645 100,000 1,246
Officer
Allan M. Park(8) 1996 172,302 38,412 -- 18,700 10,325
Vice President, Exploration 1995 181,225 78,946 -- 57,100 9,324
1994 167,625 37,685 -- 23,400 9,300
</TABLE>
- ------------------------
(1) Amounts shown include cash and non-cash compensation paid to or accrued on
behalf of the Named Executive Officers, as well as amounts earned but
deferred at the election of those officers.
(2) Amounts shown include tax reimbursement payments and, to the extent such
payments exceeded the lesser of $50,000 or 10% of such Named Executive
Officer's total annual salary and bonus, perquisites and other personal
benefits or property received from the Company by any Named Executive
Officer for the last fiscal year.
(3) Amounts shown in this column for the last fiscal year are derived from the
following: Mr. Nennecker: annual Company payment to defined contribution
plans ("DCP") of $6,365, and Company paid life
11
<PAGE>
insurance premiums of $1,664; (ii) Mr. Baker: annual Company payment to the
DCP of $5,788, and Company paid life insurance premiums of $397; (iii) Mr.
Lonergan: annual Company payment to the DCP of $6,453 and Company paid life
insurance premiums of $1,609; (iv) Mr. Geyer: annual Company payments to the
DCP of $6,454, and Company paid life insurance premiums of $573; (v) Mr.
Bauer: annual Company payments to the DCP of $6,606 and Company paid life
insurance premiums of $821; (vi) Mr. Schultz: annual payments to the DCP of
$7,708, severance payment $510,000, and Company paid life insurance premiums
of $1,608; and (vii) Mr. Park: annual Company payments to the DCP of $7,666
and Company paid life insurance premiums of $2,659.
(4) Mr. Lonergan first became an executive officer when he joined the Company in
June 1995 as Vice President, General Counsel and Corporate Secretary.
(5) Mr. Geyer first became an executive officer as Vice President, Operations in
October 1995. Mr. Geyer resigned in January 1997.
(6) Mr. Bauer first became an executive officer as Vice President, Environmental
and Governmental Affairs in April 1994.
(7) Mr. Schultz first became an executive officer when he joined the Company as
Chief Operating Officer in August 1995. Mr. Schultz resigned in August 1996.
(8) Mr. Park resigned as an executive officer on October 31, 1996.
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<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's 1987 Stock Option Plan to the Named Executive
Officers:
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES ANNUAL RATES OF STOCK
UNDERLYING % OF TOTAL PRICE APPRECIATION FOR
OPTIONS OPTIONS GRANTED EXERCISE OPTION TERM
GRANTED TO EMPLOYEES IN PRICE EXPIRATION ----------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ------------------------------------------------- ----------- --------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Werner G. Nennecker.............................. 73,200 6.2% $ 16.000 02/13/2003 $ 476,796 $ 1,111,137
99,200 8.4% 7.563 12/31/2003 305,427 711,775
Phillips S. Baker, Jr............................ 21,500 1.8% 16.000 02/13/2003 140,043 326,359
51,200 4.4% 7.563 12/31/2003 157,640 367,368
Robert A. Lonergan............................... 23,000 2.0% 16.000 02/13/2003 149,813 349,128
44,800 3.8% 7.563 12/31/2003 137,935 321,447
James P. Geyer................................... 21,900 1.9% 16.000 02/13/2003 142,648 332,430
49,200 4.2% 7.563 12/31/2003 151,482 353,017
Terry D. Bauer................................... 16,400 1.4% 16.000 02/13/2003 106,823 248,943
45,200 3.8% 7.563 12/31/2003 139,166 324,317
Trevor S. Schultz................................ 37,600 3.2% 16.000 02/13/2003 244,912 570,748
Allan M. Park.................................... 18,500 1.6% 16.000 02/13/2003 120,502 280,820
200 0.0% 14.250 04/30/2003 1,160 2,704
Total Grants in 1996............................. 1,176,333
</TABLE>
- --------------------------
(1) The 1987 Stock Option Plan (the "1987 Plan") provides for the granting of
stock options to officers and key employees of the Company and its
subsidiaries. The 1987 Plan is administered by the Compensation Committee of
the Board, the members of which are not eligible to receive options under
the 1987 Plan. Under the terms of the 1987 Plan, stock options may be
granted in the form of incentive stock options (as defined in Section 422 of
the of the Internal Revenue Code) or non-qualified stock options. Options
granted are generally exercisable for seven years following the date of
grant at exercise prices equal to the closing price of the Company's Common
Shares on the American Stock Exchange on the date of grant.
Payment of the exercise price of an option may be made in cash or in Common
Shares or a combination thereof. Options generally vest at the rate of
one-quarter per year. Options may be subject to such additional or different
terms and conditions not inconsistent with the 1987 Plan as are prescribed
by the Compensation Committee. The Compensation Committee has the power to
permit an acceleration of the exercise terms of an option granted pursuant
to the 1987 Plan upon such circumstances, and subject to such terms and
conditions, as the Committee deems appropriate, including a change in
control of the Company.
Options granted in February 1996 were granted for a term of seven years with
25 percent of the option shares covered thereby becoming exercisable on the
grant date (subject to insider trading rules) and with an additional 25
percent of the option shares becoming exercisable on each anniversary date,
with full vesting occurring on the third anniversary date. Options granted
in December 1996 were granted for a term of seven years and fully vested
upon grant. Under the terms of the Company's 1987 Plan, the Compensation
Committee retains discretion, subject to plan limits (and with the approval
of The Toronto Stock Exchange and the Montreal Exchange), to modify the
terms of outstanding options, and to reprice the options.
The Plan terminates May 21, 1997. The proposed 1997 Stock Plan, if approved
by the shareholders, will replace the 1987 Plan respecting future
stock-based awards to Company officers and key employees.
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<PAGE>
OPTION EXERCISES AND YEAR END HOLDINGS
The following table provides information, with respect to the Named
Executive Officers, concerning the exercise of options during the year ended
December 31, 1996, and unexercised options held as of the end of 1996:
AGGREGATED OPTION EXERCISES IN 1996
AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED VALUE YEAR-END (#) YEAR-END ($)
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE(1)
- ------------------------------------------------ ----------- ------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Werner G. Nennecker............................. 50,000 $ 226,250 314,417/143,883 --/--
Phillips S. Baker, Jr........................... -- -- 158,475/53,625 --/--
Robert A. Lonergan.............................. -- -- 61,075/38,300 --/--
James P. Geyer.................................. -- -- 93,750/40,150 --/--
Terry D. Bauer.................................. -- -- 110,200/48,700 --/--
Trevor S. Schultz............................... -- -- --/-- --/--
Allan M. Park................................... -- -- --/-- --/--
</TABLE>
- ------------------------
(1) Market value of underlying securities at December 31, 1996, minus the
exercise price of "in-the-money" options.
EMPLOYMENT CONTRACTS
The Company has entered into officer employment agreements with each of the
Named Executive Officers and certain other executive officers. The agreements,
except as discussed below, provide for an immediate benefit to the employee upon
termination by the Company without cause, by the employee for good reason, upon
the death or disability of the employee or upon termination after a Change of
Control, as defined in the agreements. The agreements provide that the employee
will receive a lump sum amount equal to twice his current salary and employment
search assistance upon termination for other than cause. The employee will
receive a lump sum amount equal to two and one-half times his current annual
salary if termination other than for cause occurs following a Change of Control,
except for Mr. Nennecker, who will receive a lump sum amount equal to three
times his current annual compensation, which includes bonus. If the employee
dies or is disabled, compensation equal to six months' salary will be paid. The
agreements also provide that after a Change in Control, all options will become
immediately vested and require that other benefits, such as life and health
insurance, be continued for a period of 12 months (24 months on termination
other than for cause following a Change of Control). In addition, upon
termination following a Change of Control, the Company will provide relocation
benefits and price protection equal to the original purchase price plus
improvements on the sale of the employee's residence. The term "Change of
Control" is defined, for purposes of the agreements, as an event whereby any
person, corporation, or other entity or group acquires, directly or indirectly,
securities of the Company representing 20 percent of the combined voting power
of the Company's then outstanding voting securities, or two incumbent directors
are replaced by individuals who are not supported by management.
14
<PAGE>
REPORT ON EXECUTIVE COMPENSATION BY THE COMPENSATION COMMITTEE
OVERVIEW OF COMPENSATION POLICY AND COMPONENTS
The Company's compensation policy as established by its Board is intended to
provide competitive compensation to all employees, giving consideration to the
relative contribution and performance of each individual employee. It is the
Company's policy to compensate its executive officers at levels consistent with
industry norms, primarily in the form of base salary, together with incentive
compensation at targeted percentages of base salary. In addition, it is the
Company's policy to grant stock options annually to each of its executive
officers in amounts based upon the officer's responsibility and accountability
so as to align their interests with the creation of shareholder value and to
encourage their continuation with the Company. The precious metals mining
industry is competitive with respect to recruitment and retention of qualified
personnel; accordingly, the Company's management acts to ensure that the
Company's compensation practices are competitive with other producers of
precious metals, thereby enabling it to attract and retain key employees.
For 1996, executive compensation consisted of three components: base salary,
annual incentive opportunity, and long-term incentives (including stock
options). Determining the compensation levels of the Company's executive
officers is the responsibility of the Board, through its Compensation Committee
(the "Committee"), which has overall responsibility for the Company's
compensation policies to senior management. The Committee makes recommendations
to the Board as to the salaries, incentive opportunities, and stock options
awarded to the Company's Chief Executive Officer (the "CEO") and other executive
officers. The Committee has retained the services of an independent consultant
to assist the Committee in setting base salary and incentive awards for the CEO
and the executive officers by providing advice and survey information with
respect to compensation paid by 13 medium-to-large-sized mining companies, which
generally produce in excess of 200,000 ounces of gold annually (the "Comparison
Group"). The Committee believes that the Comparison Group provides a more
meaningful comparison than the broad-based peer group used in the performance
graph because the Comparison Group companies are similar in size to the Company
and compete directly with the Company for qualified personnel.
The Committee is comprised entirely of independent directors. No member of
the Committee is a current or former officer or employee of the Company or any
of its subsidiaries.
BASE SALARIES
Base salary ranges for the CEO and the other executive officers are
established based upon surveys of similar positions in the Comparison Group.
Placement within the range reflects the Committee's evaluation and assessment of
the individual performance of each executive officer, time in position, and the
overall financial condition of the Company. Base salaries are generally set at a
level which is approximately equal to the 50th percentile of the comparable
position in the Comparison Group. In 1996, all executives received salary
adjustments in order to place them near the 50th percentile of base salaries
paid to executives performing similar functions in companies included in the
Comparison Group.
INCENTIVE COMPENSATION
The Committee determined that the goals of the Company's compensation
policies would be achieved if the Company's executive officers were given the
opportunity to earn, (when performance warranted) cash compensation at levels
that would place them at or above the 75th percentile with respect to overall
compensation received by executive officers holding comparable positions with
companies in the Comparison Group. Accordingly, the Committee determined that
the CEO should be eligible for an incentive opportunity target of 80 percent of
base salary, each Vice President eligible for an incentive opportunity target of
44 percent of base salary, and the other officers were eligible for an incentive
opportunity target of 30 percent of base salary.
15
<PAGE>
In late 1995, the Committee adopted new annual and long-term incentive plans
for executives designed to motivate executives to focus on and successfully
manage those activities which have the greatest impact on the creation of
shareholder value. These plans, which were effective for 1996, are driven by
three fundamental performance measures ("value drivers") which the Committee
believes have a direct impact on the creation of shareholder value: increased
production, increased ore reserves, and increased cash available for growth.
The Annual Incentive Plan provides executives the opportunity to earn annual
performance units, which are redeemed at the end of each year. One-half of the
executives' target unit award is fixed at the beginning of the plan year, based
on predetermined Company performance levels associated with each value driver:
cash flow for growth, production, and net reserve increases. The Committee
determined that 17 percent of the value driver performance measures were
achieved.
In addition, variable units may be earned by an executive by meeting certain
individual objectives in support of the three value drivers. An executive may
earn up to two times his or her fixed unit award, depending on the level of
accomplishment of his or her individual objectives.
In 1996, the CEO's performance was evaluated by the Board of Directors. The
Committee determined that Mr. Nennecker accomplished 96 percent of his
individual objectives. This, combined with the achievement of 17 percent of the
value driver performance measures, earned Mr. Nennecker 57 percent of his annual
incentive target (or 45 percent of his base salary).
The Committee determined that other Named Executive Officers earned
incentive awards of up to 61 percent of their incentive targets (or 64 percent
of base salary) based on the value driver performance measures and evaluation of
the individual executive's performance with respect to his individual
objectives.
The Value Creation Incentive Plan provides a long-term award opportunity for
sustained performance by meeting three-year performance objectives tied to the
three value drivers. The Plan creates a weighted market capitalization value for
the Company based on its current levels of cash flow, production, and reserves.
Participants receive value units commensurate with their accountability and
responsibility for long-term value creation. The value units will increase or
decrease in value over the three-year term of the grant, depending on whether
cash flow, production, and reserves are increased or eroded. Participants will
receive any increase in value of the units in cash, stock, stock options, or a
combination of these. For 1996, the value creation unit grants replaced 25
percent of the stock option grants based on the Committee's historical grant
practices.
The Committee believes that the Annual and Value Creation Incentive Plans
deliver competitive annual and long-term incentive opportunities which are well
aligned with business results and shareholder value created.
STOCK OPTIONS
Stock options are granted each year to the Company's employees, including
the CEO and the Named Executive Officers, to encourage management of the Company
from the perspective of an owner with an equity interest in the business, and to
encourage the employees to continue as employees of the Company. Stock options
granted to all employees eligible to receive awards, including the CEO and each
Named Executive Officer, are based on the employee's overall position of
responsibility and accountability, taking into account the participant's recent
performance and ability to effect long-term value creation. In addition, each
time an employee changes positions and assumes increased responsibilities, the
Committee awards the employee options based on the Committee's subjective
assessment of the nature and importance of the increased responsibilities
assumed.
On February 13, 1996, the Committee elected to award Mr. Nennecker options
to purchase 73,200 Common Shares. At this time, other Named Executive Officers
received annual grants to purchase from 16,400 to 37,600 Common Shares. The
exercise price of such options was $16.00 per share, the fair market
16
<PAGE>
value of the underlying Common Shares on the date the options were granted,
based on the closing price of the Common Shares on the American Stock Exchange
on such date. On December 31, 1996, the Committee elected to award Mr. Nennecker
additional options to purchase 99,200 Common Shares. At this time, other Named
Executive Officers received additional grants to purchase from 44,800 to 51,200
Common Shares. The exercise price of such options was $7.563 per share, the fair
market value of the underlying Common Shares on the date the options were
granted, based on the closing price of the Common Shares on the American Stock
Exchange on such date.
POLICY WITH RESPECT TO THE DEDUCTIBILITY OF COMPENSATION
To qualify the deductibility of compensation for United States federal
income tax purposes, it is the Company's policy to meet the requirements for
exclusion from the limit on deductibility imposed by Section 162(m) of the
Internal Revenue Code by paying performance-based compensation if possible. With
respect to cases in which it is not possible to meet the requirements for
exclusion from Section 162(m) of the Code, the Company intends to minimize any
award of compensation in excess of the limit.
COMPENSATION COMMITTEE
Lindsay D. Norman, Chairman
Douglas R. Cook
Peter R. Kutney
Michael A. Grandin
FIVE-YEAR TOTAL RETURN GRAPH
The following chart compares total cumulative shareholder return for $100
invested in Common Shares of the Company on December 31, 1991 with the
cumulative total return of the S&P 500 Index and the TSE Gold & Silver Index for
the five most recently completed fiscal years.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
PEGASUS GOLD INC. S&P 500 INDEX TSE GOLD & SILVER INDEX
<S> <C> <C> <C>
1991 100 100 100
1992 120 104 106
1993 178 112 216
1994 92 110 194
1995 112 148 211
1996 61 178 229
</TABLE>
17
<PAGE>
REMUNERATION OF DIRECTORS AND SENIOR OFFICERS
The following disclosure is required under the British Columbia Company Act.
For these purposes, "senior officer" means the chairman or any vice chairman of
the board of directors, the president, any vice president, the secretary, the
treasurer or the general manager of the Company or any other individual who
performs functions of the Company similar to those normally performed by an
individual occupying any of those offices, and the five highest paid employees
of the Company.
The aggregate direct remuneration paid or payable by the Company and its
subsidiaries to the directors and senior officers of the Company during the
financial year ended December 31, 1996 was $3,069,013. The estimated aggregate
cost to the Company and its subsidiaries during the fiscal year ended December
31, 1996 of all pension benefits proposed to be paid under the Company's pension
plans in the event of retirement at normal retirement age to the directors and
senior officers of the Company, by the Company, or any of its subsidiaries,
directly or indirectly, was $63,418.
Since January 1, 1996, options to acquire an aggregate of 633,133 Common
Shares were issued to the directors and senior officers of the Company as a
group. The exercise price of such options ranged from $7.563 per share to
$16.000 per share. During the same period, an aggregate of 70,000 options to
purchase Common Shares was exercised at exercise prices ranging from $8.563 per
share to $15.625 per share. During the period from January 1, 1996 to March 10,
1997, the closing price of the Common Shares on the American Stock Exchange
ranged from a low of $7.063 per share to a high of $17.375 per share.
During the fiscal year ended December 31, 1996, Mr. Nennecker was indebted
to the Company under a non-interest bearing loan made to him in connection with
his employment. The largest amount of debt outstanding in this regard during
such year, and the amount outstanding as of March 10, 1997, was $56,042.
PROPOSAL TO APPROVE THE ADOPTION OF THE 1997 STOCK PLAN
At the Annual Meeting, the shareholders will be requested to approve the
adoption of the 1997 Stock Plan (the "Plan"), a new incentive stock-based
compensation plan for the Company's directors and executive officers.
DESCRIPTION OF THE PLAN
On February 19, 1997, the Board of Directors adopted, subject to shareholder
approval, the 1997 Stock Plan (the "Plan"). The purpose of the Plan is to
promote the long-term success of the Company by (i) encouraging directors and
employees of the Company and its subsidiaries to focus on long-range objectives,
(ii) attracting and retaining employees, and (iii) aligning the financial
interests of directors and employees with the interests of the shareholders. The
Plan will replace the Directors Plan and the 1987 Plan, which expire June 1,
1997 and May 21, 1997, respectively. If approved, the Plan is effective January
8, 1997 and terminates on January 8, 2007 unless the Board of Directors
terminates the Plan earlier.
GENERAL TERMS
The Plan is administered by the Compensation Committee, which consists
solely of non-employee directors. The class of eligible Plan participants
consists of the directors and employees of the Company and its subsidiaries. The
Committee designates which individual directors and employees will receive
awards and determines the terms and condition of the award subject to certain
Plan limitations. The terms and conditions of all awards must be evidenced by
written agreement executed by the Company and the participant.
The Plan authorizes for issuance, pursuant to Plan awards, an aggregate
4,000,000 Common Shares plus any shares that are available under the Directors'
Plan and 1987 Plan on the date of shareholder approval (estimated to be 85,100
shares and 45,700 shares, respectively), or that become available for grant due
to the expiration, termination, or cancellation of options awarded under such
plans. The Committee
18
<PAGE>
may grant any of the following awards: stock options, stock appreciation rights,
stock awards, and unit awards. Unissued Common Shares subject to Plan awards
that expire, terminate, or are canceled will be available for future awards
under the Plan.
STOCK OPTIONS
Under the terms of the Plan, the Committee may grant stock options in the
form of incentive stock options (as defined in Section 422 of the Internal
Revenue Code) or non-qualified stock options. The exercise price for all options
may not be less than the closing price on a recognized stock exchange (such as
the American Stock Exchange) on the date of grant. The term of a stock option
may not exceed ten (10) years. With respect to any optionee who owns stock
possessing more than 10 per cent of the voting rights of the Company's
outstanding stock, the exercise price of any incentive stock option must equal
at least 110 per cent of the fair market value on the grant date and the maximum
term of the option must not exceed five (5) years. The aggregate fair market
value (determined at the time of grant of an incentive stock option) of Common
Shares with respect to which incentive stock options are exercisable for the
first time by any optionee during any calendar year may not exceed $100,000.
STOCK APPRECIATION RIGHTS
The Committee also may grant stock appreciation rights in connection with
stock options. Under the terms of the Plan, stock appreciation rights authorize
an optionee to surrender all or part of an unexercised stock option in exchange
for cash or Common Shares equal to the difference between the option exercise
price and the fair market value of the Common Shares on the date of surrender.
The Committee may include other terms and conditions as it deems appropriate.
STOCK AWARDS
In addition, the Committee may grant stock awards, which provide for the
issuance of Common Shares on such terms and conditions and subject to such
performance requirements as the Committee determines.
UNIT AWARDS
The Committee may grant unit awards as compensation for past or future
services. In general, the value of unit awards is measured by increases or
decreases in the Corporation's value during the term of the unit award. Prior to
granting such award, the Committee must determine the method of measuring such
value, such as a formula based on operating cash flow, production and reserves,
or fair market value per Common Share.
RESTRICTIONS ON TRANSFER
In general, awards are not transferable or exercisable by any one other than
the participant. However, the Committee may permit awards to be exercised by and
paid to such persons or entities as the Committee may approve based on
satisfactory evidence that the transfer is being made for estate or tax planning
purposes. Incentive stock options may not be transferred except on the death of
the participant by will or the laws of descent and distribution. In addition, if
the participant has suffered a disability, an incentive stock option may be
exercised on behalf of the participant by his or her legal representative. The
Plan permits the transfer of other awards without further Committee approval as
follows: to the Company, in connection with the death or disability of a
participant, pursuant to a domestic relations order, or pursuant to the
authorization by the Committee of "cashless exercise" procedures. No award may
be transferred if applicable stock exchange rules would not permit such
transfer.
19
<PAGE>
LIMITATIONS ON AWARDS TO CERTAIN INDIVIDUALS
The Company may not grant, issue or sell to any employee in any calendar
year stock options to purchase more than 250,000 Common Shares or stock
appreciation rights with respect to more than 250,000 Common Shares. In
addition, as long as the Common Shares are listed on The Toronto Stock Exchange
or the Montreal Exchange, the Company may not (i) grant stock options to
insiders, in respect of Common Shares exceeding an aggregate at any time of 10
per cent of the outstanding issue, (ii) issue to insiders within a one (1) year
period a number of Common Shares exceeding 10 per cent of the Company's
outstanding issue, (iii) issue to any one insider and his associates within a
one (1) year period a number of Common Shares exceeding 5 per cent of the
Company's outstanding issue, or (iv) grant stock options to any one person in
respect of Common Shares exceeding 5 per cent of the outstanding issue except
(in any such case) as may be permitted by the rules of The Toronto Stock
Exchange and the Montreal Exchange.
AMENDMENTS
The Board of Directors may amend the Plan at any time, as it deems
advisable, subject to the approval of the Toronto and Montreal stock exchanges.
However, without the consent of the shareholders, the Board may not amend the
Plan to increase the maximum number of Common Shares authorized for issuance
under the Plan or to change the class of persons eligible to receive Awards
under the Plan. Under the rules of the Toronto and Montreal stock exchanges,
certain other amendments of the Plan may require shareholder approval.
ADJUSTMENT TO AWARDS AND RELATED MATTERS
In the case of a merger, consolidation, amalgamation, arrangement,
reorganization, spin-off, recapitalization, reincorporation, stock split,
dividend issued in stock or other change in the corporate structure of the
Company, the Committee is authorized to make appropriate adjustments to awards
in order to preserve but not increase the benefits to the participants. The Plan
also authorizes the Committee to permit a participant to use Common Shares
already owned by the participant as payment of an exercise price for a stock
option or payment of any consideration required for a stock award granted under
the Plan. Consistent with applicable law, the Committee may authorize "cashless
exercise" procedures for third parties who provide financing for the purpose of
the exercise of awards and for the sale of Common Shares to cover withholding
taxes.
1997 OPTION GRANTS
Subject to the approval of the shareholders of the Plan, the Committee has
granted 200,000 options allocated among the directors and approximately 550,000
options allocated to officers and employees.
BOARD RECOMMENDATION
The Board believes it is in the best interests of the Company and its
shareholders to offer stock-based awards in accordance with the terms of the
Plan in order to continue to attract and retain the services of experienced
employees and to provide additional incentives for such employees to continue to
work for the best interests of the Company and its shareholders through an
investment interest in the future success of the Company. By their terms, the
Company's Directors' Plan and 1987 Plan will expire during the current fiscal
year. Without a new stock plan, the Company's ability to continue to attract and
retain such employees and provide such incentives would be compromised.
Pursuant to the terms of the Plan and the rules of the Toronto, Montreal and
American stock exchanges, the adoption of the Plan must be approved by a simple
majority of the votes cast at the Annual Meeting.
A full copy of the Plan is attached as Exhibit 1 to this Proxy Statement and
Information Circular.
20
<PAGE>
CORPORATE GOVERNANCE
The Toronto and Montreal stock exchanges require listed companies to provide
certain disclosure annually with respect to their corporate governance practices
with reference to the December 1994 report of The Toronto Stock Exchange
Committee on Corporate Governance in Canada. In its report, the Committee
established guidelines for corporate governance. However, in recognition of the
great diversity in the nature, size and ownership structure of corporations, the
guidelines do not constitute mandatory requirements and corporations are not
required to comply with the Committee's standards. The following disclosure is
included to illustrate and explain the differences which may exist between the
Company's system of corporate governance and the Committee's guidelines.
<TABLE>
<CAPTION>
TSE CORPORATE GOVERNANCE DOES THE
COMMITTEE GUIDELINE COMPANY ALIGN? COMMENTS
- ----------------------------------------------- --------------- -----------------------------------------------
<S> <C> <C>
1. Board should explicitly assume
responsibility for stewardship of the
corporation, and specifically for:
a. adoption of a strategic planning Yes The Board reviews annually the strategic plan
process and from time to time focuses on substantial
strategic planning matters.
b. identification of principal risks, and Yes The Board has specifically identified the
implementing risk management systems Company's principal risks and implemented risk
management systems.Forexample, the Company
conducts environmental audits of mine sites and
has adopted hedging policies to guide the
financial risk management programs.
c. succession planning and monitoring Yes The Board discusses succession planning matters
senior management at least annually, and reviews all compensation
matters pertaining to senior management.
d. communications policy Yes The Board has put structures in place to ensure
effective communication between the Company,
its shareholders and the public.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
TSE CORPORATE GOVERNANCE DOES THE
COMMITTEE GUIDELINE COMPANY ALIGN? COMMENTS
- ----------------------------------------------- --------------- -----------------------------------------------
<S> <C> <C>
e. integrity of internal Yes The Board through various committees has
control and management reviewed the integrity of internal control and
information systems management systems. The Board has also put in
place a system for monitoring the
implementation of corporate strategies. Each of
the following committees is responsible to
review and advise the Board on implementation
of corporate strategy in the noted areas:
-- Compensation Committee:
employment and remuneration
-- Environmental Committee:
environmental compliance, closure planning, and
strategy
-- Audit Committee:
financial risks, reporting, disclosure, and
planning
-- Nominating Committee:
appropriate Board candidates
2. Majority of directors should be Yes Werner G. Nennecker (President and CEO) is the
"unrelated" (independent of management and only Board member who is related.
free from conflicting interest)
3. Disclosure for each director, whether or Yes Werner G. Nennecker
not he or she is related, and how that Related--as President and Chief Executive
conclusion was reached Officer of the Company
For the remainder of the directors, none of
them has:
-- worked for the Company
-- any material contracts with the Company
-- received remuneration from the Company in
excess of directors' fees, including stock
options.
Lawrence I. Bell Unrelated
Peter M.D. Bradshaw Unrelated
Douglas R. Cook Unrelated
Michael A. Grandin Unrelated
Peter R. Kutney Unrelated
Lindsay D. Norman Unrelated
Anthony J. Petrina Unrelated
Fred C. Schulte Unrelated
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
TSE CORPORATE GOVERNANCE DOES THE
COMMITTEE GUIDELINE COMPANY ALIGN? COMMENTS
- ----------------------------------------------- --------------- -----------------------------------------------
<S> <C> <C>
4. Appoint a committee of non-management Yes The Nominating Committee has the mandate to:
directors, a majority of which are -- recommend candidates for the Board
unrelated, responsible for -- annually review credentials of nominees for
appointment/assessment of directors re-election
-- recommend candidates for filling vacancies
on the Board
-- ensure appropriate qualifications are met by
those joining the Board
5. Implement a process for assessing the Yes The Board annually reviews the effectiveness of
effectiveness of the board, its committees the Board as a whole, the committees of the
and individual directors Board and the contribution of individual
directors
6. Provide orientation and education programs Yes The Board provides informal orientation
for new directors programs to new directors and education
programs to all directors, including annual
mine site visits.
The Board reviews the gold market and hedging,
valuation of gold companies, and legal and
other matters applicable to the Company and
directors' duties.
7. Consider reducing size of board, with a Yes A board must have enough directors to carry out
view to improving effectiveness its duties efficiently, while presenting a
diversity of views and experience. Annually the
Board reviews the contributions of the
directors, and considers whether the current
size of the Board promotes effectiveness and
efficiency. The Board believes nine directors
is the appropriate number at this time.
8. Review compensation of directors in light Yes The Compensation Committee is mandated to
of risks and responsibilities review and recommend to the Board for approval
the remuneration of directors. The Committee
considers time commitment, comparative fees,
and responsibilities in determining
remuneration. The Board has received advice
from an outside consultant on the adequacy of
the compensation paid to Directors.
9a. Committees should generally be composed Yes Mr. Nennecker serves on the Executive
of non-management directors Committee. All other Board committees are
composed solely of non-management directors.
9b. Majority of committee members should be Yes
unrelated
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
TSE CORPORATE GOVERNANCE DOES THE
COMMITTEE GUIDELINE COMPANY ALIGN? COMMENTS
- ----------------------------------------------- --------------- -----------------------------------------------
<S> <C> <C>
10. Appoint a committee responsible for Yes The Executive Committee has the responsibility
approach to corporate governance issues to the full Board regarding corporate
governance.
11a. Define limits to management's
responsibilities by developing mandates
for:
(i) the board Yes The Board has the responsibility to oversee the
conduct of the business of the Corporation and
to supervise management. Its duties and
responsibilities are set forth in more detail
in the Board's terms of reference.
(ii) the CEO Yes The CEO's written terms of reference constitute
a mandate on a year-to-year basis. These
objectives include the general mandate to
optimize the assets of the Corporation in the
best interests of all shareholders.
11b. Board should approve CEO's corporate Yes The CEO's objectives are reviewed and approved
objectives by the full Board on an annual basis.
12. Establish structures and procedures to Yes The Board has appointed a non- management
enable the board to function Chairman. In addition, the Board meets
independently of management independently of the CEO and other management
when appropriate, and at least one time per
year.
13. Establish an audit committee, composed Yes The Audit Committee is composed entirely of
solely of non-management directors, with non-management directors and is mandated to:
a specifically defined mandate -- ensure that the Company's management has
designed and implemented an effective system
of internal financial controls and to review
and report to the Board on the integrity of
the consolidated financial statements of the
Company.
14. Implement a system to enable individual Yes The Board and its Committees have that power
directors to engage outside advisers, at under their terms of reference, and use it
corporation's expense when, and if, necessary.
</TABLE>
24
<PAGE>
APPOINTMENT AND REMUNERATION OF AUDITORS
The firm of Coopers & Lybrand, Chartered Accountants, 1111 West Hastings
Street, Vancouver, British Columbia, Canada, has served as the auditors of the
Company since 1981. No member of such firm, or any associate thereof, has any
financial or any other material interest in the Company or its subsidiaries. In
the absence of contrary direction, the proxies will be voted in favor of the
re-appointment of Coopers & Lybrand as auditors of the Company for the ensuing
year.
A representative of the firm of Coopers & Lybrand will be present at the
Annual Meeting and will be given the opportunity to make a statement and to
answer any questions shareholders may have with respect to the financial
statements of the Company for the fiscal year ended December 31, 1996.
The British Columbia Company Act requires that the remuneration of the
auditors of the Company be fixed by ordinary resolution of the shareholders. The
shareholders will be asked to vote for an ordinary resolution authorizing the
directors to fix the remuneration of the auditors, such authorization to expire
at the next annual general meeting of shareholders of the Company.
25
<PAGE>
PROPOSALS BY SHAREHOLDERS FOR THE 1998 ANNUAL GENERAL MEETING
Any shareholder of the Company who wishes to present a proposal to be
considered at the 1998 Annual General Meeting of Shareholders of the Company and
who wishes to have such proposal presented in the Company's Proxy Statement and
Information Circular, must deliver such proposal in writing to the Secretary or
Assistant Secretary of the Company at Suite 1500, 601 West First Avenue,
Spokane, Washington, U.S.A. 99204, no later than November 26, 1997.
The Company will furnish, without charge to any shareholder submitting a
written request, a copy of the Company's Form 10-K Annual Report for the year
ended December 31, 1996, as filed with the Securities and Exchange Commission,
including the financial statements and schedules thereto. The Company will also
furnish a copy of certain documents, including its current Annual Information
Form filed with the Canadian securities regulatory authorities, to any person
upon request. The Company may require the payment of a reasonable charge in the
case of a request made by a person who does not hold securities of the Company.
Written requests should be directed to the Director of Investor Relations,
Pegasus Gold Inc., Suite 1500, 601 West First Avenue, Spokane, Washington,
U.S.A. 99204.
The contents and the sending of this Proxy Statement and Information
Circular have been approved by the Board of Directors of the Company.
BY ORDER OF THE BOARD,
[SIGNATURE]
Robert A. Lonergan
SECRETARY
Spokane, Washington, U.S.A.
March 24, 1997
26
<PAGE>
EXHIBIT 1
PEGASUS GOLD INC.
1997 STOCK PLAN
EFFECTIVE JANUARY 8, 1997
1. ESTABLISHMENT, DURATION AND PURPOSE.
(a) Pegasus Gold Inc., a British Columbia company, (the "Corporation"),
hereby adopts the Pegasus Gold Inc. 1997 Stock Plan (the "Plan"),
effective January 8, 1997 ("Effective Date").
(b) No Award granted to an employee or a director shall become exercisable
until the Plan is approved by shareholders at a shareholders' meeting
held within twelve months of the Effective Date. Any Awards granted under
the Plan prior to such approval shall be contingent upon such approval.
(c) The purpose of the Plan is to promote the long-term success of the
Corporation by encouraging directors and employees of the Corporation and
its Subsidiaries to focus on long-range objectives, by attracting and
retaining employees and by aligning the financial interests of directors
and employees with the interests of shareholders. The Plan provides a
means whereby:
(1) employees of the Corporation and its Subsidiaries may be given an
opportunity to purchase Stock pursuant to options which may qualify
as incentive stock options under Section 422 of the Code (referred to
as "incentive stock options");
(2) directors and employees of the Corporation and its Subsidiaries may
be given an opportunity to purchase Stock pursuant to options which
do not qualify as incentive stock options (referred to as
"nonqualified stock options");
(3) directors and employees of the Corporation and its Subsidiaries may
acquire Stock for such consideration and subject to such restrictions
(if any) as the Committee determines appropriate, provided, however,
that prior to the issuance of such Stock, the Corporation will have
received from the director or employee the consideration established
for the Stock issued to him;
(4) directors and employees of the Corporation and its Subsidiaries may
be awarded Stock pursuant to the terms of incentive plans established
from time to time by such entities, provided, however, that prior to
the issuance of such Stock, the Corporation will have received from
the director or employee the consideration established for the Stock
issued to him; and
(5) directors and employees of the Corporation and its Subsidiaries may
be granted rights or units the value of which is based on the value
of the Stock.
2. DEFINITIONS. The following terms when capitalized in this Plan have the
following meanings:
(a) "Awards" refers collectively to Stock Awards (see para. 8, INFRA), stock
appreciation rights (see para. 7, INFRA), Stock Options (see para. 6,
INFRA), and Unit Awards (see para. 9, INFRA) made pursuant to this Plan.
(b) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(d) "Non-Employee Director" means a director who (1) is not currently an
officer (as defined in 17 CFR 260.16a-1(f)) of the Corporation or a
Subsidiary, or otherwise currently employed by the Corporation or a
Subsidiary; (2) is not a former employee of the Corporation who receives
compensation during the taxable year for prior services, (3) does not
receive compensation, either directly or indirectly, from the Corporation
or a Subsidiary, for services rendered as a consultant
<PAGE>
or in any other capacity except as a director, except for services that
do not require, or in such amount that does not require, disclosure under
Item 404(a) of Regulation S-K issued by the Securities and Exchange
Commission; (4) does not possess an interest in any other transaction for
which disclosure would be required pursuant to Item 404(a) of such
Regulation; (5) is not engaged in a business relationship for which
disclosure would be required pursuant to Item 404(b) of such Regulation;
and (6) is an outside director within the meaning of Treasury Regulation
1.162-27(e)(3).
(e) "Participant" refers to the recipient of an Award.
(f) "Stock" means the Corporation's Common Shares without par value. Shares
under the Plan may be authorized and unissued shares or reacquired
shares.
(g) "Stock Award" means Stock issued to eligible persons pursuant to
paragraph 8 of this Plan.
(h) "Stock Option" means options to purchase Stock granted to eligible
persons pursuant to paragraph 6 of this Plan.
(i) "Subsidiaries" refers to subsidiary corporations, as defined in Section
424(f) of the Code (but substituting "the Corporation" for "employer
corporation") and as defined in the Securities Act (of British Columbia),
including entities which become Subsidiaries after adoption of the Plan.
(j) "Unit Awards" means the units issued to eligible persons pursuant to
paragraph 9 of this Plan as compensation for services rendered or to be
rendered to the Corporation or its Subsidiaries.
3. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors of the Corporation (the "Board").
(b) The Committee shall consist solely of two or more Non-Employee
Directors.
(c) The Committee shall determine which employees and directors of the
Corporation or its Subsidiaries shall be granted (subject to Board
approval for Awards to CEO) Awards under the Plan, the timing of such
Awards, the terms thereof, and the number of shares of Stock subject to
each Award.
(d) The Committee shall have the sole authority, in its absolute discretion,
to adopt, amend, and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe
and interpret the Plan, the rules and regulations, and the instruments
evidencing Awards granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of
the Plan. All decisions, determinations, and interpretations of the
Committee shall be binding on all Participants.
(e) During periods of time and in amounts approved by the Committee,
eligible persons may elect to swap compensation for Stock, Stock Options,
stock appreciation rights or Unit Awards. Such elections, once made, will
be irrevocable.
(f) The Plan is intended to meet the requirements of Rule 16b-3 promulgated
by the Securities and Exchange Commission under Section 16(b) of the
Exchange Act and the requirements of Section 162(m)(4)(C) of the Code and
shall be administered and construed accordingly.
4. STOCK SUBJECT TO THE PLAN; LIMITATIONS ON AWARDS.
(a) Awards containing rights to acquire Stock may be granted under the Plan
to eligible persons (as set forth in para. 5, INFRA) for an aggregate of
not more than four (4) million (4,000,000) shares of Stock, plus any
shares that (i) are available for grant under the Corporation's 1987
Stock Option Plan or 1989 Non-Employee Directors' Stock Option Plan on
the date the shareholders approve this Plan, or (ii) may subsequently
become available for grant under such plans through the expiration,
termination, forfeiture or cancellation of awards under such plans. If an
Award
<PAGE>
granted under this Plan expires, terminates, or is forfeited or canceled,
the unissued shares of Stock subject to such Award shall again be
available for Awards under this Plan.
(b) If there is any change in the Stock subject to the Plan or the Stock
subject to any Award granted under the Plan (through merger,
amalgamation, arrangement, consolidation, reorganization, spin-off,
recapitalization, reincorporation, stock split, dividend issued in stock
or other change in the corporate structure of the Corporation),
appropriate adjustments may be made by the Committee in order to preserve
but not to increase the benefits to the Participants. These adjustments
may include adjustments to the aggregate number of shares of Stock
subject to the Plan, the number of shares of Stock and the price per
share subject to outstanding Awards and the limitations in subparagraph
(c) below.
(c) The Corporation shall not grant, issue or sell to any employee in any
calendar year:
(1) Stock Options pursuant to paragraph 6 to purchase more than two
hundred fifty thousand (250,000) shares of Stock, or
(2) stock appreciation rights pursuant to paragraph 7 with respect to
more than two hundred fifty thousand (250,000) shares of Stock.
(d) Notwithstanding anything to the contrary in this Plan, the Company will
not, at any time while the Stock is listed on The Toronto Stock Exchange
or the Montreal Exchange (i) grant Stock Options to insiders in respect
of Stock exceeding an aggregate at any time of 10 percent of the
outstanding issue, (ii) issue to insiders, within a one (1) year period,
a number of shares of Stock exceeding 10 percent of the Company's
outstanding issue, (iii) issue to any one insider and his associates,
within a one (1) year period, a number of shares of Stock exceeding 5
percent of the Company's outstanding issue, or (iv) grant Stock Options
to any one person in respect of shares of Stock exceeding 5 percent of
the Company's outstanding issue, other than (in any such case) as may be
permitted by the rules of The Toronto Stock Exchange and/or the Montreal
Exchange, as the case may be. For the purposes of this subsection (d),
the terms "insiders," "outstanding issue" and "associates" shall have the
meanings ascribed to them under the rules of The Toronto Stock Exchange.
5. ELIGIBILITY.
Persons who shall be eligible to have Awards granted to them shall be such
employees or directors of the Corporation or its Subsidiaries as the Committee,
in its discretion, shall designate from time to time.
6. TERMS AND CONDITIONS OF STOCK OPTIONS.
(a) The exercise price of the Stock covered by each Stock Option granted
under the Plan shall be not less than the per share fair market value, as
determined by reference to the closing share price on a recognized stock
exchange, of such Stock on the date the option is granted.
Notwithstanding the foregoing, in the case of an incentive stock option
granted to a person possessing more than ten percent (10%) of the
combined voting power of the Corporation or any Subsidiary, the exercise
price shall be not less than one hundred ten percent (110%) of the fair
market value of the Stock on the date the option is granted. The exercise
price of an outstanding Stock Option shall be subject to adjustment to
the extent provided in paragraph 4, above.
(b) Notwithstanding anything in the Plan to the contrary, the aggregate fair
market value (determined at the time of grant of an incentive stock
option) of Stock with respect to which incentive stock options are
exercisable for the first time by any Participant during any calendar
year (under all plans of the Corporation and its Subsidiaries) shall not
exceed $100,000.
(c) Each Stock Option granted pursuant to the Plan shall be evidenced by a
written stock option agreement executed by the Corporation and the person
to whom such option is granted.
(d) The Committee shall determine the term of each Stock Option granted
under the Plan, but the term of each Stock Option shall be for no more
than ten (10) years provided, however, that in the
<PAGE>
case of an incentive stock option granted to a person possessing more
than ten percent (10%) of the combined voting power, of the Corporation
or any Subsidiary, the term shall be for no more than five (5) years.
(e) The stock option agreement may contain such other terms, provisions, and
conditions as may be determined by the Committee (not inconsistent with
this Plan) including, without limitation, stock appreciation rights with
respect to Stock Options granted under this Plan. If a Stock Option, or
any part thereof, is intended to qualify as an incentive stock option,
the stock option agreement shall contain those terms and conditions which
are necessary to so qualify it.
7. STOCK APPRECIATION RIGHTS.
The Committee may, under such terms and conditions as it deems appropriate,
authorize the surrender by an optionee of all or part of an unexercised Stock
Option and authorize a payment in consideration therefor in an amount equal to
the difference obtained by subtracting the option price of the shares then
subject to exercise under such option from the fair market value of the Stock
represented by such shares on the date of surrender, provided that the Committee
determines that such settlement is consistent with the purpose of the Plan. Such
payment may be made in shares of Stock valued at their fair market value on the
date of surrender of such option or in cash, or partly in shares and partly in
cash. Acceptance of surrender and the manner of payment shall be in the
discretion of the Committee. Any payments of cash under this paragraph shall be
from the general assets of the Corporation.
8. STOCK AWARDS
The Committee may, in its discretion, issue Stock to eligible persons on
whatever basis and subject to such performance requirements, terms and
conditions as the Committee determines, subject to compliance with the
applicable provisions of the Company Act (of British Columbia). The terms and
conditions of such Stock Award shall be evidenced by a written agreement
executed by the Corporation and the Participant.
9. UNIT AWARDS
The Committee may, in its discretion, issue units to eligible persons as
compensation for services rendered or to be rendered to the Corporation or its
Subsidiaries, the value of such units to be measured by increases or decreases
(during all or a portion of the term of the Unit Award) in the Corporation's
value, including, but not limited to, a formula based on operating cash flow,
production and reserves, fair market value per share of Stock, or such other
measure specified by the Committee prior to grant of the applicable Unit Award.
Unit Awards shall be subject to whatever performance requirements, terms and
conditions the Committee determines appropriate. The terms of a Unit Award,
shall be evidenced by a written agreement executed by the Corporation and the
Participant.
10. (a) GENERAL PROHIBITION ON TRANSFERS. Unless otherwise expressly provided
in this paragraph 10 or by the Award Agreement, as either may be
amended, or by applicable law or the rules of the stock exchanges on
which the Stock is listed, (i) a Participant may not transfer
(including assign, pledge, or encumber) any of Participant's interest
in an Award; (ii) only a Participant may exercise an Award; and (iii)
the Corporation may deliver amounts payable or shares issuable pursuant
to Awards only to (or for the account of) the Participant.
(b) COMMITTEE-APPROVED TRANSFERS. Subject to applicable law, the Committee
may permit Awards to be exercised by and paid to such persons or entities
as the Committee may approve, pursuant to such conditions and procedures
as the Committee may establish, and subject to the condition that the
Committee receive evidence satisfactory to it that the transfer is being
made for estate and/or tax planning purposes on a gratuitous or donative
basis and without consideration (other than nominal consideration).
Notwithstanding the foregoing, incentive stock options shall be subject
to any additional transfer restrictions as required for such options
under the Internal Revenue Code.
<PAGE>
(c) PERMITTED TRANSFERS. The following transactions are permitted under this
Plan without the restrictions imposed by this paragraph 10, subject to
the rules of the stock exchanges on which the Stock is listed:
For all Awards:
(1) transfers to the Corporation;
(2) the designation of a beneficiary to receive benefits in the event of
the Participant's death or, if the Participant has died, transfers to
or exercise by the Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of
descent and distribution; and
For all Awards except incentive stock options:
(3) transfers pursuant to a domestic relations order;
(4) if the Participant has suffered a disability, permitted transfers or
exercises on behalf of the Participant by his or her legal
representative; or
(5) the authorization by the Committee of "cashless exercise" procedures
with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of Awards consistent with
applicable laws and stock exchange rules and the express
authorization of the Committee.
(d) Awards granted or Stock acquired under the Plan shall be subject to such
restrictions and agreements regarding performance, vesting, sale,
assignment, encumbrance, or other transfer as the Committee deems
appropriate at the time of making an Award.
11. USE OF PROCEEDS.
Any cash proceeds realized from the sale of Stock pursuant to the Plan or
from the exercise of options granted under the Plan shall constitute general
funds of the Corporation.
12. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
(a) The Board may at any time amend, suspend or terminate the Plan as it
deems advisable; provided, however, except as set forth in paragraph 4,
above, the Board shall not amend the Plan in the following respects
without the consent of the shareholders of the Corporation then
sufficient to approve the Plan in the first instance and the approval of
all stock exchanges on which the Stock is then listed, if, and to the
extent required, by such exchanges:
(1) to increase the maximum number of shares of Stock subject to the
Plan; or
(2) to change the designation or class of persons eligible to receive
Awards under the Plan.
(b) No Award may be granted during any suspension or after the termination
of the Plan, and no amendment, suspension or termination of the Plan
shall, without the Participant's consent, alter or impair any rights or
obligations under any Award previously made under the Plan,
(c) This Plan shall terminate 10 years from the date of adoption of the
plan, unless previously terminated by the Board pursuant to this
paragraph 12.
13. CONSIDERATION.
Payment of the exercise price of a Stock Option or payment of any
consideration required for a Stock Award granted under this Plan shall be made
in cash or check; or with the consent of the Committee, in shares of Stock
already owned by the Participant; or with the Committee's consent partly in cash
and partly in Stock provided, however, that the Committee, in its sole
discretion, may establish procedures which permit a Participant to pay the
exercise or purchase price in whole or in part by delivery (on a form
<PAGE>
prescribed by the Committee) of an irrevocable direction to a securities broker
approved by the Committee to sell shares and deliver all or a portion of the
proceeds to the Corporation for and on behalf of a participant in payment for
the Stock. The Committee may also establish procedures for the sale of shares of
Stock to cover withholding taxes or the withholding of shares of Stock issuable
upon exercise of an option to satisfy applicable withholding taxes to the extent
permitted by applicable law. Notwithstanding any provision in this paragraph 13
to the contrary, no share of Stock shall be issued by the Corporation until the
Corporation has received the full consideration for it as required by the
Company Act (of British Columbia).
Date Adopted By Corporation:
Date Approved By Shareholders:
<PAGE>
PEGASUS GOLD INC.
INSTRUMENT OF PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MANAGEMENT OF
PEGASUS GOLD INC. (THE "COMPANY") FOR USE AT THE ANNUAL GENERAL MEETING OF
SHAREHOLDERS TO BE HELD ON APRIL 30, 1997. The undersigned, revoking any
previous proxies, hereby appoints WERNER G. NENNECKER, President and Chief
Executive Officer, and ROBERT A. LONERGAN, Secretary, and each of them, or,
instead of either of the foregoing, , as nominee and proxy
of the undersigned, with full power of substitution, and hereby authorizes each
of them to represent and to vote all Common Shares of the undersigned of the
Company at the Annual General Meeting of Shareholders on April 30, 1997, and at
any adjournments thereof, upon all matters which may come before said meeting.
Without limiting the general powers conferred, the undersigned hereby directs
the said nominee to vote the shares represented by this Proxy in the following
matters as indicated below:
1. ELECTION OF / / FOR ALL NOMINEES / / WITHHOLD AUTHORITY
DIRECTORS LISTED (EXCEPT AS TO VOTE FOR ALL
MARKED TO THE CONTRARY) NOMINEES LISTED
2. APPOINTMENT OF COOPERS & LYBRAND AS AUDITORS
/ / FOR / / WITHHOLD VOTE
3. AUTHORIZATION OF THE DIRECTORS TO FIX THE REMUNERATION TO BE PAID
TO THE AUDITORS
/ / FOR / / AGAINST
4. APPROVAL OF ADOPTION OF THE 1997 STOCK PLAN OF THE COMPANY
/ / FOR / / AGAINST
INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
PETER M.D. BRADSHAW
DOUGLAS R. COOK
PETER R. KUTNEY
<PAGE>
PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR. PLEASE ADD YOUR TITLE IF
SIGNING AS AGENT, ADMINISTRATOR, EXECUTOR OR TRUSTEE, OR IN ANOTHER
REPRESENTATIVE CAPACITY.
Date _______________________, 1997
Note: If not dated, this Proxy
will be deemed to bear the date on
which it is mailed to the Company.
Signature ________________________
__________________________________
(Please Print Your Name & Title)
Signature ________________________
__________________________________
(Please Print Your Name & Title)
PLEASE MARK, SIGN, DATE, AND RETURN PROMPTLY
IN THE ACCOMPANYING ENVELOPE
