<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
MK GOLD COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[X] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS - AUGUST 5, 1996
To the Stockholders of MK Gold Company:
You are cordially invited to attend the Annual Meeting of Stockholders of MK
Gold Company (the "Company") to be held at the Salt Lake City Marriott, 75 S.
West Temple, Salt Lake City, Utah, on Monday, August 5, 1996, at 3:00 p.m. for
the following purposes:
1. To elect two directors of the Company.
2. To consider and act upon a proposal to amend the Company's Certificate of
Incorporation to change the name of the Company to "AdAstra Resource
Corporation."
3. To approve an amendment to the Company's Stock Incentive Plan, as
previously amended, to (i) increase by 1,500,000 the number of shares of
Common Stock with respect to which awards may be made under the Plan, (ii)
limit to 1,500,000 the number of shares with respect to which awards may
be made to a participant under the plan in a two (2) year period, and
(iii) establish a requirement that the committee administering the Stock
Incentive Plan be comprised of outside directors.
4. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on June 15, 1996 are entitled
to notice of and to vote at the meeting and at any and all adjournments or
postponements thereof. If you are unable to attend the meeting in person, you
are urged to sign, date and return the enclosed proxy as it is necessary that
holders of a majority of the outstanding shares be present, in person or by
proxy, in order to obtain a quorum for the meeting. The proxy may be returned
in the accompanying, self-addressed envelope which requires no postage if mailed
in the United States.
Dated: July 10, 1996
BY ORDER OF THE BOARD OF DIRECTORS
John C. Farmer
Controller, Treasurer and Secretary
____________________
The Company's 1996 Annual Report is being mailed to stockholders and
accompanies these proxy materials. The Annual Report contains financial and
other information about the Company, but is not incorporated in the Proxy
Statement and is not to be deemed a part of the proxy soliciting material.
<PAGE>
MK GOLD COMPANY
60 E. South Temple, Suite 2100
Salt Lake City, Utah 84111
____________________
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
AUGUST 5, 1996
____________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of MK Gold Company, a Delaware
corporation ("MK Gold" or the "Company"), to the holders of the Company's common
stock, par value $.01 per share ("Common Stock"), for use at its Annual Meeting
of Stockholders to be held at the Salt Lake City Marriott, 75 S. West Temple,
Salt Lake City, Utah, on Monday, August 5, 1996, at 3:00 p.m., and at any and
all adjournments or postponements thereof. Any proxy delivered pursuant to this
solicitation may be revoked by the person giving it at any time prior to the
exercise thereof (i) by filing a revocation instrument with the Secretary of the
Company, (ii) by delivering a duly executed proxy bearing a later date, or (iii)
by appearing at the meeting and voting in person.
This Proxy Statement and the related proxy are first being mailed to
stockholders commencing on or about July 10, 1996.
VOTING RIGHTS AND VOTE REQUIRED. Stockholders of record on June 15, 1996,
the record date, are entitled to vote at the meeting. As of June 15, 1996,
19,397,800 shares of Common Stock were outstanding and entitled to vote.
The presence at the Annual Meeting, in person or by proxy, of the holders of
a majority of the shares of Common Stock outstanding at the close of business on
June 15, 1996 will constitute a quorum. Under the Delaware General Corporation
Law and the Company's Certificate of Incorporation, for each share of Common
Stock held, each stockholder is entitled to cast one vote for each nominee for
each of the two directorships to be filled. On all other matters each
stockholder is entitled to cast one vote for each share of Common Stock held.
The two nominees for director receiving the highest number of votes cast will be
elected whether or not any one of them receives the vote of a majority of the
shares represented and entitled to vote at the meeting. The affirmative vote of
a majority of the outstanding shares of Common Stock is required for the
approval of the amendment to the Company's Certificate of Incorporation.
Approval of each of the other business items will require the affirmative vote
of a majority of the shares of Common Stock represented and entitled to vote at
the meeting. Abstentions are counted for purposes of determining the number of
shares represented and entitled to vote at the meeting. However, abstentions
are not counted in determining the number of shares voting "FOR" an item of
business and, therefore, have the same effect as a vote "AGAINST" a business
item. Broker non-votes are counted for purposes of determining the number of
shares represented and entitled to vote at the meeting; however, the shares
represented thereby are not voted and do not represent a vote either "FOR" or
"AGAINST" an item of business.
VOTING OF PROXIES. The shares of Common Stock represented by all properly
executed proxies received in time for the meeting will be voted in accordance
with the directions given by the stockholders. If no instructions are given,
the shares will be voted (i) FOR each of the nominees named herein, or their
respective substitutes, as directors, (ii) FOR approval of the amendment to the
Company's Certificate of Incorporation, and (iii) FOR approval of the amendment
to the Company's Stock Incentive Plan.
1
<PAGE>
Management knows of no business to be brought before the meeting other than
the matters described in this Proxy Statement. However, if any other matters
are properly presented for action, it is the intention of the proxy holders
named in the enclosed proxy to vote on such matters in accordance with their
discretion pursuant to such proxy.
TABULATION. Pursuant to the by-laws and policies of the Company,
representatives of ChaseMellon Shareholder Services, L.L.C. have been appointed
to serve as independent Inspectors of Election to supervise the voting of the
shares for the Annual Meeting of Stockholders. The Inspectors of Election will
decide all questions respecting the qualification of voters, the validity of the
proxies and the acceptance or rejection of votes. None of the Inspectors of
Election is an officer, employee or stockholder of the Company.
BUSINESS TO BE TRANSACTED
1. ELECTION OF DIRECTORS
The Board of Directors of the Company is divided into three classes: Class
I, Class II and Class III, each class as nearly equal in number as possible.
Each class serves three years, with terms of office of the respective classes
expiring in successive years. The two current Class III directors, whose terms
expire in 1996, are being proposed for election for new three-year terms
(expiring in 1999) at the Annual Meeting. The proxies solicited hereby cannot
be voted to elect more than two directors at the Annual Meeting.
It is the intention of the proxy holders named in the enclosed proxy to vote
such proxies for the two nominees first named below, all of whom currently are
directors, to hold office until the 1999 Annual Meeting and until their
successors are elected and qualified. Leucadia National Corporation
("Leucadia") owns approximately 46.4% of the outstanding shares of the Company's
Common Stock. Leucadia has informed the Company that it intends to vote for the
two nominees first named below.
Certain information with respect to the nominees for director and directors
continuing in office is set forth below.
CLASS III -- NOMINEES FOR ELECTION TO SERVE UNTIL THE 1999 ANNUAL MEETING OF
STOCKHOLDERS:
GORDON J. HUMPHREY, 55, was elected to the Board in 1993. Mr. Humphrey has
served as President and a Director of the Humphrey Group, Inc. since 1991.
He is a former U.S. Senator from new Hampshire (1972-1991). Mr. Humphrey
serves as Chairman of the Compensation Committee and serves on the Audit
Committee of the Board of Directors.
JAMES P. MISCOLL, 61, was elected to the Board in 1993. Mr. Miscoll served
as Vice Chairman, Bank of America from 1985 to 1992, when he retired from
that position. Mr. Miscoll also serves as a Director for Coast Federal
Financial, Inc., Rykoff-Sexton, Inc. and MK Rail Corporation. Mr. Miscoll
serves as Chairman of the Audit Committee and serves on the Compensation
Committee of the Board of Directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" THE TWO NOMINEES SET FORTH ABOVE.
CLASS I -- DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 1998 ANNUAL MEETING OF
STOCKHOLDERS:
IAN M. CUMMING, 55, was appointed to the Board in June 1995. Mr. Cumming has
served as a Director and Chairman of the Board of Directors of Leucadia
National Corporation since 1978. He also serves as a Director for Allcity
Insurance Company, Skywest, Inc. and Barbados Light and Power Company. Mr.
Cumming serves on the Executive and Audit Committees of the Board of
Directors.
2
<PAGE>
JOSEPH S. STEINBERG, 52, was appointed to the Board in June 1995. Mr.
Steinberg has served as a Director of Leucadia National Corporation since
1978 and as President since 1979. He also serves as a Director for Allcity
Insurance Company and for Jordan Industries, Inc.
G. FRANK JOKLIK, 68, was appointed to the Board in June 1995. Mr. Joklik has
served as Chief Executive Officer of the Company since November 1, 1995. Mr.
Joklik served as President and Chief Executive officer of Kennecott
Corporation from 1980 to June 1993, when he retired from Kennecott. He also
serves as a Director for First Security Corporation and Cleveland Cliffs.
Mr. Joklik serves on the Executive Committee of the Board of Directors.
CLASS II -- DIRECTORS WHOSE TERMS CONTINUE UNTIL THE 1997 ANNUAL MEETING OF
STOCKHOLDERS:
ROBERT V. HANSBERGER, 76, was elected to the Board in 1993. Mr. Hansberger
has served as the Chairman and Chief Executive Officer of Futura Corporation
since 1972. He also serves as a Director for Primary Health, Inc., Ram Golf
Corp., BMC West Corporation and Thrifty Foods, Inc. Mr. Hansberger was
elected Chairman of the Board in February 1995, and serves on the Executive
Committee of the Board of Directors.
ROBERT S. SHRIVER, 42, was elected to the Board in 1993. Mr. Shriver has
served as the Executive Director of Special Olympics Productions, Los
Angeles, California, and as a financial advisor/investor since 1990. He also
serves as a Director for MacAndrews & Forbes, Inc., and MAFCO Holdings, Inc.
Mr. Shriver serves on the Compensation and Audit Committees of the Board of
Directors.
If it is determined prior to the meeting that any nominee will be unable to
serve as a Director, the proxy holders reserve the right to substitute a nominee
and vote for another person of their choice in the place and stead of any
nominee unable so to serve, unless the Board of Directors reduces the size of
the membership of the Board of Directors prior to the Annual Meeting to
eliminate the position of any such nominee.
INFORMATION CONCERNING THE BOARD OF DIRECTORS,
BOARD COMMITTEES AND DIRECTOR COMPENSATION
BOARD COMMITTEES AND MEETINGS
The current committees of the Company's Board of Directors include an
Executive Committee, the Compensation Committee and an Audit Committee. These
committees are further described below.
Executive Committee. The Executive Committee is responsible for overseeing
the management of the business and affairs of the Company and has such
additional authority as may be granted to it from time to time by the Board of
Directors. The Executive Committee meets at such times as may be deemed
necessary by the Board of Directors or the Executive Committee. The current
members of the Executive Committee are Robert V. Hansberger, Ian M. Cumming and
G. Frank Joklik. No meetings of the Executive Committee were held during fiscal
year 1996; however, the Executive Committee took certain actions by a unanimous
written consent in fiscal year 1996.
Compensation Committee. The Compensation Committee reviews and adjusts the
salaries of the principal officers and key executives of the Company. The
Compensation Committee also administers the Company's executive compensation and
benefit plans. The Compensation Committee meets at such times as may be deemed
necessary by the Board of Directors or the Compensation Committee. The current
members of the Compensation Committee are Gordon J. Humphrey (Chairman), James
P. Miscoll and Robert S. Shriver. The Compensation Committee held one meeting
during fiscal year 1996.
Audit Committee. The primary function of the Audit Committee is to
facilitate communications among outside auditors and the Board of Directors.
The Audit Committee also reviews financial statements, internal controls, and
procedures and the scope and results of audits. The Audit Committee meets at
such times as may be deemed necessary by the Board of Directors or the Audit
Committee. The current members of the Audit Committee
3
<PAGE>
are James P. Miscoll (Chairman), Ian M. Cumming, Gordon J. Humphrey, and Robert
S. Shriver. The Audit Committee held three meetings during fiscal year 1996.
The Board of Directors held a total of 10 regular and special meetings during
the fiscal year ended March 31, 1996. During such fiscal year, each incumbent
director attended 75% or more of the total number of meetings of the Board and
the committees of the Board on which he served that were held during the periods
he served, except that (i) Mr. Steinberg attended 71% of the meetings of the
Board during the period he served, (ii) Mr. Cumming did not attend the meeting
of the Audit Committee during the period he served, (iii) Mr. Shriver attended
66% of the meetings of the Audit Committee during the period he served, and (iv)
Mr. Joklik attended one of two of the meetings of the Audit Committee during the
period he served.
DIRECTOR COMPENSATION
Cash Compensation. Non-employee Directors received a retainer fee of $5,000
per quarter, plus $1,000 for each Board meeting attended, and $500 for each
standing committee meeting attended during fiscal year 1996. Beginning with
fiscal year 1997, non-employee Directors will receive a retainer fee of $7,500
per year, plus $500 for each Board meeting attended, and $250 for each standing
committee meeting attended. As Chairman of the Board of Directors, Mr.
Hansberger was paid an annual fee for fiscal year 1996 of $60,000, payable
quarterly. For fiscal year 1997, Mr. Hansberger will receive an annual fee of
$20,000, payable quarterly. Directors who are employees of the Company receive
no additional compensation for serving as Directors, but may receive
compensation for consulting services. Directors are also reimbursed by the
Company for reasonable and necessary expenses incurred in connection with their
services as Directors of the Company. The Company does not have any consulting
agreements with its Directors and no Director received compensation for
consulting services during the fiscal year ended March 31, 1996.
Stock Option Plan for Non-Employee Directors. The Company has a Stock Option
Plan for Non-Employee Directors, the purpose of which is to encourage the
highest level of performance from those members of the Board of Directors who
are not employees of the Company by providing such non-employee Directors with a
proprietary interest in the financial success of the Company. Under the plan,
non-employee Directors are granted discounted options to purchase the MK Gold
Common Stock. The plan was amended at the 1994 Annual Meeting to increase the
number of options granted to each Non-Employee Director from 15,000 to 30,000.
Following such amendment, the following nonemployee Directors received the
following cumulative grants: (i) James P. Miscoll -- 30,000; (ii) Gordon J.
Humphrey -- 30,000; (iii) Robert V. Hansberger -- 15,000; and (iv) Robert S.
Shriver -- 15,000. Messrs. Shriver and Hansberger declined to accept the
additional option grant of 15,000 shares authorized at the 1994 Annual Meeting.
Upon their election to the Board of Directors in June 1995, each of Messrs.
Cumming, Steinberg and Joklik was granted an option under the Stock Option Plan
for Non-Employee Directors to purchase 30,000 shares of MK Gold Common Stock.
With respect to the foregoing options, options for 15,000 shares were granted
to each of Messrs. Hansberger, Shriver, Humphrey and Miscoll on December 17,
1993 at an exercise price of $3.09375 per share of which, as of the date of this
Proxy Statement, options for 10,000 shares have vested in accordance with their
terms. In addition, options for 15,000 shares were granted to each of Messrs.
Humphrey and Miscoll on July 14, 1994, at an exercise price of $2.71880 per
share of which, as of the date of this Proxy Statement, options for 5,000 shares
have vested in accordance with their terms. Options for 30,000 shares were
granted to each of Messrs. Cumming, Steinberg and Joklik on June 6, 1995, at an
exercise price of $1.81 per share, and 10,000 have vested as of the date of this
Proxy Statement. The options granted to Mr. Joklik under the Stock Option Plan
for Non-Employee Directors were canceled when Mr. Joklik was elected President
and Chief Executive Officer of the Company. Mr. Joklik subsequently received a
grant of options under the Company's Stock Incentive Plan. See "EXECUTIVE
COMPENSATION."
The purchase price per share for shares covered by each option award under
the Stock Option Plan for Non-Employee Directors is equal to 50% of the fair
market value of MK Gold Common Stock on the date of grant. Options granted
under the plan are non-transferable and non-assignable by the participant other
than by will or by the laws of descent and distribution. The options granted
under the plan vest over a three-year period in annual
4
<PAGE>
increments of one-third on each anniversary of the date of grant for
participants who continue to serve on the Board of Directors. If a participant
ceases to be a member of the Board of Directors for any reason except
termination for cause, all vested options then held are exercisable for a period
of three years and all unvested options terminate 30 days after the participant
ceases to be a member of the Board of Directors. If a participant is terminated
for cause, all vested options are exercisable for a period of 30 days and all
unvested options automatically terminate.
EXECUTIVE OFFICERS OF THE REGISTRANT
Following is a schedule of names and certain information regarding all of the
executive officers of the Company, as of June 24, 1996:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Robert V. Hansberger 76 Chairman of the Board
G. Frank Joklik 68 President and Chief Executive Officer
Philip J. Bernhisel 48 Chief Financial Officer
Don L. Babinchak 60 Director of Human Resources
John C. Farmer 46 Controller, Treasurer and Secretary
Larry L. Lackey 60 Chief Geologist
Thomas G. White 52 Manager of Operations
Terry V. Rogers 49 Project Manager, Jerooy Gold Project
</TABLE>
Robert V. Hansberger became Chairman of the Board of the Company on February 20,
1995, and has been a director since December 17, 1993 when the Company became a
publicly traded entity. Mr. Hansberger has also served as the Chairman and
Chief Executive Officer of Futura Corporation located in Boise, Idaho, since
1972.
G. Frank Joklik has been the President and Chief Executive Officer of the
Company since November 1, 1995. Mr. Joklik has been a director since June 6,
1995. Mr. Joklik was formerly the President and CEO of Kennecott Corporation.
Philip J. Bernhisel has been the Chief Financial Officer since February 26,
1996. He was formerly the Senior Vice President of Finance and Law of Kennecott
Corporation. Mr. Bernhisel is employed on a part-time basis by the Company.
Don L. Babinchak has been Director of Human Resources of the Company since March
25, 1996. Mr. Babinchak was formerly Vice President of Human Resources of
Kennecott Corporation. Mr. Babinchak is employed on a part-time basis by the
Company.
John C. Farmer was appointed Controller, Treasurer and Secretary April 25, 1996.
He was formerly the Chief Financial Officer of Dyno Noble Inc.
Larry L. Lackey has been Chief Geologist for MK Gold since August 23, 1995. He
was formerly Regional Vice President-Central America and the Caribbean for
Independence Mining Company, Inc.
5
<PAGE>
Thomas G. White has been the Vice President of Operations for MK Gold since
October 8, 1993. Prior to joining MK Gold, Mr. White served as a Mining
Executive for the gold operations of Homestake Mining Co., located in San
Francisco, California (1975 to 1992).
Terry V. Rogers has been the Company's Project Manager for the Jerooy Gold
Project since November 1994. Mr. Rogers previously served as Mine Operations
Manager of the American Girl Mining Joint Venture (1987 - 1994).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding persons known by the
Company to beneficially own, as defined by the Securities and Exchange
Commission ("SEC") Rule 13d-3, more than 5% of the Company's Common Stock as of
the Record Date, based solely on information regarding such ownerships available
to the Company in filings by such beneficial owners with the SEC on Schedules
13D and 13G. It also shows the same information as of the Record Date for all
Directors and Executive Officers named in the Summary Compensation Table on page
8 (the "Named Executive Officers"), and all Directors and Executive Officers as
a group. Except as set forth in the footnotes below, all such persons possess
sole voting and investment power with respect to the shares listed. An asterisk
in the column listing the percentage of class owned indicates the person owns
less than 1% of the Company's Common Stock as of the Record Date.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (3) (4)
Number of Shares
and Nature of
Beneficial
Ownership as of
June 15, 1996/1/ Right to Acquire Percent
Name and Address (Including Shares in Within 60 Days of of
of Beneficial Owner Column (3)) June 15, 1996 Class/2/
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Certain Beneficial Owners:
- -------------------------
Leucadia National Corporation 9,000,000 - 46.4
315 Park Avenue South
New York, NY 10010
Invesco PLC 1,000,000 - 5.2
11 Devonshire Square
London EC2M 4YR
England
Robertson, Stephens & Company, Inc. 1,354,290 - 6.98
555 California Street
San Francisco, CA 94104
Directors:
- ---------
R.V. Hansberger/3/ 11,000 10,000 *
G.J. Humphrey 15,000 15,000 *
J.P. Miscoll/4/ 22,100 20,000 *
R.S. Shriver 20,000 10,000 *
I.M. Cumming/5/ 10,000 10,000 *
J.S. Steinberg/6/ 10,000 10,000 *
G.F. Joklik - - *
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Nondirector Named Executive Officers:
- ------------------------------------
D.J. Kunz/7/ 2,000 - *
T.K. Eller/8/ 40,000 40,000 *
T.V. Rogers/9/ 39,240 30,000 *
G.L. Sneddon/10/ 13,000 - *
T.G. White/11/ 56,906 46,666 *
All Directors and Executive Officers as a 239,246 191,666 1.2
Group
- ---------------------------------------------------------------------------------------------------------
</TABLE>
/1/ For purposes of this table, shares are considered to be "beneficially"
owned if the person directly or indirectly has the sole or shared power to
vote or direct the voting of the securities or the sole or shared power to
dispose of or direct the disposition of the securities; and a person has
the right to acquire the beneficial ownership of the shares within 60 days
of June 15, 1996. Unless otherwise indicated in these footnotes, each
stockholder has sole voting and investment power with respect to the shares
beneficially owned.
/2/ The percentages shown are calculated based upon the shares indicated in
column (2).
/3/ Mr. Hansberger shares voting and dispositive power as to 1,000 such shares
with his wife.
/4/ Of such shares, 2,100 shares are beneficially owned by the J. P. Miscoll
and I. Miscoll Trust, dated November 11, 1991, Ingeburg Miscoll, Trustee.
/5/ By virtue of Mr. Cumming's approximately 18.4% interest in the common
shares of Leucadia, Mr. Cumming may be deemed to be the beneficial owner of
the shares of MK Gold Common Stock owned by Leucadia.
/6/ By virtue of Mr. Steinberg's approximately 16.5% interest in the common
shares of Leucadia (excluding an approximately 2% interest in Leucadia
securities held by two trusts for the benefit of Mr. Steinberg's minor
children as to which Mr. Steinberg disclaims beneficial ownership), Mr.
Steinberg may be deemed to be the beneficial owner of the shares of MK Gold
Common Stock owned by Leucadia.
/7/ Mr. Kunz resigned as an executive officer of the Company on October 31,
1995.
/8/ Ms. Eller resigned as an executive officer of the Company on June 1, 1996.
/9/ Mr. Rogers has sole voting power as to 9,200 shares, sole dispositive power
as to 5,480 shares and shared voting and dispositive power with his wife as
to 40 shares.
/10/ Mr. Snedden resigned as an executive officer of the Company on January 8,
1996.
/11/ Mr. White has sole voting power as to 10,240 shares, sole dispositive
power as to 4,830 shares and shared dispositive power as to 0 shares.
CHANGE OF CONTROL
A change in control of the Company occurred as a result of the purchase by
Leucadia of 46.4% of the outstanding shares of Common Stock from Morrison
Knudsen on June 6, 1995. As part of this transaction, two Directors of the
Company resigned and the Board of Directors, at the request of Leucadia,
appointed Messrs. Cumming, Steinberg and Joklik to fill vacancies created by
such resignations and by the expansion of the size of the Board from seven to
eight Directors. Messrs. Cumming, Steinberg and Joklik were subsequently
elected as Directors at the Annual Meeting of Stockholders held on December 11,
1995.
The acquisition by Leucadia of Morrison Knudsen's interest in the Company was
effected pursuant to a Stock Purchase Agreement between Leucadia and Morrison
Knudsen. Pursuant to the Stock Purchase Agreement, Leucadia paid Morrison
Knudsen $22,500,000 from its internal funds and agreed to acquire the interest
of Canadian Imperial
7
<PAGE>
Bank of Commerce, the Company's primary lender, in the Company's $20 million
loan facility. All of Morrison Knudsen's obligations under the loan facility
were extinguished. See "Related Party Transactions."
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's Executive Officers and Directors, and
persons who beneficially own more than 10% of the Company's Common Stock, to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission and furnish the Company with copies. Based solely upon a
review of the copies of such forms furnished to the Company and written
representations from certain reporting persons, the Company believes that during
the fiscal year ended March 31, 1996 all persons subject to the reporting
requirements of Section 16(a) filed the required reports on a timely basis.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information concerning
compensation paid or accrued by the Company and its subsidiaries to each person
that served as the Chief Executive Officer of the Company during the last fiscal
year and each of the Company's four other most highly compensated officers
(collectively, the "Named Executive Officers"). It should be noted that during
1994, the Company changed its fiscal year end to March 31. Accordingly, "1995"
is the 12 months ended March 31, 1995 and "1994" is the interim period of three
months ended March 31, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------- --------------------------- -------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL
COMPENSATION STOCK OPTIONS/ LTIP OTHER
NAME AND PRINCIPAL YEAR/1/ SALARY BONUS ($) AWARD(S)/3/ SARS/4/ PAYOUTS COMP.
POSITION ($)/2/ ($) ($) (#) ($) ($)/5/
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
G. Frank Joklik 1996 59,423 - - - 900,000 - -
President and Chief 1995 - - - - - - -
Executive Officer (since 1994 - - - - - - -
November 1, 1995)
Daniel J. Kunz 1996 121,820 - - - - - 12,000
President and Chief 1995 200,000 70,000 - - - - 11,000
Executive Officer (until 1994 53,846 - - - 300,000 - 1,538
October 31, 1995)
Gerald L. Sneddon 1996 131,999 - - - - - 9,000
Executive Vice 1995 120,000 30,000 - - - - 7,500
President (until 1994 32,308 - - 9,375 40,000 - 3,226
January 8, 1996)
Thomas G. White 1996 130,395 - - - - -
Vice President of 1995 120,000 24,000 - - - - 7,200
Operations/6/ 1994 32,417 - - 48,125 70,000 - 923
Terry K. Eller 1996 107,276 - - - - -
Vice President, 1995 100,000 20,000 - - - - 5,807
Secretary and 1994 25,759 - - - 60,000 - 1,454
General Counsel/7/
Terry V. Rogers 1996 136,234 - - - - -
Project Manager 1995 99,600 22,000 - - - - 6,791
Jerooy Gold Project 1994 24,058 - - 38,750 45,000 - 686
- ----------------------------
</TABLE>
8
<PAGE>
/1/ In 1994, the Company changed its fiscal year end to March 31. Accordingly,
"1995" is the 12 months ended March 31, 1995 and "1994" is the stub period
of three months ended March 31, 1994.
/2/ Base salary figures for 1994 are based on seven weeks out of a 26-week
payroll period.
/3/ The number and value of the aggregate restricted stock holdings at the end
of the fiscal year ended March 31, 1996 was 30,800 shares of MK Gold Common
Stock valued at $63,525. All restricted stock awards were made on January
1, 1994. Mr. Kunz was not awarded restricted stock and Mr. Joklik and Ms.
Eller were not employed by the Company when the grants were made. Mr.
Sneddon was awarded 1,500 shares of restricted MK Gold Common Stock,
vesting in equal increments over a two-year period. All the remaining
awards vest equally over a five year period. Mr. White and Mr. Rogers were
awarded 7,700 and 6,200 shares, respectively. Although the Company pays no
dividends, shares of restricted MK Gold Common Stock have no dividend
restrictions.
/4/ The options shown for fiscal year 1994 were granted on April 13, 1995, in
exchange for replacement options, which were originally granted January 1
and April 15, 1994, and were exercisable in three installments annually
beginning one year following their date of grant. Except for the exercise
price, the replacement options contain identical terms to the options
surrendered. Mr. Joklik's options were granted on February 8, 1996. The
award of options covering 900,000 shares to Mr. Joklik was negotiated by
the Company and Mr. Joklik at the time he agreed to serve as President and
Chief Executive Officer. The options shown for Mr. Joklik include options
covering 751,304 shares that were granted subject to approval by the
stockholders of the Company of an amendment to the Company's Stock
Incentive Plan to increase the number of shares available for award. See
"Stock Options" below.
/5/ Amounts in this column consist of matching contributions to the employee's
401(k) account. For Mr. Sneddon, amounts in this column include $2,278 paid
by Morrison Knudsen upon his departure from that company with respect to
accrued vacation amounts and service recognition payments.
/6/ Mr. White served as a consultant until May 25, 1994, when he was hired by
the Company.
/7/ Ms. Eller resigned as an executive officer of the Company on June 1, 1996.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with certain Executive
Officers, including the Named Executive Officers (excluding Messrs. Joklik and
Sneddon), each effective as of January 1, 1995. The employment agreements
provide that upon a "change of control" of the Company (as defined in the
agreements), the Company shall continue the executive's employment and the
executive shall remain in the Company's employ for a period ranging from one to
three years (the "Employment Period"). During the Employment Period, the
executive shall receive his base compensation and shall participate in all
employee incentive, bonus and health and welfare benefit plans of the Company.
If the Company terminates the executive during the Employment Period, the
executive shall receive the balance of his base compensation remaining for the
Employment Period in a lump sum. In addition, any outstanding stock options or
restricted stock awards and any accrued award under long-term incentive plans of
the Company will be immediately vested and paid. If the executive voluntarily
resigns during the Employment Period, he will forfeit all unaccrued compensation
and benefits for the remaining term of the Employment Period.
Each of the employment agreements also provides that upon termination of the
executive's employment for any reason other than death, disability, cause,
voluntary resignation not constituting constructive termination or retirement,
the Company will continue to pay his base compensation for periods ranging from
one to three years, any outstanding stock options or restricted stock awards and
any accrued award under long-term incentive plans of the Company will become
immediately vested and paid. "Constructive termination" of the executive's
employment will be deemed to have occurred if he resigns within 90 days after
(a) failure of the Company to abide by any provision of the Employment
Agreement, which continues for 10 days after notice, or (b) a reduction in his
title or responsibilities. No offset is required for amounts earned, or that
might have been earned, from other employment. In the event that payments due
to the executive result in any so-called "parachute tax" under the Internal
Revenue Code of 1986, as amended (the "Code"), he will be entitled to receive an
amount which, net of taxes, would be sufficient to pay such parachute tax.
Mr. Kunz voluntarily resigned as President and Chief Executive Officer of the
Company, effective October 31, 1995, and Ms. Eller voluntarily resigned as Vice
President, Secretary and General Counsel of the Company, effective June 1, 1996.
As a result of such voluntary resignations, which did not constitute
constructive terminations pursuant to the terms of the Company's Employment
Agreements with Mr. Kunz and Ms. Eller, the Company is not required to make
additional payments of base salary and other compensation to Mr. Kunz or Ms.
Eller under the terms of such Employment Agreements. Pursuant to a letter
agreement with Ms. Eller, however, the Company has agreed to make payments of
base salary and benefits to Ms. Eller through November 30, 1996. The Company's
9
<PAGE>
Employment Agreements with the Named Executive Officers that are currently
employed by the Company (Mr. White and Mr. Rogers) are effective for one year
periods, subject to successive one-year extensions.
STOCK OPTIONS
The following table provides information related to options to purchase the
Company's Common Stock granted to the Named Executive Officers during the fiscal
year ended March 31, 1996. The Company has never granted any stock appreciation
rights. None of the Named Executive Officers exercised any options during the
1996 fiscal year. Mr. Kunz voluntarily resigned as President and Chief
Executive Officer of the Company, effective as of October 31, 1995. As a result
of such resignation, Mr. Kunz forfeited options with respect to 166,667 shares
of the 300,000 shares of Common Stock set forth in the table below. Mr. Kunz's
remaining options expired in accordance with their terms. Mr. Sneddon resigned
on January 8, 1996. Following such resignation, all of Mr. Sneddon's options
were canceled. Except for the options granted to Mr. Joklik, all of the option
grants reflected in the following table were previously disclosed in the
Company's Definitive Proxy Statement/Prospectus which was delivered to
stockholders in connection with the Company's Annual meeting of Stockholders
held on December 11, 1995.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Potential Realizable
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation for
Option Terms/4/
- ------------------------------------------------------------------------------------------- ------------------------
(a) (b) (c) (d) (e)
Number of % of Totals
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price/2/ Expiration
Name Granted (#)/1/ Fiscal Year ($/Sh) Date/3/ 5%($) 10%($)
- ------------------ -------------- ------------- -------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
G. Frank Joklik 900,000 54.3 $2.69 02/07/06 $1,522,554 $3,858,450
Daniel J. Kunz 300,000 18.1 $4.00 01/01/04 754,669 1,912,462
Gerald L. Sneddon 40,000 2.4 $4.00 01/01/04 100,624 254,996
Thomas G. White 70,000 4.2 $4.00 01/01/04 176,092 446,243
Terry K. Eller 60,000 3.6 $4.00 01/01/04 150,936 382,494
Terry V. Roger 45,000 2.7 $4.00 01/01/04 113,202 286,871
</TABLE>
- ---------------------------------------
/1/ Except for the options granted to Mr. Joklik, all options granted in fiscal
1996 were granted on April 13, 1995 as replacement options for options
covering a like number of shares awarded at an exercise price of $6.00 per
share. The surrendered options, which were originally granted January 1 and
April 15, 1994, were exercisable in three installments annually beginning
one year following their date of grant. Except for the exercise price, the
replacement options contain identical terms to the options surrendered. The
options granted to Mr. Joklik were granted on February 8, 1996. The award
of options covering 900,000 shares to Mr. Joklik was negotiated by the
Company and Mr. Joklik at the time he agreed to serve as President and
Chief Executive Officer. The options shown for Mr. Joklik include options
covering 751,304 shares that were granted subject to approval by the
stockholders of the Company of an amendment to the Stock Incentive Plan to
increase the number of shares available for award.
/2/ Market price on date of grant.
/3/ Subject to earlier termination under certain circumstances.
10
<PAGE>
/4/ Potential realizable value is calculated based on an assumption that the
price of the Company's Common Stock appreciates at the annual rates shown
(5% and 10%), compounded annually, from the date of grant of the option
until the end of the option term. The value is net of the exercise price
but is not adjusted for the taxes that would be due upon exercise. The 5%
and 10% assumed rates of appreciation are mandated by the rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of future stock prices. Actual gains, if any, upon
future exercise of any of these options will depend upon the actual
performance of the Company's Common Stock.
The following table provides information as to options exercised by each of
the Named Executive Officers during the fiscal year ended March 31, 1995, and
the value of options held by such Executives at fiscal year end measured in
terms of the last reported sale price for the Company's Common Stock on March
31, 1996 ($2-1/16, as reported on the Nasdaq National Market System).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised In-
Acquired Underlying Unexercised the-Money Options/SARs
on Value Options/SARs at FY-End (#) at FY End ($)
Name Exercise (#) Realized Exercisable/Unexercisable Exercisable/Unexercisable)
- -------------------- ------------ -------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
G. Frank Joklik - - 0/900,000 0/0
Daniel J. Kunz - - 133,333/0 0/0
Gerald L. Sneddon - - 0/0 0/0
Thomas G. White - - 46,666/23,334 0/0
Terry K. Eller - - 20,000/40,000 0/0
Terry V. Rogers - - 30,000/15,000 0/0
</TABLE>
OPTIONS REPRICED
The following table provides information related to the repricing of
certain options held by Executive Officers of the Company which occurred during
the fiscal year ended March 31, 1996. Such repricing is the only instance
during the last ten fiscal years in which the exercise price of any option
granted by the Company to any of its Executive Officers has been repriced. The
Board of Directors of the Company has discussed, however, the possible repricing
of certain options during the 1997 fiscal year. The Company has never granted,
and thus has never repriced, any stock appreciation rights. The information
below was previously disclosed in the Company's Definitive Proxy
Statement/Prospectus which was delivered to stockholders in connection with the
Company's Annual Meeting of Stockholders held on December 11, 1995.
11
<PAGE>
TEN YEAR OPTION/SAR REPRICING
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
Length of
Original Option
Number of Market Price Term
Securities of Stock at Remaining at
Underlying Time of Exercise Price Date of
Optional SARs Repricing at Time of New Repricing or
Repriced or or Repricing or Exercise Amendment
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) (Years)
- -------------------- --------- ------------- ------------- ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Daniel J. Kunz 04/13/95 300,000 $4.00 $6.00 $4.00 9.71
Gerald L. Sneddon 04/13/95 40,000 $4.00 $6.00 $4.00 9.71
Thomas G. White 04/13/95 70,000 $4.00 $6.00 $4.00 9.71
Terry K. Eller 04/13/95 60,000 $4.00 $6.00 $4.00 9.71
Terry V. Rogers 04/13/95 45,000 $4.00 $6.00 $4.00 9.71
</TABLE>
EMPLOYEE INCENTIVE COMPENSATION AND SAVINGS PLANS
Executive Incentive Plan. The Company has an Executive Incentive Plan
whereby key officers and employees of the Company may earn bonuses.
Participants in the Executive Incentive Plan are selected by the Compensation
Committee based on their level of responsibility, salary, and past and
prospective contributions to the business and growth of the Company. Bonus
payments are determined by MK Gold's Compensation Committee.
Under the Executive Incentive Plan, cash awards may be made to individuals
from an award fund established annually by the Company. The amount of the award
fund will be based on criteria established by the Compensation Committee. The
criteria may be described in terms of Company-wide objectives, such as net
income, return on capital and cash flow, or such other or similar objectives
which are related to performance. The amount of the award fund for any year may
not in any event exceed 9.55% of the Company's net profit after taxes for such
year. Each participant potentially may receive an award from the award fund up
to a specified percentage of the participant's base salary, which percentage
generally ranges from 20% to 50% depending on the participant's base salary and
the participant's organizational duties. The Compensation Committee may modify
individual awards but in no event may the Compensation Committee increase by
more than 50% the award otherwise payable. Awards are subject to forfeiture if
a participant's employment terminates prior to receipt of the award unless
termination is due to retirement, death, permanent disability or, after a change
in control of the Company, termination is by the Company for Cause (as defined
in the plan) or is by the participant without Good Reason (as defined in the
plan). No awards were made under the Executive Incentive Plan for the fiscal
year ended March 31, 1996.
Long-Term Incentive Plan. The Company has a Long-Term Incentive Plan whereby
officers and employees of the Company may earn bonuses. Under the Long-Term
Incentive Plan, cash awards may be made dependent on a comparison of the Company
at the end of an initial 3-year period (ended December 31, 1996) and each
rolling 3-year period thereafter against total shareholder return for other
companies in the same industry. In the event of a change in control of the
Company (as defined in the plan), each active participant would be entitled to
receive a pro rata portion of the benefit payable under the plan for any pending
performance period (based on 30-day average closing prices as of the month
immediately preceding the month in which the change in control occurs) as soon
as practicable following such change in control. No awards have been made under
this Plan.
Stock Incentive Plan. The Company has a Stock Incentive Plan, pursuant to
which awards of stock options, stock appreciation rights and restricted stock
may be made to officers and key employees. The Stock Incentive Plan is
administered by the Compensation Committee, no voting member of which may be an
employee of the Company
12
<PAGE>
or be eligible to receive awards under the Stock Incentive Plan. A maximum of
1,000,000 shares of Common Stock are authorized to be issued pursuant to the
Stock Incentive Plan. As of May 31, 1996, awards covering 1,085,496 shares of
Common Stock had been made under the Stock Incentive Plan and awards of options
covering 520,000 shares had been terminated without being exercised. Under the
Stock Incentive Plan, awards are not considered to have been made with respect
to options or stock appreciation rights that terminate without being exercised.
Accordingly, 434,504 shares are currently available for awards under the Stock
Incentive Plan. An amendment to the Stock Incentive Plan is being submitted to
the stockholders for approval at the Annual Meeting. Among other things, the
amendment would increase the total number of shares of Common Stock authorized
to be issued under the Stock Incentive Plan to 2,500,000. See "3. APPROVAL OF
THE AMENDMENT TO THE MK GOLD COMPANY STOCK INCENTIVE PLAN."
Awards of restricted stock are subject to vesting requirements, and shares of
restricted stock generally are not permitted to be sold, pledged, or otherwise
disposed of during the period in which the restrictions exist. Shares of
restricted stock otherwise carry full voting and dividend rights from the date
of the award. Options awarded pursuant to the Stock Incentive Plan are subject
to vesting requirements. Generally, the exercise price of all options granted
under the Stock Incentive plan are not less than the market price at the date of
grant or the average market price over a period preceding or following the date
of grant as specified in the option.
The risk of forfeiture as to shares of restricted stock initially awarded
under the Stock Incentive Plan lapse as to 25% of such shares as of each of the
first four anniversaries of the award. Generally, options awarded under the
Stock Incentive Plan have a term of 10 years. The foregoing periods are subject
to acceleration in the event of a change in the control of the Company and in
certain other events, including retirement after age 65, death, and disability.
Pursuant to the Stock Incentive Plan, the Compensation Committee will review
from time to time and may revise any of the foregoing vesting or other
requirements as they apply to eligible participants.
Savings Plan. The Company has adopted a tax-qualified retirement plan
("Savings Plan") with a salary deferral feature within the meaning of Section
401(k) of the Code. Employees of the Company and of certain affiliates are
eligible to participate in the Savings Plan, provided, among other things, that
they are at least 21 years of age and U.S. citizens or lawfully admitted
residents.
Pursuant to the salary deferral feature of the Savings Plan, each participant
may elect to reduce his or her compensation by between 1% and 15%, but not more
than $9,500 (for 1996) per year, adjusted for changes in the cost of living and
subject to non-discrimination limits under the Code. The Company will
contribute these compensation deferrals to the Savings Plan. The Company has
also agreed to contribute 3% of eligible compensation ("Company Non-Elective
Contributions") and to match, dollar for dollar, participant compensation
deferrals in amounts up to 2% of the participant's annual compensation ("Company
Matching Contributions"). The Company retains the right to make additional non-
elective Company contributions to help satisfy federal non-discrimination
requirements.
Savings Plan deferrals (including Company Matching Contributions and Company
Non-Elective Contributions) are allocated to accounts in the name of the
participants and invested at their direction in investment funds which have been
chosen by the savings plan committee under the Savings Plan.
A participant's retirement benefit under the Savings Plan is dependent upon
the participant's vested account balance at the time of distribution. The value
of such account is dependent upon how well the participant invests his or her
deferrals (including Company Matching Contributions and Company Non-Elective
Contributions) over the period of time he or she participates in the Savings
Plan. Compensation deferrals and Company Non-Elective Contributions are always
fully vested. Company Matching Contributions are fully vested upon completion of
five years of service, or attainment of age 65, death or total disability.
Distribution of the vested balance of a participant's account is to be made
in a single cash payment within one year after termination of employment,
reaching age 65 or death, unless the account balance exceeds $3,500, in which
case distribution is made at age 65 or earlier if the participant consents.
13
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised entirely of non-employee Directors
who make independent decisions with respect to executive compensation.
Compensation of the top executive officers (including the Named Executive
Officers) is reviewed at least annually by the Compensation Committee. The most
recent review was conducted on May 17, 1996.
Compensation Policy Applicable to Officers and Key Executives. The goal of
the Compensation Committee is to create compensation packages for officers and
key executives which will attract, retain and motivate executive personnel who
are capable of achieving the Company's short-term and long-term financial and
strategic goals. Compensation packages are designed to combine a mixture of
short-term and long-term incentives tied to Company performance as described
more particularly below. In exercising its responsibilities, the Compensation
Committee seeks to encourage management to achieve the Company's short-term and
long-term financial and strategic objectives, including maximizing long-term
value for stockholders. Through the implementation of its compensation
policies, the Compensation Committee believes it can motivate management to
consider the Company's short-term and long-term objectives, such as the
Company's financial performance and stock price appreciation, by rewarding the
Company's key officers and executives upon achieving such objectives. The
Compensation Committee has not adopted a policy in response to federal tax law
changes that, beginning in 1994, limit the deductibility by the Company of
compensation in excess of $1 million per employee per year for each of the
Company's five most highly compensated executives, since the total compensation
paid to any individual executive officer does not now, and is not in the
foreseeable future anticipated to, exceed the deductibility levels.
Executive Compensation Policies. Executive compensation at the Company is
made up of three elements: (i) base salary, (ii) bonuses (short-term and long-
term incentives) and (iii) grants of equity-based compensation (e.g., stock
options and restricted stock).
Base Salary. Effective January 1, 1994, the Compensation Committee
-----------
established base salaries for all of the executive officers of the Company. The
base salary level for each executive officer, including the Chief Executive
Officer, was based on each employee's job responsibilities with consideration
given to comparable salaries disclosed in a 1992 Canadian Mining Industry Salary
Survey containing data on 27 public mining company corporate offices and
approximately 75 associated mine sites. The base salaries established in
January 1994 for the Chief Executive Officer and the other executive officers of
the Company were in the middle of the range of annual salaries for comparable
positions disclosed in the salary survey.
On January 9, 1995 and on May 17, 1996, the Compensation Committee reviewed
the salaries for officers and executives of the Company and determined that no
changes in base salary levels from those established in 1994 were appropriate.
Bonuses. In addition to base salary, key officers and employees are eligible
--------
to receive bonuses under the Company's Executive Incentive Plan and Long-Term
Incentive Plan. Bonuses under the Company's Executive Incentive Plan are
determined by the Compensation Committee within the parameters of the Executive
Incentive Plan. The Plan requires the establishment of an award fund which
shall not exceed 9.55% of the Company's net profits after taxes for the year.
This fund is allocated to Company officers and executives in accordance with an
allocation schedule which is tied to salary grade and/or organizational level of
a participant. No bonuses were granted under the Company's Executive Incentive
Plan during the last fiscal year.
The Company's Long-Term Incentive Plan provides long-term incentives to
officers and employees based upon the overall performance of the Company over
periods of three years as compared to other companies in the same industry. To
date, no cash awards have been granted under the Long-Term Incentive Plan since
the three-year computation period has not been completed.
Stock Options and Restricted Stock. In addition to salary and bonus, the
-----------------------------------
Company has adopted the Stock Incentive Plan, which provides that the long-term
compensation of officers and key employees be dependent upon the financial
performance of the Company. Under the Stock Incentive Plan, officers and key
employees are eligible
14
<PAGE>
to receive awards of stock options, stock appreciation rights and restricted
stock. The number of stock options and shares of restricted stock granted to
each executive officer is determined by a competitive compensation analysis and
each individual's salary and responsibility. The Compensation Committee also
considers the number and exercise price of options and shares of restricted
stock granted to individuals in the past. All option grants have been made with
an exercise price equal to the fair market value of the MK Gold Common Stock on
the date of grant as required pursuant to the terms of the Company's stock
option plan.
CEO'S COMPENSATION. Mr. Kunz's minimum annual base salary was established by
the terms of an employment agreement ("Employment Agreement") entered into
between Mr. Kunz and the Company on January 1, 1994, as amended effective
January 1, 1995. Such initial base salary of $200,000 was based on Mr. Kunz's
responsibilities and comparable salaries for chief executive officers in the
mining industry. Bonus amounts, stock options and restricted stock awards to
Mr. Kunz were based on Company performance, and his level of responsibility and
experience.
The Company entered into the Employment Agreement with Mr. Kunz for a term
expiring on October 31, 1997, subject to successive one-year extensions, under
which he is to serve as President and Chief Executive Officer of the Company.
The Employment Agreement provided for a base salary to be established by the
Compensation Committee, his participation as an officer or key employee in the
Company's benefit plans as described herein and participation in other health,
welfare, insurance and disability benefit plans or arrangements. The Employment
Agreement also provided that upon termination of Mr. Kunz's employment for any
reason other than death, disability, cause, voluntary resignation not
constituting constructive termination or retirement, the Company would continue
to pay his base compensation for three years, any outstanding stock options or
restricted stock awards will become immediately vested and any accrued award
under long-term incentive plans of the Company will be immediately vested and
paid.
Mr. Kunz voluntarily resigned as President and Chief Executive Officer of the
Company, effective October 31, 1995. As a result of such voluntary resignation,
which did not constitute constructive termination pursuant to the terms of his
Employment Agreement as described above, the Company is not required to make
additional payments of base salary and other compensation to Mr. Kunz following
his resignation. The Company has entered into a Consulting Agreement with Mr.
Kunz pursuant to which Mr. Kunz has agreed to provide certain services to the
Company for a fee of $2,000 per month until October 31, 1996.
Mr. Joklik was appointed President and Chief Executive Officer of the Company
on November 1, 1995. The Company does not currently have an employment
agreement with Mr. Joklik. Mr. Joklik's minimum annual base salary of $150,000
was established by the Compensation Committee, and approved by the Board of
Directors. Mr. Joklik agreed to an initial salary which is below market due to
the current financial condition of the Company. Stock option awards to Mr.
Joklik were based on his level of responsibility and experience.
EMPLOYMENT ARRANGEMENTS. The Company has Employment Agreements with Thomas
G. White, its Manager of Operations, and Terry V. Rogers, the Project Manager of
the Jerooy Gold Project. These Employment Agreements provide for certain
severance compensation to be paid to the Employee in the event of his
involuntary termination after a change in control of the Company or constructive
termination of employment. The Company does not currently have employment
agreements with any of the other Named Executive Officers that are currently
employed by the Company.
Gordon J. Humphrey (Chairman)
James P. Miscoll
Robert S. Shriver
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
The Compensation Committee consists of three non-employee Directors.
Currently, the members of the Compensation Committee are Messrs. Humphrey
(Chairman), Miscoll and Shriver. None of the executive officers
15
<PAGE>
of the Company serve as a director of another corporation in a case where an
executive officer of such other corporation serves as a Director of the Company.
RELATED PARTY TRANSACTIONS
On June 6, 1995, Leucadia purchased 46.4% of the outstanding shares of Common
Stock from Morrison Knudsen Corporation ("Morrison Knudsen"). As part of its
acquisition of Morrison Knudsen's interest in the Company, Leucadia agreed to
acquire the interest of Canadian Imperial Bank of Commerce ("CIBC"), the
Company's primary lender, in the Company's $20 million loan facility with CIBC
(the "Credit Facility") and all of Morrison Knudsen's obligations under, or with
respect to, the Credit Facility, including its guarantee of MK Gold's
obligations under the Credit Facility, were extinguished. On August 18, 1995,
the Company repaid $15 million in principal to Leucadia which was outstanding
under the Credit Facility. In addition, the Company has paid an aggregate of
$732,000 in interest and commitment fees to Leucadia in accordance with the
terms of the Credit Facility through June 25, 1996. Under the terms of the
Credit Facility, the Company is required to pay to Leucadia an on-going
quarterly commitment fee of $22,500. As of the Record Date, no borrowings were
outstanding under the Credit Facility. Two directors of the Company, Messrs.
Cumming and Steinberg, are officers, directors and principal shareholders of
Leucadia.
COMPANY PERFORMANCE GRAPH
Rules adopted by the Securities and Exchange Commission require that the
Company include in this proxy statement a line-graph presentation comparing
cumulative, five-year shareholder returns (or such shorter period of time as the
Company has been a reporting company under the Exchange Act) on an indexed basis
with the Nasdaq Stock Index and either a nationally recognized industry standard
or an index of peer companies selected by the Company. The Common Stock of the
Company commenced trading on December 15, 1993, and prior to this date the
Company was wholly owned by Morrison Knudsen. The Company chose a group of 7
mining and development companies as a peer group for purposes of this
performance comparison. A list of these companies follows the graph set forth
below.
<TABLE>
<CAPTION>
INDEXED RETURNS
YEARS ENDING
14DEC93 DEC93 MAR94 MAR95 MAR96
<S> <C> <C> <C> <C> <C>
CRSP NASDAQ INDEX 100 103.36 99.01 110.14 149.55
MK GOLD COMPANY 100 92.31 100.00 63.46 31.72
PEER GROUP 100 94.76 105.04 97.45 114.92
</TABLE>
Peer group includes: Agnico Eagle Mines Ltd.; Amax Gold Inc., Battle Mountain
Gold Company; Camboir Inc., Bema Gold Corp., Glamis Gold Ltd.; and Greenstone
Resources Ltd.
16
<PAGE>
2. PROPOSAL TO CHANGE THE NAME OF THE COMPANY
Until December 1993, the Company was a wholly-owned subsidiary of Morrison
Knudsen. In December 1993, MK Gold completed a registered initial public
offering of Common Stock pursuant to which approximately 53.6% of its
outstanding shares were sold to the public. In June 1995, Morrison Knudsen sold
its remaining 46.4% interest in the Company to Leucadia.
As a result of the sale of Common Stock to Leucadia, Morrison Knudsen is no
longer a stockholder of the Company. In addition, Morrison Knudsen no longer
provides management services to the Company. Accordingly, the Board of
Directors believes it would be in the Company's best interests to change the
name of the Company in order to prevent any inference that the Company is
affiliated with Morrison Knudsen.
As amended, Article First of the Company's Certificate of Incorporation would
-----
provide:
"FIRST: The name of the corporation is AdAstra Resource Corporation (the
-----
"Company")"
The Board of Directors reserves the right to abandon the proposed amendment
to the Certificate of Incorporation in accordance with Delaware law if the Board
of Directors determines that the amendment would not be in the best interests of
the Company. Accordingly, notwithstanding authorization of the proposed
amendment to the Company's Certificate of Incorporation by the stockholders of
the Company, the Board of Directors of the Company may abandon such proposed
amendment at any time prior to the filing of the amendment with the Secretary
of State of the State of Delaware without further action by the stockholders of
the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"FOR" APPROVAL OF THE AMENDMENT TO THE
CERTIFICATE OF INCORPORATION.
3. APPROVAL OF THE AMENDMENT TO THE MK GOLD COMPANY STOCK INCENTIVE PLAN
INTRODUCTION. The Company's stockholders are being asked to act upon a
proposal to approve the action of the Board of Directors amending the MK Gold
Company Stock Incentive Plan (the "Incentive Plan"). The Board of Directors has
determined that it is in the best interests of the Company to increase the
number of shares with respect to which awards may be made under the Incentive
Plan in order to enable the Company to continue to provide incentives to
officers and key employees. In addition, the Board of Directors has determined
that it is in the best interests of the Company to make such amendments to the
Incentive Plan as are necessary to permit awards under the Incentive Plan to
qualify as "performance-based" compensation under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, the amendment (i)
increases by 1,500,000 the number of shares of Common Stock with respect to
which awards may be made under the Incentive Plan, (ii) limits to 1,500,000 the
number of shares with respect to which awards may be made to a participant under
the Incentive Plan in a two (2) year period, and (iii) establishes a requirement
that the committee administering the Incentive Plan be comprised of outside
directors. Leucadia owns approximately 46.4% of the outstanding shares of the
Company's Common Stock. Leucadia has informed the Company that it intends to
vote for approval of the amendment to the Company's Incentive Plan.
GENERAL. The purpose of the Incentive Plan is to provide a means whereby
officers and key employees who are responsible for the successful management and
continued success of the Company, acquire a proprietary interest in the Company,
thus providing added incentive for excellence of achievement.
The Incentive Plan originally authorized awards with respect to 1,000,000
shares of Common Stock. As of May 31, 1996, awards covering 1,085,496 shares of
Common Stock had been made under the Incentive Plan and awards of options
covering 520,000 shares had been terminated without being exercised. Under the
Incentive Plan, awards are not considered to have been made with respect to
options or stock appreciation rights that terminate
17
<PAGE>
without being exercised. Accordingly, 434,504 shares are currently available
for awards under the Incentive Plan. The amendment would increase by 1,500,000
the number of shares with respect to which awards may be made under the
Incentive Plan to a total of 2,500,000. In addition, the amendment would make
certain changes in order to ensure that all awards under the Incentive Plan will
qualify as "performance based" compensation under the Code. Certain options
have been granted under the Incentive Plan, subject to approval of the amendment
by the stockholders of the Company. See "Incentive Plan Benefits," below.
The Incentive Plan authorizes the granting of options to purchase shares of
Common Stock ("Options"), stock appreciation rights ("SARs"), limited stock
appreciation rights ("LSARs") (SARs and LSARs, collectively referred to as
"Appreciation Rights") and/or restricted shares ("Restricted Shares"). The
terms applicable to these various types of awards, including those terms that
may be established by the Compensation Committee, which has been authorized by
the Board of Directors to administer the Incentive Plan, when making or
administering particular awards, are set forth in detail in the Incentive Plan.
GENERAL DESCRIPTION OF THE INCENTIVE PLAN. The following general description
of certain features of the Incentive Plan is qualified in its entirety by
reference to the Incentive Plan, as proposed to be amended, which is attached as
Appendix A.
Eligibility. Officers, including officers who are members of the Board of
Directors, and other key employees of the Company and its affiliates may be
selected by the Compensation Committee to receive benefits under the Incentive
Plan.
Shares Available under the Incentive Plan. Subject to adjustment as provided
in the Incentive Plan, the Incentive Plan currently provides that the number of
shares of Common Stock that may be issued or transferred and covered by
outstanding awards granted under the Incentive Plan shall not in the aggregate
exceed 1,000,000 shares, which may be shares of original issuance or treasury
shares or a combination thereof. The amendment to the Incentive Plan increases
the total number of shares of Common Stock with respect to which awards may be
made under the Incentive Plan to 2,500,000. The amendment also limits to
1,500,000 the total number of shares of Common Stock with respect to which
awards may be made under the Incentive Plan during any two consecutive calendar
years to any one participant.
Options. The Compensation Committee may grant Options that entitle the
optionee to purchase shares of Common Stock at a price equal to or greater than
market value on the date of grant, but in no event will the Option price be less
than par value. Options may take the form of Incentive Stock Options ("ISOs")
under Section 422 of the Code or Options which do not qualify as ISOs
(Nonqualified Stock Options, "NQSOs"). As required by Section 422 of the Code,
the aggregate Fair Market Value (as defined in the Incentive Plan) of the
Company's Common Stock (determined at the date of grant of the ISO) with respect
to which ISOs granted to an employee are exercisable for the first time in any
calendar year may not exceed $100,000. The foregoing limitation does not apply
to NQSOs.
The shares purchased upon the exercise of an Option are to be paid in cash
or, with the consent of the Compensation Committee, through the delivery of
other shares of Common Stock held by the optionee for more than six months with
a value equal to the total exercise price, or with money loaned (with full
recourse) by the Company to the optionee in compliance with applicable law and
on terms and conditions to be determined by the Company, with a combination of
the foregoing, or any other consideration approved by the Compensation
Committee. No Option may be exercised more than ten years from the date of
grant. An Option or Appreciation Right is not transferable except by will or
the laws of descent and distribution. If the employment of an optionee
terminates for any reason (other than for cause or by reason of death,
disability or retirement) the optionee may, within the three-month period
following such termination, exercise such Options or Appreciation Rights to the
extent the optionee was entitled to exercise such Options or Appreciation Rights
at the date of termination. If an optionee dies while employed or terminates
employment by reason of disability or retirement, the Options or Appreciation
Rights may be exercised within one year after the optionee's death by the person
or persons to whom the optionee's rights pass or within one year after the
optionee's disability or retirement. In no other case may the Options or
Appreciation Rights be exercised later than the expiration date specified in the
Option or Appreciation Right grant. If the employee is terminated for cause,
the Options or Appreciation Rights shall terminate immediately.
18
<PAGE>
Appreciation Rights. The Incentive Plan authorizes the Compensation
Committee to grant SARs in conjunction with an Option or independent of any
Option. The Compensation Committee may grant SARs related to Options
simultaneously with the grant of an Option or, in the case of NQSOs, at any time
during their respective terms.
SARs may not be exercised until the expiration of six months from the date of
grant. SARs related to Options will be exercisable only if, and to the extent
that, the Options to which they relate are exercisable and only when the fair
market value of the Common Stock exceeds the exercise price. When an SAR
related to an Option is exercised, the underlying Option terminates to the
extent of the number of shares to which the SAR is exercised. Conversely, if an
underlying Option is exercised, the related SAR terminates to the extent of the
number of shares covered by the Option. As with ISOs and NQSOs, the
Compensation Committee sets the terms and conditions which govern the exercise
of SARs. Exercise of SARs also will be subject to such further restrictions
(including limits on the time of exercise) as may be required to satisfy the
requirements of Rule 16b-3 promulgated by the Securities and Exchange
Commission. SARs are not transferable except by will or under the laws of
descent and distribution.
Upon exercise of an SAR, the employee will receive for each share for which
an SAR is exercised, as determined by the Compensation Committee in its
discretion, (i) shares of Common Stock, or (ii) cash or (iii) cash and shares of
Common Stock, equal to the difference between (a) the Fair Market Value per
share of Common Stock on the date of exercise of the SAR and (b) the exercise
price per share of the SAR. The exercise price of an SAR that is related to an
Option will be the exercise price of the Option. The exercise price of an SAR
that is not related to an Option will be the Fair Market Value of a share of
Common Stock on the date of grant of the SAR.
The Compensation Committee may also grant LSARs with respect to all or any
portion of the shares covered by Options or SARs. LSARs may not be exercised
within six months of the date of grant and may be exercised only during the 60-
day period following a trigger event, as defined in the Incentive Plan.
Limited Stock Appreciation Rights. The Incentive Plan also authorizes the
Compensation Committee to grant LSARs with respect to all or any portion of the
shares covered by Options or SARs. The Compensation Committee may grant LSARs
simultaneously with the grant of an Option or SAR or, in the case of NQSOs and
SARs not related to ISOs, at any time during their respective terms.
LSARs may be exercised only if (i) a tender offer or exchange offer, other
than one made by the Company, Morrison Knudsen or a subsidiary corporation or
employee benefit plan of the Company or a subsidiary corporation, is made for
Common Stock and shares of such stock are purchased pursuant to such offer,
irrespective of the number of shares so purchased, (ii) Common Stock of the
Company, representing more than 30% of the voting power of the Company, is
acquired by any person or group other than the Company, Morrison Knudsen or a
subsidiary corporation or employee benefit plan of the Company or a subsidiary
corporation, (iii) there is a substantial change in the composition of the
Company's Board over a period of two consecutive years, or (iv) the Company's
stockholders approve an amendment to merge or consolidate the Company with or
into another corporation which will not be controlled by the Company's
stockholders or to sell or otherwise dispose of substantially all its assets.
LSARs may be exercised only during the 60-day period following the occurrence of
any of these events. All Options and SARs become fully exercisable on the
occurrence of any of these events, except that no Option, SAR or LSAR may be
exercised for six months after the date of grant and SARs related to LSARs may
not be exercised during the 60-day period following the occurrence of such a
trigger event. LSARs may, in certain circumstances, be deemed to have an anti-
takeover effect.
Upon exercise of an LSAR granted to an optionee, such optionee will receive
for each share for which an LSAR is exercised an amount in cash equal to the
difference between (i) the exercise price per share of the Option to which the
LSARs relate and (ii) the greater of (x) the highest Fair Market Value of the
Company's Common Stock during the 90-day period ending the date the LSARs are
exercised, and (y) whichever of the following is applicable: (a) the highest
per share price paid in any tender offer or exchange offer which is in effect at
any time during the 90 days preceding the exercise of the LSARs; (b) the highest
price per share shown on Schedule 13D or amendment thereto, filed by holders of
the specified percentage of stock whose acquisition gives rise to the
exercisability of the LSAR; (c) the fixed or formula price for the acquisition
of shares of the Company's Common Stock in a merger or similar agreement
approved by stockholders, if such price is determinable on the date of exercise.
In the case of an
19
<PAGE>
LSAR related to an ISO, however, the holder of an LSAR will receive an amount
equal to the excess of the fair market value per share on the date the LSAR is
exercised over the exercise price.
Restricted Stock Awards. Awards of the Company's Common Stock may be made by
the Compensation Committee subject to the restriction that such shares may not
be sold, exchanged, transferred, pledged or otherwise disposed of until such
restriction lapses. The restriction may lapse due to the passage of time or the
satisfaction of certain predetermined performance criteria as determined by the
Compensation Committee, unless terminated earlier by any of the following
events: (i) a recipient's attainment of age 65 (in which case the restriction
lapses pursuant to a formula in the Incentive Plan); (ii) a recipient's death or
disability; (iii) the occurrence of a trigger event, as defined in the Incentive
Plan and (iv) any other time determined by the Compensation Committee in its
sole discretion. Subject to the above restrictions, a grantee of an award has
all the rights of a stockholder with respect to the shares covered by the award
including the right to vote such shares and the right to receive cash or stock
dividends with respect thereto.
Effect of Dissolution or Change in Control. Upon the occurrence of a
dissolution, liquidation or change in control of the Company, the Incentive Plan
shall terminate and any outstanding Options or Appreciation Rights shall
terminate, unless provision be made in connection with such transaction for the
assumption or substitution of such awards. Any one of the following events
constitutes a change in control: (i) the Company is dissolved or becomes a
party to a transaction involving sale of substantially all its assets; or (ii)
the stockholders of the Company approve a merger or consolidation of the Company
with any other corporation and the Company is not the surviving corporation.
Adjustments. The maximum number of shares that may be issued or transferred
under the Incentive Plan, the number of shares covered by outstanding Options or
Appreciation Rights and the purchase prices, repurchase prices or exercise
prices per share applicable thereto are subject to adjustment in the event of
stock dividends, stock splits, combination of shares, recapitalizations,
mergers, consolidations, reorganizations and similar transactions or events. In
the event of any such transaction or event, the Compensation Committee may in
its discretion provide in substitution for any or all outstanding awards under
the Incentive Plan such alternative consideration as it may in good faith
determine to be equitable in the circumstances and may require the surrender of
all awards so replaced.
Administration. The Incentive Plan is administered by the Compensation
Committee or such other committee which must consist of three or more non-
employee directors who are "disinterested persons" within the meaning of Rule
16b-3 under the Exchange Act. The amendment requires that the members of the
committee administering the Incentive Plan also be outside directors. In
connection with its administration of the Incentive Plan, the Compensation
Committee is authorized to interpret the Incentive Plan and related agreements
and other documents. The Compensation Committee may make grants to participants
under any or a combination of all of the various categories of awards that are
authorized under the Incentive Plan.
INCENTIVE PLAN BENEFITS. Set forth in the table below are the number of
awards that were granted under the Incentive Plan during the Company's last
completed fiscal year, to (i) each of the executive officers named in the
Summary Compensation Table, (ii) all current executive officers as a group, and
(iii) all employees, including all current officers who are not executive
officers, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF UNDERLYING OPTIONS
NAME AND POSITION RESTRICTED SHARES AND APPRECIATION RIGHTS/1/
<S> <C> <C>
G. Frank Joklik, President and - 900,000/2/
Chief Executive Officer (since
November 1, 1995)
Daniel J. Kunz, President and
Chief Executive Officer (until - 300,000
October 31, 1995)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Number of Shares
Number of Underlying Options
Name and Position Restricted Shares and Appreciation Rights/1/
<S> <C> <C>
Gerald L. Sneddon, Executive
Vice President (until January 8, - 40,000
1996)
Thomas G. White, Vice President
of Operations - 70,000
Terry K. Eller, Vice President, - 60,000
Secretary and General Counsel
(until June 1, 1995)
Terry V. Rogers, Project Manager, - 45,000
Jerooy Gold Project
All Current Executive Officers,
as a Group (6 persons) - 663,696
All Employees, Including All
Current Officers Who Are Not
Executive Officers, as a Group
(7 persons) - 241,000
- ------------------------------------------------------------------------------------------
</TABLE>
/1/ The table only includes awards granted under the Incentive Plan during the
last fiscal year. The types of awards and amounts thereof that will be
granted under the Incentive Plan to the above-named individuals and groups
in the future is not determinable at this time.
/2/ The award of options covering 900,000 shares to Mr. Joklik includes
options covering 751,304 shares that were granted subject to approval by
the stockholders of the Company of an amendment to the Incentive Plan to
increase the number of shares available for award under the Incentive Plan.
FEDERAL INCOME TAX CONSEQUENCES. The following is a brief summary of certain
of the federal income tax consequences of certain transactions under the
Incentive Plan based on federal income tax laws in effect on June 15, 1996.
This summary is not intended to be exhaustive and does not describe state or
local tax consequences.
TAX CONSEQUENCES TO PARTICIPANTS.
Nonqualified Stock Options. In general: (i) no income will be recognized by
an optionee at the time an NQSO is granted; (ii) at the time of exercise of an
NQSO, ordinary income will be recognized by the optionee in an amount equal to
the difference between the option price paid for the shares and the fair market
value of the shares if they are nonrestricted on the date of exercise; and (iii)
at the time of sale of shares acquired pursuant to the exercise of an NQSO, any
appreciation (or depreciation) in the value of the shares after the date of
exercise will be treated as either short-term or long-term capital gain (or
loss) depending on how long the shares have been held.
The exercise of an NQSO by delivering other shares will generally not cause
the recognition of gain or loss with respect to the exchange of shares even if
the value of the exchanged shares exceeds the tax basis of those shares.
However, ordinary income will be recognized on the exercise of the NQSO to the
same extent it would have been recognized if the exercise price had been paid in
cash.
Incentive Stock Options. No income generally will be recognized by an
optionee upon the grant or exercise of an ISO. If shares of Common Stock are
issued to an optionee pursuant to the exercise of an ISO and no disqualifying
disposition of the shares is made by the optionee within two years after the
date of grant or within one year after the transfer of the shares to the
optionee, then upon the sale of the shares any amount realized in excess of the
Option price will be taxed to the optionee as long-term capital gain and any
loss sustained will be a long-term capital loss.
21
<PAGE>
The exercise of an ISO will, however, generally increase the alternative
minimum taxable income of the optionee in the same amount that ordinary income
would have resulted from the exercise if the option were a NQSO. Depending upon
the circumstances of the optionee, the exercise could result in minimum tax
liability.
If shares of Common Stock acquired upon the exercise of an ISO are disposed
of prior to the expiration of either holding period described above, the
optionee generally will recognize ordinary income in the year of disposition in
an amount equal to any excess of the fair market value of the shares at the time
of exercise (or, if less, the amount realized on the disposition of the shares
in a sale or exchange) over the Option price paid for the shares. Any further
gain (or loss) realized by the optionee generally will be taxed as short-term
and long-term capital gain (or loss) depending on the holding period.
The exercise of an ISO by delivering other shares previously acquired
pursuant to the exercise of an ISO will be treated as a disposition of the
shares (with the potential for ordinary income recognition as discussed above)
if the shares are delivered in payment of the exercise price prior to the
expiration of either holding period described above. However, if the holding
period is satisfied, it would appear that the optionee would not recognize gain
or loss with respect to previously acquired shares delivered in payment of the
exercise price.
Appreciation Rights. No income will be recognized by a participant in
connection with the grant of an Appreciation Right. When the Appreciation Right
is exercised, the participant normally will be required to include as taxable
ordinary income in the year of exercise an amount equal to the amount of any
cash, and the fair market value of any nonrestricted shares of Common Stock,
received pursuant to the exercise.
Restricted Shares. A recipient of Restricted Shares generally will be
subject to tax at ordinary income rates on the fair market value of the
Restricted Shares reduced by an amount paid by the recipient at such time as the
shares are no longer subject to a risk of forfeiture or restrictions on transfer
for purposes of Section 83 of the Code. However, a recipient who so elected
under Section 83(b) of the Code within 30 days of the date of transfer of the
shares will have taxable ordinary income on the date of transfer of the shares
equal to the excess of the fair market value of the shares (determined without
regard to the risk of forfeiture or restrictions on transfer) over any purchase
price paid for the shares. If a Section 83(b) election has not been made, any
dividends received with respect to Restricted Shares that are subject at that
time to a risk of forfeiture or restrictions on transfer generally will be
treated as compensation that is taxable as ordinary income to the recipient.
Special Rules Applicable to Officers and Directors. In limited circumstances
where the sale of stock that is received as the result of a grant of an award
could subject an officer or Director to suit under Section 16(b) of the Exchange
Act, the tax consequences to the officer or Director may differ from the tax
consequences described above. In these circumstances, unless a special election
has been made, the principal difference usually will be to postpone valuation
and taxation of the stock received so long as the sale of the stock received
could subject the officer or Director to suit under Section 16(b) of the
Exchange Act, but not longer than six months.
TAX CONSEQUENCES TO THE COMPANY OR SUBSIDIARY. To the extent that a
participant recognizes ordinary income in the circumstances described above, the
Company or subsidiary for which the participant performs services will be
entitled to a corresponding deduction provided that, among other things, the
income meets the test of reasonableness, is an ordinary and necessary business
expense and is not an "excess parachute payment" within the meaning of Section
280G of the Code and is not disallowed by the $1 million limitation on certain
executive compensation.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR APPROVAL OF THE
AMENDMENT TO THE INCENTIVE PLAN.
22
<PAGE>
STOCKHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal submitted by a stockholder for action at the Company's 1997
Annual Meeting of Stockholders must be submitted in a letter to the Secretary of
the Company and received by the Company by March 12, 1997 in order for such
proposal to be included in the Company's proxy statement and form of proxy
relating to such meeting. The proposal must be in the form required by and
subject to the other requirements of applicable rules of the Securities and
Exchange Commission.
The Executive Committee will consider nominees for the Board of Directors
recommended by stockholders for the 1997 Annual Meeting if the following
information concerning each nominee is disclosed in writing: name, age,
business address, residence address, principal occupation or employment, class
and number of shares of Common Stock of the Company which are beneficially owned
by each nominee and other information relating to the nominee that is required
to be disclosed in solicitations for proxies for election of directors pursuant
to Regulation 14A under the Exchange Act. The stockholder making the nomination
must also disclose his name, address and the number of shares beneficially
owned. All such recommendations must be submitted to the Company in a letter to
the Secretary of the Company not less than 60 days prior to the 1997 Annual
Meeting; provided, however, that in the event public announcement of the date of
the annual meeting is not made at least 75 days prior to the date of the annual
meeting, such recommendation by the stockholder must be received not later than
10 days following the day on which public announcement is first made of the date
of the 1997 Annual Meeting.
SOLICITATION OF PROXIES
The Company will bear the costs of soliciting proxies from its stockholders
on behalf of the Board of Directors. In addition to the use of the mails,
proxies may be solicited by the directors, officers, and employees of the
Company by personal interview, telephone or telegram. Such directors, officers
and employees will not be additionally compensated for such solicitation, but
may be reimbursed for out-of-pocket expenses incurred in connection therewith.
Arrangements will also be made with brokerage houses and other custodians,
nominees and fiduciaries for the forwarding of solicitation material to the
beneficial owners of the Company's Common Stock held of record by such persons,
and the Company will reimburse such brokerage houses, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred in connection
therewith.
Dated: July 10, 1996 BY ORDER OF THE BOARD OF DIRECTORS
John C. Farmer
Controller, Treasurer and Secretary
23
<PAGE>
APPENDIX A
MK GOLD COMPANY
STOCK INCENTIVE PLAN
SECTION 1 - PURPOSE OF PLAN
This Stock Incentive Plan is intended to promote the long-term interests of the
Company and its shareholders by providing officers and other key employees of
the Company and its Affiliates with an additional incentive to promote the
financial success of the Company and its Affiliates.
SECTION 2 - DEFINITIONS
Unless otherwise required by the context, the following terms when used in the
Plan shall have the meanings set forth in this Section 2:
(a) "Affiliate": Any "parent corporation" or "subsidiary corporation" of the
Company, as such terms are defined in Sections 425(e) and (f), respectively,
of the Code.
(b) "Agreement": A restricted stock agreement, option agreement or rights
agreement evidencing an Award in such form as adopted by the Committee
pursuant to the Plan.
(c) "Award": An award of Restricted Stock, an Option or a Right, or a
combination thereof, under the Plan.
(d) "Board of Directors": The Board of Directors of the Company.
(e) "Code": The Internal Revenue Code of 1986, as amended from time to time.
(f) "Committee": The Compensation Committee of the Board of Directors or such
other committee appointed by the Board of Directors which meets the
requirements set forth in Section 14(a) hereof.
(g) "Company": MK Gold Company, a Delaware corporation.
(h) "Effective Date": The date on which the Plan shall become effective as set
forth in Section 15 hereof.
(i) "Exchange Act": The Securities Exchange Act of 1934, as amended, together
with all regulations and rules issued thereunder.
(j) "Exercise Price":
(i) In the case of an Option, the price per Share at which the Shares
subject to such Option may be purchased upon exercise of such Option;
and
(ii) in the case of a Right, the price per Share which, upon grant, the
Committee determines shall be utilized in calculating the aggregate
value which a Participant shall be entitled to receive upon exercise
of such Right.
(k) "Fair Market Value": As applied to a specific date, the mean between the
highest and lowest quoted selling price of a Share on the NASDAQ system on
such date, or if there are no reported sales on such date, on the last
preceding date on which sales were reported. The Fair Market Value
determined by the Committee in good faith in such manner shall be final,
binding and conclusive on all parties.
A-1
<PAGE>
(l) "ISO": An Option intended to qualify as an "incentive stock option," as
defined in Section 422 of the Code or any statutory provision that may
replace such Section.
(m) "LSAR": A limited stock appreciation right awarded to a Participant under
Section 9 hereof.
(n) "NQSO": An Option not intended to be an ISO and designated a nonqualified
stock option by the Committee.
(o) "Option": Any ISO or NQSO granted under the Plan.
(p) "Participant": An officer or other key employee of the Company or any of
its Affiliates who has been granted an Award under the Plan.
(q) "Plan": This MK Gold Company Stock Incentive Plan, as the same may be
amended from time to time.
(r) "Related":
(i) in the case of a Right, a Right which is granted in connection with,
and to the extent exercisable, in whole or in part, in lieu of, an
Option or another Right; and
(ii) in the case of an Option, an Option which is granted in connection
with, and to the extent exercisable, in whole or in part, in lieu of, a
Right or another Option.
(s) "Restricted Stock": Shares of restricted stock awarded to a Participant
under Section 10 hereof.
(t) "Right": Any SAR or LSAR granted under the Plan.
(u) "SAR": A stock appreciation right awarded to a Participant under Section 8
hereof.
(v) "Shares": Shares of the Company's authorized but unissued or reacquired
$.01 par value common stock, or such other class or kind of shares or other
securities as may be applicable pursuant to the provisions of Section 4(b)
hereof.
(w) "Subsidiary": Any "subsidiary corporation" of the Company, as such term is
defined in Section 425(f) of the Code.
(x) "Trigger Event": An event described in Section 9(c) hereof.
SECTION 3 - PARTICIPATION
The class of persons eligible to receive Awards under the Plan shall be those
officers and other key employees of the Company or its Affiliates, as designated
by the Committee from time to time, but in no case shall any member of the Board
of Directors be eligible to receive any Award under the Plan unless such member
of the Board of Directors is also an officer or other key employee of the
Company or any of its Affiliates.
SECTION 4 - SHARES SUBJECT TO PLAN
(a) Maximum Shares. Subject to adjustment by the operation of Section 4(b)
--------------
hereof, the maximum number of shares with respect to which Awards may be
made under the Plan is 2,500,000. The maximum number of shares with respect
to which Awards may be made to a Participant in any period covering two
consecutive calendar years is 1,500,000. The Shares with respect to which
Awards may be made under the Plan may be either authorized and unissued
shares or issued shares heretofore or hereafter reacquired and held as
treasury shares. Shares which are subject to Related Rights and Related
Options shall be counted only once in determining whether the maximum number
of Shares with respect to which Awards may be granted under the Plan has
been exceeded. An Award shall not be considered to have been made under the
Plan with respect
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to any Option or Right to the extent that it terminates without being
exercised, and new Awards may be granted under the Plan with respect to the
number of Shares as to which such termination has occurred.
(b) Adjustment of Shares and Price. In the event that the Shares are changed
------------------------------
into or exchanged for a different kind or number of shares of Stock or
securities of the Company as the result of any stock dividend, stock split,
combination of shares, exchange of shares, merger, consolidation,
reorganization, recapitalization or other change in capital structure, then
the number of Shares subject to this Plan and to Awards granted hereunder
and the purchase price, repurchase price or Exercise Price for such Shares
shall be equitably adjusted by the Committee to prevent the dilution or
enlargement of Awards, and any new stock or securities into which the Shares
are changed or for which they are exchanged shall be substituted for the
Shares subject to this Plan and to Awards granted hereunder; provided,
however, that fractional shares may be deleted from any such adjustment or
substitution.
SECTION 5 - GENERAL TERMS AND CONDITIONS OF OPTIONS AND RIGHTS
(a) General Terms. The Committee shall have full and complete authority and
-------------
discretion, except as expressly limited by the Plan, to grant Options and
Rights and to provide the terms and conditions (which need not be identical
among Participants) thereof. In particular, the Committee shall prescribe
the following terms and conditions:
(i) the Exercise Price of any Option or Right, determined in accordance
with Section 5(b) hereof;
(ii) the number of Shares subject to, and the expiration date of, any Option
or Right, provided, however, that no Option or Right shall have a term
in excess of 10 years from the date of grant of the Option or Right;
(iii) the manner, time and rate (cumulative or otherwise) of exercise of
such Option or Right; and
(iv) the restrictions, if any, to be placed upon such Option or Right or
upon Shares which may be issued upon exercise of such Option or Right.
The Committee may, as a condition of granting any Option or Right,
require that a Participant agree not to thereafter exercise one or more
Options or Rights previously granted to such Participant.
(b) Exercise Price. The Exercise Price shall be determined by the Committee and
--------------
shall not be less than the Fair Market Value per Share on the date of grant.
Notwithstanding the foregoing, in no event shall the Exercise Price be less
than the par value per Share.
SECTION 6 - EXERCISE OF OPTIONS AND RIGHTS
(a) General Exercise Rights. An Option or Right granted under the Plan shall be
-----------------------
exercisable during the lifetime of the Participant to whom such Option or
Right was granted only by such Participant, and except as provided in
Section 6(c) hereof, no such Option or Right may be exercised unless at the
time such Participant exercises such Option or Right, such participant is an
employee of, and has continuously since the grant thereof been an employee
of, the Company or an Affiliate. Transfer of employment between Affiliates
or between an Affiliate and the Company shall not be considered an
interruption or termination of employment for any purpose of this Plan.
Neither shall a leave of absence at the request, or with the approval, of
the Company or an Affiliate be deemed an interruption or termination of
employment, so long as the period of such leave does not exceed 90 days, or,
if longer, so long as the Participant's right to re-employment with the
Company or an Affiliate is guaranteed by contract. An Option or Right also
shall contain such conditions upon exercise (including, without limitation,
conditions limiting the time of exercise to specified periods) as may be
required to satisfy applicable regulatory requirements, including, without
limitation, Rule 16b-3 (or any successor rule) promulgated by the Securities
and Exchange Commission.
(b) Notice of Exercise. An Option or Right may not be exercised with respect to
------------------
less than 25 Shares, unless the exercise relates to all Shares covered by
the Option or Right at the date of exercise. An Option or Right shall be
exercised by delivery of a written notice to the Company. Such notice shall
state the election to exercise
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the Option or Right and the number of whole Shares in respect of which it is
being exercised, and shall be signed by the person or persons so exercising
the Option or Right. In the case of an exercise of an Option, such notice
shall either: (a) be accompanied by payment of the full Exercise Price and
all applicable withholding taxes, in which event the Company shall deliver
any certificate(s) representing Shares which the Participant is entitled as
a result of the exercise as soon as practicable after the notice has been
received; or (b) fix a date (not less than 5 nor more than 15 business days
from the date such notice has been received by the Company) for the payment
of the full Exercise Price and all applicable withholding taxes, against
delivery by the Company of any certificate(s) representing Shares which the
Participant is entitled to receive as a result of the exercise. Payment of
such Exercise Price and withholding taxes shall be made as provided in
Sections 6(d) and 13, respectively. In the event the Option or Right shall
be exercised pursuant to Section 6(c)(i) hereof, by any person or persons
other than the Participant, such notice shall be accompanied by appropriate
proof of the right of such person or persons to exercise the Option or
Right.
(c) Exercise After Termination of Employment. Except as otherwise determined by
----------------------------------------
the Committee at the date of grant of the Option or Award and as is provided
in the applicable Agreement evidencing the Option or Right, upon termination
of a Participant's employment with the Company or any of its Affiliates,
such Participant (or in the case of death, the person(s) to whom the Option
or Right is transferred by will or the laws of descent and distribution) may
exercise such Option or Right during the following periods of time (but in
no event after the normal expiration date of such Option or Right):
(i) in the case of termination as a result of death, disability or
retirement of the Participant, the Option or Right shall remain
exercisable (as to the number of shares exercisable on the termination
date) for one year after the date of termination; for this purpose,
"disability" shall mean such physical or mental condition affecting the
Participant as determined by the Committee in its sole discretion, and
"retirement" shall mean voluntary retirement under a retirement plan or
program of the Company or any Affiliate;
(ii) in the case of termination for cause, the Option or Right shall
immediately terminate and shall no longer be exercisable; and
(iii) in the case of termination for any reason other than those set forth in
subparagraphs (i) and (ii) above, with respect to the shares
exercisable on the date of termination, the Option or Right shall
remain exercisable for three months after the date of termination.
To the extent the Option or Right is not exercised within the foregoing
periods of time, the Option or Right shall automatically terminate at the end
of the applicable period of time. Notwithstanding the foregoing provisions,
failure to exercise an ISO within the periods of time prescribed under
Sections 421 and 422 of the Code shall cause an ISO to cease to be treated as
an "incentive stock option" for purposes of Section 421 of the Code.
(d) Payment of Option Exercise Price. Upon the exercise of an Option, payment
--------------------------------
of the Exercise Price shall be made either (i) in cash (by a certified
check, personal check, bank draft or money order), (ii) with the consent of
the Committee and subject to Section 6(e) hereof, by delivering the
Participant's duly-executed promissory note and related documents, (iii)
with the consent of the Committee, by delivering Shares owned by the
Participant for more than six (6) months valued at Fair Market Value, or
(iv) by a combination of the foregoing forms of payment.
(e) Payment with Loan. The Committee may in its sole discretion assist any
-----------------
Participant in the exercise of one or more Options granted to such
Participant under the Plan by authorizing the extension of a loan to such
Participant from the Company. Except as otherwise provided in this Section
6(e), the terms of any loan (including the interest rate and terms of
repayment) shall be established by the Committee in its sole discretion.
The maximum amount of any loan shall not exceed 80% of the Exercise Price
payable for the Shares being purchased. Any such loan by the Company shall
be with full recourse against the Participant to whom the loan is granted,
shall be secured in whole or in part by the Shares so purchased, and shall
bear interest at a rate not less than the minimum interest rate required at
the time of purchase of the Shares in order to avoid having imputed interest
or original issue discount under Sections 483 or 1272 of the Code. In
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<PAGE>
addition, any such loan by the Company shall become immediately due and
payable in full, at the option of the Company, upon termination of the
Participant's employment with the Company or its Affiliates for any reason
or upon a sale of any Shares acquired with such loan to the extent of the
cash and fair market value of any property received by the Participant in
such sale. The Committee may make arrangements for the application of
payroll deductions from compensation payable to the Participant to amounts
owing to the Company under any such loan. Until any loan by the Company
under this Section 6(e) is fully paid in cash, the Shares shall be pledged
to the Company as security for such loan and the Company shall retain
physical possession of the stock certificates evidencing the Shares so
purchased together with a duly executed stock power for such Shares. No
loan shall be made hereunder unless counsel for the Company shall be
satisfied that the loan and the issuance of Shares funded thereby will be in
compliance with all applicable federal, state and local laws.
(f) Rights as a Shareholder. A Participant shall have no rights as a
-----------------------
shareholder with respect to any Shares issuable on exercise of any Option or
Right until the date of the issuance of a stock certificate to the
Participant for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property)
or distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as provided in Section 4(b)
hereof.
(g) Effect of Dissolution, Merger, Etc. Upon the dissolution or liquidation of
-----------------------------------
the Company, or upon a reorganization, merger, or consolidation of the
Company with one or more corporations as a result of which the Company is
not the surviving corporation, or upon a sale of substantially all the
property of the Company to another corporation, this Plan shall terminate,
and any outstanding Options and Rights shall terminate, unless provision be
made in connection with such transaction for the assumption of such Options
and Awards, or the substitution for such Options and Awards of new incentive
awards covering the stock of a successor employer corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to number and kind of
shares and prices.
SECTION 7 - SPECIAL PROVISIONS FOR ISO'S
Any provision of the Plan to the contrary notwithstanding, the following special
provisions shall apply to all ISOs granted under the Plan:
(a) the Option must be expressly designated as an ISO by the Committee and in
the ISO Agreement;
(b) no ISO shall be granted more than ten years from the Effective Date of the
Plan and no ISO shall be exercisable more than ten years from the date such
ISO is granted;
(c) the Exercise Price of any ISO shall not be less than the Fair Market Value
per Share on the date such ISO is granted;
(d) no ISO shall be granted to any individual who, at the time such ISO is
granted, owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any Affiliate unless the
Exercise Price of such ISO is at least 110% of the Fair Market Value per
Share at the date of grant and such ISO is not exercisable after the
expiration of five years from the date such ISO is granted;
(e) the aggregate Fair Market Value (determined as of the time any ISO is
granted) of any Company stock with respect to which any ISOs granted to a
Participant are exercisable for the first time by such Participant during
any calendar year (under this Plan and all other stock option plans of the
Company and any of its Affiliates and any predecessor of any such
corporations) shall not exceed $100,000 as required under Section 422(d)(7)
of the Code. (To the extent the $100,000 limit is exceeded, the $100,000 in
options, measured as described above, granted earliest in time will be
treated as ISOs); and
(f) any other terms and conditions as may be required in order that the ISO
qualifies as an "incentive stock option" under Section 422 of the Code or
successor provision.
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SECTION 8 - STOCK APPRECIATION RIGHTS
(a) Grant of SAR. An SAR shall, upon its exercise, entitle the Participant to
------------
whom such SAR was granted to receive a number of Shares or cash or
combination thereof, as the Committee in its discretion shall determine, the
aggregate value of which (i.e., the sum of the amount of cash and/or Fair
Market Value of such Shares on date of exercise) shall equal the amount by
which the Fair Market Value per Share on the date of such exercise shall
exceed the Exercise Price of such SAR, multiplied by the number of Shares
with respect of which such SAR shall have been exercised. An SAR may be
Related to an Option or may be granted independently of any Option, as the
Committee shall from time to time in each case determine. A Related SAR may
be granted at the time of grant of an Option or, in the case of an NQSO, at
any time thereafter during the term of the NQSO.
(b) Related SAR. The Exercise Price of a Related SAR shall be the same as the
-----------
Exercise Price of the Related Option. A Related SAR shall be exercisable
only at such time or times and only to the extent that the Related Option is
exercisable and then only when the Fair Market Value per Share on the date
of exercise exceeds the Exercise Price. A Related SAR shall expire no later
than the Related Option. Upon exercise of a Related SAR, in whole or in
part, the Related Option shall be canceled automatically to the extent of
the number of Shares covered by such exercise, and such Shares shall no
longer be available for grant of future Awards. Conversely, if the Related
Option is exercised, in whole or in part, the Related SAR shall be canceled
automatically to the extent of the number of Shares covered by the Option
exercise.
SECTION 9 - LIMITED STOCK APPRECIATION RIGHTS; ACCELERATION OF AWARDS
(a) Grant of LSAR. At the time of grant of an Option or SAR to any Participant
-------------
(or, in the case of an NQSO or an SAR not Related to an ISO, at any time
thereafter during the term of the NQSO or SAR), the Committee shall have
full and complete authority and discretion to also grant to such Participant
an LSAR which is Related to such Option or SAR.
(b) Exercise of LSAR. An LSAR shall entitle the holder thereof, upon exercise
----------------
of the LSAR within the exercise period prescribed below and satisfaction of
any conditions imposed by the Committee in the grant of the LSAR, to
surrender the Related Option and/or SAR or any portion thereof, and to
receive without payment to the Company an amount of cash determined pursuant
to Section 9(d) hereof. An LSAR shall be exercisable only during one or
more of the periods prescribed below in Section 9(c), provided, however,
that no LSAR may be exercised within six months of the date the LSAR was
granted and an LSAR shall be exercisable only at such time or times and to
the extent that the Related SAR or Option is exercisable and only when the
Fair Market Value per Share exceeds the Exercise Price per Share. To the
extent that an LSAR is exercised, the Related Option and/or SAR shall
automatically be canceled to the extent of the number of Shares covered by
such exercise, and such Shares shall no longer be available for future
Awards. To the extent that a Related Option or SAR is exercised, the
Related LSAR shall automatically be canceled to the extent of the number of
Shares covered by such exercise.
(c) Trigger Event. An LSAR shall be exercisable, subject to the provisos in
-------------
Section 9(b), during any one or more of the following periods:
(i) for a period of 60 days beginning on the date on which Shares are first
purchased pursuant to a tender offer or exchange offer (other than such
an offer by Morrison Knudsen Corporation, the Company, any Subsidiary,
any employee benefit plan of the Company or of any Subsidiary or any
entity holding Shares or other securities of the Company for or pursuant
to the terms of such plan), whether or not such offer is approved or
opposed by the Company and regardless of the number of Shares purchased
pursuant to such offer;
(ii) for a period of 60 days beginning on the date the Company acquires
knowledge that any person or group deemed a person under Section 13(d)(3)
of the Exchange Act (other than Morrison Knudsen Corporation, the Company,
any Subsidiary, any employee benefit plan of the Company or of any
Subsidiary or any
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<PAGE>
entity holding Shares or other securities of the Company for or pursuant to
the terms of any such plan), in a transaction or series of transactions,
has become the beneficial owner, directly or indirectly (with beneficial
ownership determined as provided in Rule 13d-3, or any successor rule,
under the Exchange Act), of securities of the Company entitling the person
or group to 30% or more of all votes (without consideration of the rights
of any class of stock to elect directors by a separate class vote) to which
all shareholders of the Company would be entitled in the election of the
Board of Directors were an election held on such date;
(iii) for a period of 60 days beginning on the date, during any period of
two consecutive years, when individuals who at the beginning of such
period constitute the Board of Directors of the Company cease for any
reason to constitute at least a majority thereof, unless the
election, or the nomination for election by the shareholders of the
Company, of each new Director was approved by a vote of at least two-
thirds of the Directors then still in office who were Directors at
the beginning of such period; and
(iv) for a period of 60 days beginning on the date of approval by the
shareholders of the Company of an agreement (a "reorganization
agreement") providing for:
(A) the merger or consolidation of the Company with another corporation
where the shareholders of the Company, immediately prior to the merger
or consolidation, do not beneficially own, immediately after the
merger or consolidation, shares of the corporation issuing cash or
securities in the merger or consolidation entitling such shareholders
to 80% or more of all votes (without consideration of the rights of
any class of stock to elect directors by a separate class vote) to
which all shareholders of such corporation would be entitled in the
election of Directors or where the members of the Board of Directors
of the Company, immediately prior to the merger or consolidation, do
not, immediately after the merger or consolidation, constitute a
majority of the Board of Directors of the corporation issuing cash or
securities in the merger or consolidation; or
(B) the sale or other disposition of all or substantially all the assets
of the Company.
Each of the events specified in (i), (ii), (iii) and (iv) above from which
the sixty-day period specified above commences is a "Trigger Event" for the
purposes of the Plan.
(d) Payment Upon Exercise. Upon exercise of an LSAR, the Participant shall be
---------------------
entitled to receive an amount of cash in respect of each Share subject to
the Related Option or SAR equal to the excess of the fair market value of
such Share over the Exercise Price of such Related Option or SAR. In the
case of LSARs related to ISOs, "fair market value" shall mean the Fair
Market Value of Shares on the date the LSAR is exercised. In the case of
all other LSARs, "fair market value" shall mean the highest mean between the
highest and lowest quoted selling price of a Share on the NASDAQ system
during the period beginning on the 90th day prior to the date on which the
LSAR is exercised and ending on such date, except that:
(i) in the event of a tender offer or exchange offer for Shares, fair
market value shall mean the greater of such last sale price or the
highest price paid for Shares pursuant to any tender offer or
exchange offer in effect at any time beginning on the 90th day prior
to the date on which the LSAR is exercised and ending on such date,
(ii) in the event of the acquisition by any person or group of beneficial
ownership of securities of the Company entitling the person or group
to 30% or more of the combined voting power of the Company's
outstanding securities, fair market value shall mean the greater of
such last sales price or the highest price per Share paid shown on
the Schedule 13D, or any Amendment thereto, filed by the person or
group becoming a 30% beneficial owner or disclosing an intention or
possible intention to acquire control of the Company, and
(iii) in the event of approval by shareholders of the Company of a
reorganization agreement, fair market value shall mean the greater of
such last sale price or the fixed or formula price specified in the
reorganization agreement if such price is determinable as of the date
of exercise of the LSAR.
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<PAGE>
Any securities or property which are part or all of the consideration paid
for Shares in a tender offer or exchange offer or under an approved
reorganization agreement shall be valued at the higher of (1) the valuation
placed on such securities or property by the person making the tender offer
or exchange offer or by the corporation other than the Company issuing
securities or property in the merger or consolidation or to whom the Company
is selling or otherwise disposing of all or substantially all the assets of
the Company and (2) the valuation placed on such securities or property by
the Committee.
(e) Acceleration of Options and SARs. All Options and SARs shall become fully
--------------------------------
exercisable upon the occurrence of any Trigger Event, whether or not such
Options or SARs are then exercisable under the provisions of the applicable
Agreements relating thereto, except that (1) in no event will SARs or
Options Related to SARs be exercisable within six months after the date on
which granted, and (2) SARs Related to LSARs may not be exercised for cash
during any of the 60-day periods after a Trigger Event.
SECTION 10 - TERMS AND CONDITIONS OF AWARDS OF RESTRICTED STOCK
(a) General Terms. The Committee shall have full and complete authority and
-------------
discretion, except as expressly limited by the Plan, to grant Awards of
Restricted Stock and to provide the terms and conditions (which need not be
identical among Participants) thereof. Awards of Restricted Stock shall be
evidenced by written Agreements in such form as the Committee from time to
time shall approve. In particular, the Committee shall prescribe the
following terms and conditions:
(i) the number of Shares of Restricted Stock to be awarded to each
Participant;
(ii) the restriction period applicable to each Award of Restricted Stock,
which period shall be determined at the time of the Award and need not
be the same for all Awards; and
(iii) the payment, if any, to be made by the Participant in consideration of
the Award. Any Award may be made without payment of consideration by
the Participant or may provide for payment of cash or deferred
consideration which is less than the Fair Market Value of the awarded
shares at the date of grant. Any such Award may be on the basis that
the shares awarded thereby may be repurchased by the Company at a fixed
price or at a price established by formula, either upon forfeiture of
the awarded shares or in other specified circumstances.
(b) Restrictions. The Shares of Restricted Stock awarded shall be subject to
------------
restrictions as set forth in Section 11.
(c) Certificates. A stock certificate or certificates evidencing the Shares of
------------
Restricted Stock awarded shall be issued in the name of the recipient and
delivered to the Committee or its designee to be held in safekeeping until
the periodic expiration of the restrictions. The certificates issued
pursuant to the Plan shall contain a legend necessary to reflect the
restrictions on such Shares as contained in Section 11.
(d) Rights as a Shareholder. Subject to the restrictions contained in Section
-----------------------
11 hereof, the recipient of an Award of Restricted Stock pursuant to the
Plan shall have all the rights as a shareholder with respect to the Shares
covered by the Award including, but not limited to, the right to vote such
Shares, the right to receive cash or stock dividends with respect thereto
and the right to participate in any subdivision or consolidation of Shares
or other capital adjustment, or the payment of a stock dividend or other
increase or decrease in such Shares, effected without receipt of
consideration by the Company. In the event the recipient receives
additional Shares pursuant to any of the foregoing events, the Shares
acquired shall be subject to the terms, conditions and restrictions
contained herein as if such additional Shares were received at the date of
the original Award.
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<PAGE>
SECTION 11 - RESTRICTIONS ON RESTRICTED STOCK AND LAPSE THEREOF
(a) Restrictions. Shares of Restricted Stock awarded shall be subject to the
------------
restrictions that, during the restriction period or prior to the lapse of
the restrictions in accordance with subsection (c) hereof, such Shares:
(i) shall not be sold, exchanged, transferred, pledged or otherwise
disposed of; and
(ii) shall be forfeited to the Company if the recipient's employment is
terminated;
except as provided in subsection (c) hereof.
(b) Restriction Period. Restrictions shall lapse at the times determined by the
------------------
Committee unless such restrictions are terminated earlier in accordance with
subsection (c) below.
(c) Lapse of Restrictions. The restrictions contained herein shall lapse upon
---------------------
the occurrence of any of the following events:
(i) Upon the retirement of a recipient at the normal retirement date as
defined under the MK Gold Company 401(k) Savings Plan, the restrictions
applicable to stock awards to said recipient shall lapse according to
the following formula.
For each award of restricted stock:
Number of shares for which
restrictions shall lapse = X x N
-
Y
Where:
X = number of months from the date of award to the date of the
Participant's termination;
Y = number of months required under the award for all restrictions to
lapse without regard to early lapse under Section 11(c) of the Plan;
and
N = the number of shares under each award for which restrictions have not
lapsed.
(ii) The death or total and permanent disability of a recipient while
employed by the Company or an Affiliate;
(iii) The occurrence of a Trigger Event;
(iv) At such times, other than as described in (i), (ii) or (iii), above,
including termination by the Company or an Affiliate of a recipient's
employment for any reason or the early retirement of a recipient with
the consent of the Company, if the Committee determines in the
exercise of its sole discretion that the lapse of restrictions at
such time with respect to all or a portion of the shares awarded is
in the best interest of the Company.
SECTION 12 - RESTRICTIONS ON TRANSFERS; GOVERNMENT REGULATIONS
(a) Awards Not Transferable. No Option or Right nor any right or interest of a
-----------------------
Participant under the Plan in any instrument evidencing any Option or Right
under the Plan may be assigned, encumbered, or transferred, except, in the
event of the death of a Participant, by will or the laws of descent and
distribution.
(b) Government Regulations. This Plan, the granting of Awards under this Plan
----------------------
and the issuance or transfer of Shares (and/or the payment of money)
pursuant thereto are subject to all applicable Federal and state laws,
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<PAGE>
rules and regulations and to such approvals by any regulatory or
governmental agency (including without limitation "no action" positions of
the Securities and Exchange Commission) which may, in the opinion of counsel
for the Company, be necessary or advisable in connection therewith. Without
limiting the generality of the foregoing, no Awards may be granted under
this Plan, and no Shares shall be issued by the Company, nor cash payments
made by the Company, pursuant to or in connection with any such Award,
unless and until, in each such case, all legal requirements applicable to
the issuance or payment have, in the opinion of counsel to the Company, been
complied with. In connection with any stock issuance or transfer, the
person acquiring the shares shall, if requested by the Company, give
assurances satisfactory to counsel to the Company in respect of such matters
as the Company may deem desirable to assure compliance with all applicable
legal requirements. The Company shall not be required to deliver any Shares
under the Plan prior to (i) the admission of such Shares to listing or for
quotation on any stock exchange or automated quotation system on which
Shares may then be listed or quoted, and (ii) the completion and
effectiveness of such registration or other qualification of such Shares
under any state or federal law, rule or regulation, as the Committee shall
determine to be necessary or advisable.
SECTION 13 - TAX WITHHOLDING
The Company shall have the right to withhold from amounts due Participants, or
to collect from Participants directly, the amount which the Company deems
necessary to satisfy any taxes required by law to be withheld at any time by
reason of participation in the Plan, and the obligations of the Company under
the Plan shall be conditional on payment of such taxes. The Participant may,
prior to the due date of any taxes, pay such amounts to the Company in cash, or
with the consent of the Committee, in Shares (which shall be valued at their
Fair Market Value on the date of payment). There is no obligation under this
Plan that any Participant be advised of the existence of the tax or the amount
required to be withheld. Without limiting the generality of the foregoing, in
any case where it determines that a tax is or will be required to be withheld in
connection with the issuance or transfer or vesting of Shares under this Plan,
the Company may, pursuant to such rules as the Committee may establish, reduce
the number of such Shares so issued or transferred by such number of Shares as
the Company may deem appropriate in its sole discretion to accomplish such
withholding or make such other arrangements as it deems satisfactory.
Notwithstanding any other provision of this Plan, the Committee may impose such
conditions on the payment of any withholding obligation as may be required to
satisfy applicable regulatory requirements, including, without limitation, Rule
16b-3 (or successor provision) promulgated by the Securities and Exchange
Commission.
SECTION 14 - ADMINISTRATION OF PLAN
(a) The Committee. The Plan shall be administered by the Committee, which shall
-------------
be comprised of three or more members of the Board of Directors, each of
whom shall be a "disinterested person" as defined in Rule 16b-3 (or
successor provision) promulgated by the Securities and Exchange Commission
and shall be an "outside director" as defined in Code Section 162(m) and the
regulations thereunder promulgated by the Treasury Department.
(b) Committee Action. A majority of the members of the Committee at the time in
----------------
office shall constitute a quorum for the transaction of business, and any
determination or action may be taken at a meeting by a majority vote or may
be taken without a meeting by a written resolution signed by all members of
the Committee. All decisions and determinations of the Committee shall be
final, conclusive and binding upon all Participants and upon all other
persons claiming any rights under the Plan with respect to any Options or
Rights. Members of the Board of Directors and members of the Committee
acting under the Plan shall be fully protected in relying in good faith upon
the advice of counsel and shall incur no liability except for willful
misconduct in the performance of their duties.
(c) Committee Authority. In amplification of the Committee's powers and duties,
-------------------
but not by way of limitation, the Committee shall have full authority and
power to:
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<PAGE>
(i) Construe and interpret the provisions of the Plan and make rules and
regulations for the administration of the Plan not inconsistent with
the Plan;
(ii) Decide all questions of eligibility for Plan participation and for
the grant of Awards;
(iii) Adopt forms of Agreements and other documents consistent with the
Plan;
(iv) Engage agents to perform legal, accounting and other such
professional services as it may deem proper for administering the
Plan; and
(v) Take such other actions as may be reasonably required or appropriate
to administer the Plan or to carry out the Committee activities
contemplated by other sections of this Plan.
(d) Indemnification. In addition to such other rights of indemnification as
---------------
they may have as directors or as members of the Committee, the Board of
Directors and the members of the Committee shall be indemnified by the
Company against the reasonable expenses, including court costs and
reasonable attorneys' fees, actually incurred in connection with the defense
of any action, suit or proceeding, or in connection with any appeal therein,
to which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any Award granted
hereunder, and against all amounts paid by them in settlement thereof or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except where such indemnification is expressly prohibited by
applicable law.
SECTION 15 - EFFECTIVE DATE
The effective date of this Plan shall be November 15, 1993 (the date such Plan
will be approved by the Board of Directors), subject to receipt of shareholder
approval of this Plan within one year of that date. All Awards pursuant to this
Plan prior to receipt of shareholder approval shall be effective when made but
shall be subject to the terms of this Plan only upon receipt of such shareholder
approval. If such approval is not received within the one-year period specified
above, all Awards made on or after November 15, 1993 shall be forfeited.
SECTION 16 - AMENDMENT AND TERMINATION
(a) The Plan.
--------
(i) Amendment. The Board of Directors may amend the Plan from time to
---------
time in its sole discretion; provided, however, that no such amendment
shall, without the approval of the shareholders of the Company if such
approval is required by the laws of the State of Delaware or Section
422 of the Code or Rule 16b-3 under the Exchange Act: (a) change the
class of persons eligible to receive Awards or otherwise materially
modify the requirements as to eligibility for participation in the
Plan; (b) increase the aggregate number of Shares with respect to
which Awards may be made under the Plan; (c) materially increase the
benefits accruing to Participants under the Plan; or (d) remove the
administration of the Plan from the Committee or render any member of
the Committee eligible to receive an Award under the Plan while
serving thereon. Any purported amendment in violation of these
restrictions shall be void and of no effect. Furthermore, no amendment
shall impair the rights of any Participant under any Award theretofore
made under the Plan, without the Participant's consent.
(ii) Termination. The Board of Directors may suspend or terminate the Plan
-----------
at any time. Upon termination of the Plan, no additional Awards shall
be granted under the Plan; provided, however, that the terms of the
Plan shall continue in full force and effect with respect to
outstanding and unexercised Options and Rights granted under the Plan
and Shares issued under the Plan.
(b) Awards. Subject to the terms and conditions and the limitations of the
------
Plan, the Committee may in the exercise of its sole discretion modify,
extend or renew the terms of outstanding Awards granted under the
A-11
<PAGE>
Plan, or accept the surrender of outstanding Awards (to the extent not
theretofore exercised) and authorize the granting of new Awards in
substitution therefor (to the extent not theretofore exercised). Without
limiting the generality of the foregoing, the Committee may in its
discretion at any time accelerate the time at which any Option or Right is
exercisable, subject to compliance with the requirements of Rule 16b-3 (or
successor provision) promulgated by the Securities and Exchange Commission.
Notwithstanding the foregoing, however, no modification of an Award shall,
without the consent of the Participant, impair any rights or obligations
under any Awards theretofore granted under the Plan.
SECTION 17 - MISCELLANEOUS
(a) Employment. Neither the establishment of the Plan nor any amendments
----------
thereto, nor the granting of any Award under the Plan, shall be construed as
in any way modifying or affecting, or evidencing any intention or
understanding with respect to, the terms of the employment of any
Participant with the Company or any of its Affiliates. No person shall have
a right to be granted Awards or, having been selected as a Participant for
one Award, to be so selected again.
(b) Multiple Awards. Subject to the terms and restrictions set forth in the
---------------
Plan, a Participant may hold more than one Award.
(c) Written Notice. As used herein, any notices required hereunder shall be in
--------------
writing and shall be given on the forms, if any, provided or specified by
the Committee. Written notice shall be effective upon actual receipt by the
person to whom such notice is to be given; provided, however, that in the
case of notices to Participants and their heirs, legatees and legal
representatives, notice shall be effective upon delivery if delivered
personally or three business days after mailing, registered first class
postage prepaid to the last known address of the person to whom notice is
given. Written notice shall be given to the Committee and the Company at
the following address or such other address as may be specified from time to
time:
MK Gold Company
60 East South Temple, Suite 2100
Salt Lake City, Utah 84111
Attn: Secretary
(d) Applicable Law; Severability. The Plan shall be governed by and construed
----------------------------
in all respects in accordance with the laws of the State of Delaware. If
any provisions of the Plan shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
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<PAGE>
APPENDIX B
[FORM OF PROXY]
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF STOCKHOLDERS
AUGUST 5, 1996 AT 3:00 P.M.
MK GOLD COMPANY
The undersigned stockholder of MK Gold Company hereby appoints Philip J.
Bernhisel and John C. Farmer and each of them, as attorneys and proxies, each
with the power to act without the other and with power of substitution and
revocation, and hereby authorizes them to represent the undersigned and vote, as
designated on the other side, all shares of stock of MK Gold Company standing in
the name of the undersigned with all powers which the undersigned would possess
if present at the Annual Meeting of Stockholders of the Company to be held
August 5, 1996 or any adjournments or postponements thereof.
RECEIPT OF THE NOTICE OF ANNUAL MEETING OF STOCKHOLDERS AND THE PROXY
STATEMENT FURNISHED HEREWITH, IS HEREBY ACKNOWLEDGED.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
- --------------------------------------------------------------------------
FOLD AND DETACH HERE
ANNUAL MEETING OF
STOCKHOLDERS
MK GOLD COMPANY
AUGUST 5, 1996
3:00 P.M.
SALT LAKE CITY MARRIOTT
75 S. WEST TEMPLE
SALT LAKE CITY, UT 84101
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE Please mark
MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. your votes as
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR indicated in
PROPOSALS 1 THROUGH 3. this example
X
---
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS (THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE NOMINEES LISTED BELOW)
<S> <C> <C>
FOR all nomi- WITHHOLD
nees listed to AUTHORITY NOMINEES: Gordon J. Humphrey, James P. Miscoll
the right (ex- to vote for
cept as marked all nominees (INSTRUCTIONS: To withhold authority to
to the con- listed to vote for any individual nominee, write
trary herein) the right that nominee's name in the space pro-
vided below.)
-----------------------------------------------------------------------------------------------------------------------------------
2. To approve an amend- 3. To approve an amend- 4. In their discretion
ment to the Company's ment to the Company's the Proxies are
Certificate of Incor- Stock Incentive Plan, authorized to vote
poration to change the as described in the upon such other busi-
name of the Company to Proxy Statement. ness as may properly
"AdAstra Resource come before the meet-
Corporation." ing or any adjourn-
ment thereof.
</TABLE>
FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN
___ ___ ___ ___ ___ ___
The signature should agree with the
name on your stock certificate. When
shares are held by joint tenants,
both should sign. When signing as
attorney, executor, administrator,
trustee, or guardian, please give
full title as such. If a corporation,
please sign in full corporate name by
president or other authorized
officer. If a partnership, please
sign in partnership name by
authorized person.
Dated: _____________________, 1996
__________________________________
(Signature)
__________________________________
(Signature if held jointly)
PLEASE SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
2
<PAGE>
- ------------------------------------------------------------------------
FOLD AND DETACH HERE
ADMISSION TICKET
ANNUAL MEETING OF
STOCKHOLDERS
MK GOLD COMPANY
AUGUST 5, 1996
3:00 P.M.
SALT LAKE CITY MARRIOTT
75 S. WEST TEMPLE
SALT LAKE CITY, UTAH 84101
Agenda
------
* Election of Directors
* Approval of Amendment to Certificate of Incorporation
* Approval of Amendment to Stock Incentive Plan
3
