-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, nGyZVIkRO9V5sRBFXuRrG6jtOGTs0AgCRZdXbr9PAkCEv0b/flu1nKqjczH2C4n7 DMLR68ny/P96jblDXXiKzg== 0000315523-95-000003.txt : 19950511 0000315523-95-000003.hdr.sgml : 19950511 ACCESSION NUMBER: 0000315523-95-000003 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950523 FILED AS OF DATE: 19950509 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: USMX INC CENTRAL INDEX KEY: 0000315523 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 841076625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-09370 FILM NUMBER: 95535573 BUSINESS ADDRESS: STREET 1: 141 UNION BLVD STE 100 CITY: LAKEWOOD STATE: CO ZIP: 80228 BUSINESS PHONE: 3039854665 MAIL ADDRESS: STREET 1: 141 UNION BLVD SUITE 100 CITY: LAKEWOOD STATE: CO ZIP: 80228 FORMER COMPANY: FORMER CONFORMED NAME: U S MINERALS EXPLORATION CO DATE OF NAME CHANGE: 19880222 DEF 14A 1 USMX, INC. 141 UNION BOULEVARD, SUITE 100 LAKEWOOD, COLORADO 80228 PROXY STATEMENT This Statement is furnished in connection with the solicitation of Proxies by and on behalf of the Board of Directors of USMX, Inc., a Delaware corporation (the "Company" or "USMX"), for use at the Annual Meeting of Stockholders to be held at 2:00 p.m, local time, on May 23, 1995, at the Sheraton Denver West Hotel, 360 Union Boulevard, Lakewood, Colorado or at any adjournments thereof. The Company anticipates that this Proxy Statement and the accompanying form of Proxy will be first mailed or given to the stockholders of the Company on or about April 20, 1995. The Company's Annual Report to Stockholders, including financial statements, for the year ended December 31, 1994, accompanies this Proxy Statement, but does not form a part of the proxy solicitation materials. The cost of soliciting Proxies will be borne by the Company. Officers and regular employees of the Company, without compensation other than their regular compensation, may solicit Proxies by further mailing, by telephone and by telegraph and by personal conversations. The Company will reimburse brokerage firms and others for their expenses in forwarding solicitation material to the beneficial owners of common stock. The Company has no plans to retain any firms, or otherwise incur any extraordinary expense, in connection with the solicitation of stockholders. VOTING PROCEDURES Stockholders of record at the close of business on April 7, 1995, ("Record Date") will be entitled to vote at the meeting. On such Record Date, the Company had outstanding and entitled to vote 14,766,134 shares of common stock. Each stockholder is entitled to cast one vote for each share of common stock registered in such stockholder's name on the books of the Company held on the Record Date. The presence in person or by proxy of the holders of one-third of the shares of the Company is necessary to constitute a quorum at the meeting. Any Proxy may be revoked by the person giving it at any time before it has been exercised or by attending the meeting and voting in person. Revocation in writing is the sole means by which Proxies may be revoked. Proxies may be revoked by execution of a later dated Proxy or by written notice to the Secretary of the Company at the Company's address above before the Annual Meeting or by a personal vote at the Annual Meeting of Stockholders. Unless instructed to the contrary in the Proxies, the Proxies will be voted for the persons named below in the election of the Company's Board for the proposals related to the Company's option plans, and will be voted in the discretion of the Proxies on such other matters as may properly come before the meeting. The Company does not know of any other matters to come before the meeting. Pursuant to applicable Delaware law, only votes cast "for" a matter constitute affirmative votes. Votes "withheld" or abstaining from voting are counted for quorum purposes, but as they are not cast "for" a particular matter, they will have the same effect as negative votes or votes "against" a particular matter. VOTING SECURITIES AND PRINCIPAL HOLDERS The number of shares of the Company's common stock beneficially owned as of March 31, 1995, by each of the directors and nominees is stated opposite each individual's name in "ELECTION OF DIRECTORS". The number of shares of the Company's common stock beneficially owned by all directors and officers of the Company as a group is stated at the end of the list of directors in "ELECTION OF DIRECTORS". The following is information with respect to the only persons known by the Company to be the beneficial owners of more than 5% of the outstanding shares of common stock of the Company:
Amount and Nature of Title of Name and Address of Beneficial Percent Class Beneficial Owner Ownership of Class ----------- -------------------------------- ------------- ---------- Common Pegasus Gold Inc. 9 North Post Street, Suite 400 Spokane, WA 99201 4,826,000(1) 32.6% Common Van Eck Associates Corporation 122 East 42nd Street New York, New York 10168 1,270,000(2) 8.6% (1) Represents direct ownership. (2) Van Eck Associates Corporation has advised the Company that it is a registered investment adviser, and that such shares are held for funds or trusts managed by it, including 930,000 shares (6.3%) held for Gold/Resources Fund and 275,000 shares (1.9%) held for International Investors Incorporated and 65,000 shares (0.4%) for a private investor. Gold/Resources Fund and International Investors Incorporated are open end, diversified investment management companies which concentrate investments in gold mining shares. The shares of both of such companies are publicly held and Van Eck Associates Corporation has advised the Company that to its knowledge no natural person owns beneficially more than 5% of the outstanding shares of either such company. John C. Van Eck, whose business address is the same as that of Van Eck Associates Corporation, has voting control of Van Eck Associates Corporation.
ELECTION OF DIRECTORS The Board of Directors of the Company (the "Board") is divided into three Groups, with the terms of office of each Group ending in successive years. The terms of directors of Group I expire with this Annual Meeting. The directors of Group II and Group III will continue in office. Proxies will be voted at the Annual Meeting, unless authority is withheld, FOR the election of the persons in Group I named below. The Company does not contemplate that any of the persons named below will be unable or will decline to serve. However, if any such nominee is unable or declines to serve, the persons named in the accompanying Proxy will vote for a substitute, or substitutes, at their discretion. The following information is submitted respecting the nominees for election and other directors of the Company: NOMINEES FOR DIRECTOR GROUP I FOR THREE YEAR TERM EXPIRING 1998
Director Shares Beneficially Percent Name and Business Experience Since Owned of Class George J. Allen, age 66, has served as President of Allen Engineering since 1983. From 1951 to 1983, he served in various positions with Kennecott Corporation, including Vice President and Director of Tolling. 1990 27,000(3) .2% Werner G. Nennecker, age 41, joined Pegasus Gold Inc. in September 1992 as Senior Vice President and Chief Operating Officer. In November 1992, Mr. Nennecker assumed the position of President and Chief Executive Officer of Pegasus. Prior to joining Pegasus, Mr. Nennecker worked 15 years in the mining industry with Ranchers Exploration and Santa Fe Pacific Gold Corporation. Most recently, he held the positions of Executive Vice-President of Santa Fe Pacific Minerals Corporation and President of Santa Fe Pacific Gold Corporation. He has extensive experience in all aspects of the mining business. Mr. Nennecker is also a director of Pegasus Gold Inc., Zapopan NL, the Gold Institute, and the National Mining Hall of Fame. 1992 4,846,000(1)(6) 31.8% Robert Scullion, age 56, has been a partner in Scullion, Strasheim & Company, a firm of Certified Public Accountants, since 1975. He is a Certified Public Accountant licensed in the United States as well as a Scottish Chartered Accountant. 1987 16,750(2) .1%
MEMBERS OF BOARD OF DIRECTORS CONTINUING IN OFFICE GROUP II THREE YEAR TERM EXPIRING 1996
Director Shares Benefically Percent Name and Business Experience Since Owned of Class Phillips S. Baker, age 35, joined Pegasus Gold in January 1994 as Vice President, Finance and Chief Financial Officer. Prior to joining Pegasus, Mr. Baker worked seven years for Battle Mountain Gold Company, most recently as Treasurer. He also worked as an accountant for Arthur Andersen LLP. Mr. Baker is an Attorney, Certified Public Accountant and Certified Cash Manager. 1995 4,836,000(4)(6) 31.8% Terry P. McNulty, age 56, has served as President of T.P. McNulty & Associates, a consulting firm, since 1988. From 1983 to 1988, he was President of Hazen Research, Inc. 1990 28,000(3) .2% James A. Knox, age 61, has served as President of the Company since June 1991. From 1969 until June 1991, he was an officer and director of Knox, Kaufman, Inc. That firm provided geological consulting services and managed exploration programs in the United States and Western Canada. Mr. Knox has previously been employed as a geologist with several other companies, including The Superior Oil Company where he was a district Exploration Manager, and Kermac Nuclear Fuels Corporation where he also managed the exploration efforts. 1985 317,232(5) 2.1%
GROUP III THREE YEAR TERM EXPIRING 1997
Director Shares Beneficially Percent Name and Business Experience Since Owned of Class Donald P. Bellum, age 62, has over 35 years of experience in the mining industry and related fields. Mr. Bellum currently serves as a consultant to the mining industry. From 1987 to 1991, Mr. Bellum was Executive Vice President of Cyprus Minerals Company. He served as President of Cyprus Coal Company from 1978 to 1987. From 1974 to 1978, Mr. Bellum was Vice President of Operations for Tesoro Coal Company. Mr. Bellum served as Project Manager (1965 to 1969) and as Mine Manager (1969 to 1973) for Kennecott Copper 1992 20,000(1) .1% Corporation. Gregory Pusey, age 43, served as the Company's Chief Financial Officer from May 1989 until January 1990 and he also has served as the Secretary and Treasurer of the Company. Since 1983, Mr. Pusey has been engaged in private investment activities. He has served as President of Livingston Capital, Ltd. and President of the General Partner of Graystone Capital, Ltd, a venture capital firm. He is also President and a Director of Cambridge Holdings, Ltd. Mr. Pusey was a founder of the Company. 1979 292,274(4) 1.9% All directors and executive officers as a group (11 persons) 5,864,939(6)(7) 38.5% (1) Includes 20,000 shares underlying currently exercisable options granted pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee Directors. (2) Includes 16,750 shares underlying currently exercisable options granted pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee Directors. (3) Includes 15,000 shares underlying currently exercisable options granted pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee Directors. (4) Includes 10,000 shares underlying currently exercisable options granted pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee Directors. (5) Includes 190,000 shares underlying currently exercisable options granted pursuant to the Company's 1987 Stock Option Plan. (6) Messrs. Nennecker and Baker are officers and Mr. Nennecker is a director of Pegasus. As such, they can be considered to be beneficial owners of the 4,826,000 shares held of record by Pegasus. Accordingly, the figures opposite their names reflect the 4,826,000 shares owned by Pegasus. (7) Includes currently exercisable options to purchase 436,750 shares.
Effective September 1987, the Company and Pegasus Gold Inc. ("Pegasus") entered into an Agreement pursuant to which the Company and Pegasus agreed that the Board of Directors of the Company would consist of nine members including three individuals designated by Pegasus (the "Pegasus Representatives"). The Agreement expired in September 1989. None of the present members of the Board of Directors was designated as a Pegasus Representative during the term of the Agreement. Messrs. Nennecker and Baker were elected by the Board as directors to fill vacancies created by the resignations of former officers of Pegasus who themselves were either Pegasus Representatives or successors of Pegasus Representatives. The Board of Directors held ten meetings in person or by consent during the year ended December 31, 1994. All incumbent directors attended at least 75 percent of the meetings of the Board held during the period for which they served as directors except Mr. Nennecker who, because of previous business commitments, was unable to attend three meetings. The Company's Board of Directors had three standing committees in 1994: the Audit Committee, the Compensation Committee and the Option Committee. The members of the Audit Committee are Terry P. McNulty and Robert Scullion. The primary functions of the Audit Committee are to review the scope and results of audits by the Company's independent auditors, internal accounting controls, non- audit services performed by the independent accountants and the cost of accounting services. Although members of the Audit Committee had informal discussions, the Audit Committee held no formal meetings in 1994. The Compensation Committee determines matters related to compensation payable to the Company's executive officers. The members of the Compensation Committee during 1994 were George J. Allen, Donald P. Bellum and Gregory Pusey. The Compensation Committee held two meetings in 1994. The Option Committee administers the Company's 1987 Stock Option Plan. The members of the Option Committee in 1994 were George J. Allen, a director of the Company, c/o Allen Engineering Company, 2610 Skyline Drive, Salt Lake City, Utah 84108; Robert Scullion, a director of the Company, 1720 South Bellaire Street, Suite 301, Denver, Colorado 80222; and Werner G. Nennecker, 601 West First Avenue, Suite 1500, Spokane, Washington 99204. During the year ended December 31, 1994, the Option Committee held one meeting in person which was attended by all members. In October 1994, the Compensation Committee and the Option Committee were combined. The members of the newly combined committee are George J. Allen, Donald P. Bellum and Gregory Pusey. EXECUTIVE OFFICERS Set forth below are the names and offices held by each of the executive officers of the Company:
Name and Business Experience Offices Held - ---------------------------------------------------------------------- -------------------------------- James A. Knox. Information with respect to the age and business President, Chief Executive experience of Mr. Knox is set forth under "Directors" above. Officer, Chairman Dennis L. Lance, age 50, has served as Vice President -- Exploration of the Company since May 1989. He also served as Secretary of the Company from January 1990 to December 1990. He has served as a geologist with the Company since June 1986. Prior thereto, he was an independent consulting geologist. Vice President -- Exploration Donald E. Nilson, age 50, joined the Company in October 1990. Immediately prior thereto, he was Corporate Controller of Brazier Forest Industries, Inc. Vice President -- Finance Paul B. Valenti, age 45, joined the Company in May 1987 and was elected Vice President in August 1988. From November 1983 to May 1987, he served as the Metallurgy Manager for Silver King Mines. Vice President -- Operations
There are no family relationships among the officers or directors. EXECUTIVE COMPENSATION Following is information regarding compensation paid during each of the last three completed fiscal years to the executive officers of the Company whose salary and bonus exceeded $100,000 during 1994. Summary Compensation Table
Annual Compensation --------------------------- Long Term Compensation All Other Name and Principal Awards Compen- Position Year Salary($) Bonus($) (Options#) sation($) - ---------------------- ------ ----------- ---------- -------------- ------------- James A. Knox, President and CEO 1994 $151,500 $20,000 30,000 $4,022(1) 1993 $142,500 $25,000 30,000 $4,069(1) 1992 $135,000 - 30,000 $13,750 Dennis L. Lance, V.P. -- Exploration 1994 $93,816 $8,000 15,000 $2,814(1) 1993 $89,256 $16,227 15,000 $2,678(1) 1992 $84,448 $6,500 10,000 $2,533 Donald E. Nilson, V.P. -- Finance 1994 $95,530 $8,000 15,000 $2,790(1) 1993 $91,719 $10,000 15,000 $2,741(1) 1992 $87,615 $6,500 10,000 $2,628 Paul B. Valenti, V.P. -- Operations 1993 $98,650 $8,000 15,000 $2,959(1) 1993 $96,230 $13,050 15,000 $2,887(1) 1992 $93,429 $6,500 10,000 $2,803 (1) The amounts shown represent the Company's matching contribution for the stated individuals to its 401(K) plan.
The following table sets forth information with respect to stock options granted during 1994 to each of the executives named in the Summary Compensation Table. The assumed annual rates of stock price appreciation of 5% and 10% are set by a rule of the Securities and Exchange Commission, and are not intended as a forecast of possible future appreciation and stock prices. The potential value of options granted depends upon an increase in the market price of the Company's common stock. If the stock price does not increase, the options would be worthless and if the stock price does increase, this increase would benefit both option holders and stockholders commensurately. OPTION GRANTS IN 1994 - ---------------------
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term ----------------------------- % of Total Options Options Granted to Granted Employees in Exercise Name (#) Fiscal Year Price ($/Sh) Expiration Date 5%($) 10%($) - --------- -------- ------------ ------------ --------------- ------------- ------------- James A. Knox 30,000 10.9 % $3.00 7/13/2004 $56,601 $143,437 Dennis L. Lance 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718 Donald E. Nilson 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718 Paul B. Valenti 15,000 5.5 % $3.00 7/21/2004 $28,300 $71,718 All Stock- holders(1) $27,801,000 $70,453,000 Executive officers' gain as a % of All Stock- holders' gain 0.53% 0.53% (1) The amounts shown for All Stockholders represent the potential realizable value assuming appreciation at the rates indicated based on the exercise price per share and the expiration date applicable to grants made in 1994 and the number of outstanding shares on the date of grant.
The following table sets forth, in the aggregate, the number of shares underlying options exercised during 1994 and states the value at year-end of exercisable and unexercisable options remaining outstanding. The "Value Realized" column reflects the difference between the market price on the date of exercise and the market price on the date of grant (which establishes the exercise price for the option) for all options exercised. However, the "Value Realized" numbers do not necessarily reflect what the executive might receive should he choose to sell the shares acquired, as the market price of the shares so acquired may at any time be higher or lower than the price on the exercise date of the option. Further, the executive may have actually received fewer shares as a result of the surrender of previously owned shares to pay the exercise price or the tax liability, or the withholding of shares to cover the tax liability associated with the option exercise. AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Value of Number of Unexercised In- Shares Unexercised the-Money Acquired Options at Options at on Value FY-End (#) FY-End ($) Exercise Realized Exercisable/ Exercisable/ Name (#) ($) Unexercisable Unexercisable - ----------------- ---------- --------- -------------- ---------------- James A. Knox 50,000 $71,625 160,000/ $75,200/ 30,000 - Dennis L. Lance 10,000 $26,225 45,000/ $16,800/ 15,000 - Donald E. Nilson - - 15,000 - 15,000 - Paul B. Valenti - - 35,000/ $10,600/ 15,000 -
COMPENSATION OF DIRECTORS In 1992, the Board adopted a plan by which all directors who are not employed either by the Company or by Pegasus are paid a fee of $350 for each meeting of the Board attended. In addition, each director who is not a full- time employee of the Company receives a fee of $500 per month. These directors also receive additional compensation plus reasonable expenses for any additional services performed. Robert Scullion is paid an additional $4,000 per year as chairman of the Audit Committee. During 1994, Terry P. McNulty was paid consulting fees totaling $5,700 for technical work related to process development for several of the Company's mining properties. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS The Company employs James A. Knox on a full-time basis as its President and Chief Executive officer. In July 1993, the Company entered into an Employment Agreement with Mr. Knox for a two-year term ending June 30, 1995, at an annual salary of $150,000. The salary may be supplemented by such merit raises or bonuses as may be determined by the Company's Board of Directors. The Employment Agreement also requires the Company to provide certain benefits to Mr. Knox, including the use of an automobile. If the Employment Agreement is terminated by Mr. Knox, or by the Company for "cause", which is defined to mean willful or fraudulent misconduct or felonious or other behavior which is materially injurious to the Company, then the Company would be obligated to pay for Mr. Knox's services only through the date of termination. If the Employment Agreement is terminated by the Company without cause or if Mr. Knox terminates the Agreement as a result of a breach by the Company, the Company would be liable for severance pay equal to 50 percent of his annual salary. In the event Mr. Knox's employment with the Company terminates as a result of his death or disability, the Company would be required to pay six months' salary. If the Company effects a merger or acquisition and Mr. Knox's employment is thereafter terminated without cause, which includes a material change in his job responsibilities, the Company would be obligated to pay Mr. Knox 50 percent of his annual salary. Mr. Knox has agreed not to acquire, for two years after the termination of the Employment Agreement, an interest in any mineral properties within two miles of any properties in which the Company has an interest or is, on the date of termination, negotiating to acquire an interest. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS George J. Allen, Donald P. Bellum and Gregory Pusey served as members of the Compensation Committee during 1994. In addition, Mr. Allen also served as a member of the Option Committee during 1994 along with Werner G. Nennecker and Robert Scullion. Mr. Nennecker is also an officer and director of Pegasus and, as such, can be considered to be a beneficial owner of the 4,826,000 shares of the Company's common stock held of record by Pegasus. BOARD COMPENSATION AND OPTION COMMITTEES' REPORT ON EXECUTIVE COMPENSATION The compensation policies of the Compensation Committee and the Option Committee applicable to the Company's executive officers are based on the continuing need to attract and retain a management team capable of guiding the growth of the Company over the long term. Compensation of executive officers paid during 1994 is based on the qualifications and experience of the individual officers, competitive market conditions for executive talent, and the contributions of the individuals to the long term growth and stability of the Company and to maximizing the long term value of stockholders' investment in the Company. Factors considered by the Compensation Committee and the Option Committee to be important in the long term growth and stability of the Company and to maximizing the long term value of the stockholders' investment include increasing the quantity and quality of the Company's portfolio of exploration properties, development of these properties into producing mines where justified, acquisition and improvement of producing properties, increasing the amount and timeliness of internal and external financial reporting and building and maintaining a complement of well trained and highly motivated employees. The Compensation and Option Committees also compared annual salary and bonuses with those paid by other gold mining companies. The Company's Compensation and Option Committees did not make its determinations based specifically upon objective measures of corporate performance in 1994 such as revenue or net income, nor did those Committees set any targets of performance using such objective measures. Those Committees believe that, for a growing exploration and mining company, primary emphasis should be placed on the exploration and development of mining properties with superior potential that will ultimately result in the achievement of improved financial results, through mineral production or property sale. The Committees believe that the performance of the Company's CEO and other executive officers during 1994 was commendable in continuing to lay the groundwork for such success and considered their performance as well as other factors discussed above in making its compensation decisions. The salary paid by the Company to James A. Knox for his services as President and Chief Executive Officer during 1994 was in accordance with the Employment Agreement which the Company entered into with Mr. Knox in July of 1993. During 1994 Mr. Knox was granted an option to purchase up to 30,000 shares of the Company's common stock. The number of options granted to Mr. Knox and the other executive officers was based on the Option Committee's positive assessment of their performance and a review of similar benefits offered by other gold mining companies. The exercise price for all options granted in 1994 was the fair market value of the stock on the date of grant. George J. Allen Donald P. Bellum Werner G. Nennecker Gregory Pusey Robert Scullion PERFORMANCE GRAPH The paper copy contains a line graph based on the following table: Base Year Dec Dec Dec Dec Dec 1989 1990 1991 1992 1993 1994 USMX,INC. 100 55 50 98 152 95 NASDAQ Stock Market 100 85 136 159 181 177 S & P Gold Mining Index 100 87 70 64 116 93 The above graph assumes an initial investment of $100 as of the close of trading December 31, 1989. Each of the data points gives the dollar value of the investment from December 31, 1989, forward assuming dividends, where paid, are reinvested monthly plus any price change in the investment. PROPOSAL TO INCREASE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER 1987 STOCK OPTION PLAN The Board of Directors of the Company, subject to approval by the Company's stockholders at this Annual Meeting, has increased from 1,200,000 to 2,000,000 the number of shares of the Company's common stock reserved for issuance under the Company's 1987 Stock Option Plan (the "Plan"). The increase in the number of shares reserved for issuance is intended to enable the Company to provide incentives for employees of the Company and its subsidiaries by providing up to an additional 800,000 shares of the Company's common stock issuable pursuant to grants. The Plan was originally adopted effective May 1987 to supplement the Stock Option Plan adopted by the Company in 1982 by providing 400,000 shares issuable under option grants and by allowing for the grant of both incentive and non- qualified stock options. The Company's stockholders have twice approved increases in the number of shares reserved for issuance under the Plan: at the Annual Meeting of Stockholders in July 1990 from 400,000 to 800,000 shares, and at the Annual Meeting of Stockholders in May 1992 from 800,000 to 1,200,000 shares. The Board of Directors has approved, subject to stockholder approval, an increase in the number of shares reserved for issuance under the Plan to 2,000,000. The Plan provides that incentive stock options may be granted solely to key employees, whereas non-qualified stock options may be granted to any employee. There are also different tax consequences associated with incentive and non-qualified stock options (see Federal Income Tax Effects below.) As of April 11, 1995, no shares remained available for grant under the Plan, the Company had approximately 35 employees eligible to participate in the Plan, and the closing price of the Company's common stock as quoted on the Nasdaq Stock Market was $2.25. By increasing the number of shares issuable under option grants, the Company will be able to provide the opportunity for increased levels of compensation for its personnel without the need to make cash payments. Accordingly, the Company will be able to maximize cash available for other purposes such as investment, acquisitions and operations. In addition, because the incentives are provided in the form of stock options rather than cash, benefits accruing under the Plan through appreciation of the shares which underlie the options will also be realized by the Company's stockholders. The following discussion is a summary of the Plan and is qualified in its entirety by reference to the Plan as set forth in Exhibit A. The aggregate number of shares currently subject to options under the Plan for all current executive officers as a group is 455,000. There are no outstanding options under the Plan granted to any directors who are not executive officers. Additional information with respect to options granted to the Company's directors and executive officers is set forth under the headings of ELECTION OF DIRECTORS and EXECUTIVE COMPENSATION herein. On March 14, 1995, the Company granted an option to purchase 50,000 shares to James A. Knox. Aside from that grant, the Company has made no grants to any individual of five percent or more of the additional shares to be available pursuant to the Plan; however, it is possible that such grants may be made in the future. The following table sets forth information concerning grants of stock options which are subject to approval by the stockholders of the proposed amendment to increase the number of shares reserved for issuance under the Plan. The named individuals are executive officers whose salary and bonus exceeded $100,000 in the year ended December 31, 1994.
Options Granted Exercise Price Name (#) ($/sh) Expiration Date ------------------ --------------- -------------- --------------- James A. Knox 50,000 $2.1875 3/14/2005 Dennis L. Lance 15,000 $3.00 7/21/2004 25,000 $2.1875 3/14/2005 Donald E. Nilson 15,000 $3.00 7/21/2004 25,000 $2.1875 3/14/2005 Paul B. Valenti 15,000 $3.00 7/21/2004 25,000 $2.1875 3/14/2005 All others 268,800 $2.1875- 7/21/2004- $3.94 3/14/2005
The approval of holders of shares representing a majority of the votes represented at the Annual Meeting will be necessary to approve the increase of the number of shares reserved for issuance under the Plan from 1,200,000 to 2,000,000 shares. The Board of Directors recommends a vote for the approval of the increase of the number of shares reserved for issuance under the Plan from 1,200,000 to 2,000,000 shares. GENERAL PROVISIONS OF THE PLAN The Plan is administered by the Option Committee. The members of the Option Committee are George J. Allen, Donald P. Bellum and Gregory Pusey. The Option Committee is authorized, within the limits of the Plan, to determine the individuals to whom, and the time or times at which, options will be granted, the number of shares to be subject to each grant and the applicable restriction period. In addition, the Option Committee may determine the purchase price for the shares subject to the option and specify such other terms and provisions of any grants of options under the Plan as it deems necessary or desirable; provided, however, that grants intended to qualify as incentive stock options shall not be for less than 100% of the fair market value of the shares underlying the grant on the date of the grant. The Option Committee may adopt rules and regulations for carrying out the purposes of the Plan. It may also make such changes in and to the Plan as it deems in the best interests of the Company; provided, however, that no change or addition may impair any option previously granted under the Plan and that the approval by the affirmative votes of the holders of a majority of the outstanding shares of the Company entitled to vote and represented at a meeting held in accordance with Delaware law is required for any amendment which would modify the eligibility requirements for receiving options under the Plan, increase the benefits accruing to any employee under the Plan or increase the number of shares as to which options may be granted. The term of any option granted under the Plan may not be greater than 10 years and no option may be exercised for a six-month period following the date of its grant (except in the event of death). The Option Committee may determine whether an option will be exercisable in installments and, if it so decides, the number of installments and the percentage of the option exercisable at each installment date. If an optionee ceases to be employed by the Company or its subsidiaries because of his death or permanent and total disability, any exercisable option not exercised by him or his representative within 90 days of the date his employment ceases will expire. Any exercisable options granted to an employee whose employment ceases for any other reasons may be exercised within 30 days of the date of termination of employment. Payment of the purchase price of any shares underlying an option must be made in cash or certified funds except that if the purchase price at one time exceeds $2,000, the Option Committee may permit payment to be made by delivery to the Company for cancellation shares of the Company's common stock previously owned by the optionee with a fair market value at the date of payment equal to the portion of the purchase price not paid in cash. The Option Committee may also permit the optionee to use shares to be received from the exercise of the option to satisfy the minimum federal and state tax withholding requirements. In the event of any merger, consolidation, reorganization or exchange or reclassification, appropriate adjustments will be made to the number and kind of shares of stock which underlie options to be granted under the Plan. In the event of a "change in control" of the Company or a "reorganization event" (as these terms are defined in the Plan), including the merger or consolidation, reorganization, dissolution or liquidation of the Company, the Option Committee may advance the dates upon which outstanding options may be exercised, provide for the payment upon termination or cancellation of an option of an amount by which the fair market value of the shares underlying the options exceeds their exercise price or make such other adjustments as it deems appropriate. Incentive stock options may be granted only to those employees who are regarded by the Committee as "key" employees. With respect to incentive stock options, the aggregate fair market value (determined at the time the option is granted) of the stock with respect to which an incentive stock option first becomes exercisable may not exceed $100,000 per calendar year. Further, no incentive stock option shall be granted to an individual if, at the time the option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company unless (i) at the time such option is granted the option price is at least 110% of the fair market value of the stock subject to the option and (ii) such option by its terms is not exercisable after the expiration of five years from the date of grant. No options may be granted after the date on which the Plan terminates. The Plan will terminate at midnight on May 5, 1997, unless eliminated or terminated at an earlier date by the Board of Directors. Termination of the Plan does not affect options then outstanding under the Plan. FEDERAL INCOME TAXATION OF OPTIONS The following is a summary of the federal income tax consequences of the issuance and exercise of stock options under the Plan to optionees and the Company under the Code. The discussion does not purport to be complete and does not cover foreign, state and/or local tax treatments. Options granted under the Plan may be either non-qualified stock options or incentive stock options as the Option Committee may determine. NON-QUALIFIED OPTIONS Non-qualified stock options do not qualify for special federal income tax treatment. Generally, no tax is imposed on the optionee upon the grant of a non-qualified stock option. Except as described below, upon the exercise of a non-qualified stock option, the optionee will be treated as receiving compensation taxable as ordinary income in the year of exercise, in an amount equal to the excess of the fair market value of the shares at the time of exercise over the option price paid for those shares. There is no item of tax preference upon such exercise. When shares received on exercise of a non - -qualified stock option are sold or otherwise disposed of, any difference between the fair market value of the shares at the time of exercise and the amount realized on the disposition would be treated as long-term or short-term capital gain or loss, depending on the period for which the shares have been held. Upon the exercise of a non-qualified stock option, the Company may claim a deduction for compensation paid in the same amount as compensation is recog nized to the optionee. INCENTIVE STOCK OPTIONS Options granted under the Plan may also constitute incentive stock options. No federal income tax is imposed on the optionee upon the grant of an incentive stock option. If the optionee does not dispose of shares acquired pursuant to the exercise of an incentive stock option within two years from the date the option was granted nor within one year after the shares were transferred to him, except for the item of alternative minimum tax adjustment described below, no income is recognized by the optionee by reason of his exercise of the option. The difference between the option price paid and the amount realized on disposition of the shares is treated as long-term capital gain or loss. In such event, the Company would not be entitled to any deduction in connection with the grant or exercise of the option or the disposition of the shares so acquired. Disqualifying Dispositions If, however, an optionee disposes of shares acquired pursuant to the exercise of an incentive stock option prior to the end of the two-year or one-year holding periods noted above, the disposal would be treated as a disqualifying disposition. The optionee is treated as having received, at the time of such disposition, compensation taxable as ordinary income. The Company may claim a deduction for compensation paid in the same amount as compensation is treated as received by the optionee. The amount treated as compensation is the excess of the fair market value of the shares at the time of exercise (or, in the case of a sale in which a loss (if sustained) would be recognized, the amount realized on the sale, if less) over the option price. Any amount realized in excess of the fair market value of the shares at the time of exercise would be treated as long-term or short-term capital gain, depending on the period for which the shares had been held. Compensation taxable to an optionee as ordinary income is generally subject to a maximum effective income tax rate of 39.6%. Exercise of incentive stock option is a tax preference The excess of the fair market value of shares acquired upon exercise of an incentive stock option over the option price paid for such shares is an item of tax preference for the taxable year in which the shares are acquired. Accordingly, such excess would be taken into account in determining the optionee's alternative minimum taxable income subject to the alternative minimum tax. The alternative minimum tax, which is imposed in addition to regular income tax, is equal to the excess of (i) up to 28% of the taxpayer's alternative minimum taxable income in excess of a specified exemption amount, over (ii) the taxpayer's regular tax on his regular taxable income. Computation of gain on sale of stock acquired by means of incentive stock option Gain on the sale or other disposition of stock acquired by means of an incentive stock option is computed differently for regular tax and alternative minimum tax purposes. If the taxpayer is subject to the regular income tax regime in the year of sale, the taxable gain (for regular tax purposes) will be equal to the excess of the amount received for such shares over the option price paid for them. The taxpayer may be entitled to a credit against the regular federal income tax imposed on such gain for all or a portion of the alternative minimum tax previously paid. For alternative minimum tax purposes the taxable gain will be equal to the excess of the amount received for such shares over the fair market value of such shares at the time the option was exercised, and no credit will be allowed against the resulting alternative minimum tax liability for any previously paid alternative minimum tax. USE OF PREVIOUSLY ACQUIRED SHARES FOR PAYMENT OF OPTION PRICE Non-qualified stock options In the case of a non-qualified stock option, if the option price is paid by the delivery of shares of common stock previously acquired by the optionee having a fair market value equal to the option price ("Previously Acquired Shares"), gain or loss would not be recognized on the exchange of the Previously Acquired Shares for a like number of shares pursuant to such an exercise of the option, and the optionee's basis in the number of shares received equal to the number of Previously Acquired Shares would be the same as his basis in the Previously Acquired Shares. In addition, the optionee would be treated as receiving compensation taxable as ordinary income equal to the fair market value at the time of exercise of the shares received in excess of the number of Previously Acquired Shares, and the optionee's basis in such excess shares would be equal to their fair market value at the time of exercise, except as described below. Incentive stock options In the case of an incentive stock option, the federal income tax consequences to the optionee of the payment of the option price with Previously Acquired Shares will depend on the nature of the Previously Acquired Shares. If the Previously Acquired Shares were acquired through the exercise of an incentive stock option and if such Previously Acquired Shares are being trans ferred prior to the expiration of the applicable minimum statutory holding period, the transfer would be treated as a disqualifying disposition of the Previously Acquired Shares (see DISQUALIFIYING DISPOSITIONS above). If the Previously Acquired Shares were acquired other than pursuant to the exercise of an incentive stock option, or were acquired pursuant to the exercise of an incentive stock option but had been held for the applicable minimum statutory holding period, no gain or loss would be recognized on the exchange of the Previously Acquired Shares. In either case, (i) the optionee's basis in the number of shares received equal to the number of Previously Acquired Shares would be the same as his basis in the Previously Acquired Shares, increased by any income recognized by the optionee upon the disqualifying disposition of the Previously Acquired Shares, (ii) the optionee's basis in the shares received in excess of the number of Previously Acquired Shares would be zero, and (iii) the other incentive stock option rules would apply. Upon a subsequent disqualifying disposition of the shares so received, the shares with the lowest basis would be treated as disposed of first. NON-QUALIFIED STOCK OPTIONS HELD BY PERSONS SUBJECT TO SECTION 16(B) If shares of common stock are received upon the exercise of a non-qualified stock option by an optionee who is subject to liability under Section 16(b) of the Securities Act Of 1934 (the "Exchange Act"), recognition of the compensation attributable to such exercise is postponed (for not more than six months) so long as the sale at a profit of the shares so acquired could subject the optionee to suit under Section 16(b) of the Exchange Act. One effect of this postponement is to measure the amount of compensation taxable to the optionee as ordinary income by reference to the fair market value of such shares at the time such liability to suit under Section 16(b) of the Exchange Act no longer exists (rather than at the earlier date of exercise of the option). Similarly, the fair market value of such shares at that time would become the optionee's basis in the shares for purposes of computing gain or loss upon a subsequent disposition, and the optionee's holding period for the shares would date from that time. However, an optionee may elect with respect to such shares, pursuant to Section 83(b) of the Code, to recognize the compensation attributable to such exercise at the time of such exercise, in which case his tax treatment would be as described above. Such election must be made not later than 30 days after the date such shares are transferred to the optionee. PROPOSAL TO EXTEND THE TERM OF OPTIONS IN THE NON-DISCRETIONARY STOCK OPTION PLAN The Board of Directors of the Company adopted a Non-Discretionary Stock Option Plan for non-employee directors (the "Non-Discretionary Plan"), on October 7, 1991. The Non-Discretionary Plan was approved by the stockholders on May 14, 1992. As originally adopted, the Non-Discretionary Plan provided for the grant of options with an expiration date of three years from the date of grant. The options also expire 90 days after the optionholder ceases to be a director of the Company. On March 14, 1995, the Option Committee of the Board determined that it would be in the best interest of the Company to extend the term of all outstanding options to employees of the Company to ten years from the respective dates of grant. The extension of the terms of the options to employees of the Company was made to foster and promote the long term financial success of the Company by attracting and retaining able employees, to enable such employees to participate in the financial success of the Company and to align the economic interests of the employees with stockholders. On March 14, 1995, the Board determined that similar incentives should be provided to the non-employee directors. The Board believes that a long term option position will more closely align the financial interests of the directors with the stockholders and create significant incentives for increasing stockholder value. The Board recommends that stockholders approve the extension of the term of the outstanding options pursuant to the Non-Discretionary Plan, as well as an amendment to the Non-Discretionary Plan to provide that all options to be granted in the future under the Non-Discretionary Plan will expire ten years after the date of grant. The provision that options also expire 90 days after the optionholder ceases to be a director of the Company will be unaffected by this amendment. The full text of the Non-Discretionary Plan, as amended, is set forth in Exhibit B. The Non-Discretionary Plan provides that the Company grant options to purchase 10,000 shares of the Company's common stock to each person who becomes a non-employee director of the Company and, as of October 1 of each year, options to purchase an additional 5,000 shares of common stock are granted to each person who is at that time a non-employee director of the Company. The exercise price of the options is the fair market value of the Company's common stock on the date the options are granted. The options are exercisable in full as of the date of grant. Shares acquired upon exercise of these options cannot be sold for six months following the date of grant. Options granted pursuant to the Non-Discretionary Plan are non-transferable during the optionee's lifetime other than by will, by the laws of descent and distribution, or by court order in a domestic relations proceeding. Options are exercisable during the optionee's lifetime only by the optionee or by the optionee's guardian or legal representative. At present the Company has outstanding options to purchase 106,750 shares of the Company's common stock under the Non-Discretionary Plan. The amendment to the Non-Discretionary Plan will not increase the number of shares available for purchase pursuant to outstanding options, nor will it increase the number of shares that have been authorized to be issued under the Non-Discretionary Plan. A total of 500,000 shares of common stock are authorized. Options to purchase 93,250 shares have been previously exercised; therefore, there remain 300,000 shares available for future grants. Options granted pursuant to the Non-Discretionary Plan will not qualify for the special tax benefits given to incentive stock options under Section 422 of the Internal Revenue Code. Accordingly, all of the stock options granted pursuant to the Non-Discretionary Plan may be deemed to be non-qualified stock options. A discussion of the federal income tax consequences of the issuance and exercise of non-qualified stock options is provided in the PROPOSAL TO INCREASE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER 1987 STOCK OPTION PLAN section above. The Company currently has seven directors who are eligible to receive option grants under the Non-Discretionary Plan. Details with respect to outstanding options to each non-employee director are included in the ELECTION OF DIRECTORS section above. The approval of holders of shares representing a majority of the votes represented at the Annual Meeting will be necessary to approve the extension of the term of options in the Non-Discretionary Plan. RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The firm of KPMG Peat Marwick was engaged to audit the financial statements of the Company for the year ended December 31, 1994. A representative of KPMG Peat Marwick is expected to be present at the meeting and available to respond to appropriate questions and, although the firm has indicated that no statement will be made, an opportunity for a statement will be provided. Management has not made an appointment of auditors for 1995 but anticipates that it will use KPMG Peat Marwick. There were no disagreements with the Company's principal independent accountants on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedure. SECTION 16 REPORTING Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company's officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership to the Securities and Exchange Commission. Officers, directors and greater than 10% stockholders are required by the regulations of the Securities and Exchange Commission to furnish the Company with copies of all Section 16(a) reports they file. Based solely on its review of copies of such reports received by it and written representations from certain reporting persons that no other reports were required for those persons, the Company believes that all filing requirements applicable to its officers, directors and greater than 10% stockholders were complied with for the fiscal year ended December 31, 1994. STOCKHOLDER PROPOSALS Any proposal which a stockholder may desire to present to the Annual Meeting of Stockholders for the year ending December 31, 1995, must be received in writing by the Secretary of the Company prior to December 1, 1995. OTHER MATTERS The Board does not know of any other matters to be brought before the meeting. However, if any other matters should properly come before the meeting, it is the intention of the persons named in the accompanying proxy to vote such Proxy as in their discretion they may deem advisable. BY ORDER OF THE BOARD OF DIRECTORS \s\ Donald E. Nilson Donald E. Nilson, Secretary DATED: April 14, 1995 EX-99.AINCENTIVESTOC 2 USMX, INC. 1987 STOCK OPTION PLAN This Stock Option Plan (the "Plan") is adopted in consideration for services rendered and to be rendered to USMX, Inc. and related companies. 1. Definitions. The terms used in this Plan shall, unless otherwise indicated or required by the particular context, have the following meanings: Board: The board of Directors of USMX, Inc. Code: The Internal Revenue Code of 1986, as amended. Common Stock: The $.001 par value Common Stock of USMX, Inc. Company: USMX, Inc., a corporation incorporated under the laws of Delaware, and any successors in interest by merger, operation of law, assignment or purchase of all or substantially all of the property, assets or business of the Company. Date of Grant: The date on which an Option (see below) is granted under the Plan. Disinterested Person: A director who has not been granted or awarded equity securities pursuant to any plan of the Company or of any of the Company's affiliates during one year prior to that directors' service as an administrator of the Plan, except as otherwise provided in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act") with respect to (a) participation in formula plans or ongoing securities acquisitions plans, and (b) an election to receive securities for an annual retainer fee. Employee: An Employee is an employee of the Company or any Related Company. Fair Market Value: The Fair Market Value of the Option Shares. Such Fair Market Value as of any date shall be reasonably determined by the Option Committee (sse below); provided, however, that if there is a public market for the Common Stock, the Fair Market Value of the Option Shares as of any date shall be the average of the representative closing bid and asked prices, as quoted by the National Association of Securities Dealers through NASDAQ (its automated system for reporting quotes), for the date in question, or, if the Common Stock is listed on the NASDAQ National Market System or is listed on a national stock exchange, the officially-quoted closing price on such exchange on the date in question. In the event the Common Stock is not traded publicly, the Fair Market Value of a share of Common Stock on any date shall be determined, in good faith, by the Board or the Option Committee after such consultation with outside legal, accounting and other experts as the Board or the Option Committee may deem advisable, and the Board or the Option Committee may deem advisable, and the Board or the Option Committee shall maintain a written record of its method of determining such value. Incentive Stock Options ("ISOs"): "Incentive Stock Options" as that term is defined in Section 422A of the Internal Revenue Code. Key Employee: A person designated by the Option Committee who either is employed by the Company or a Related Company (see below) and upon whose judgment, initiative and efforts the Company or a Related Company is largely dependent for the successful conduct of its business; provided, however, that Key Employees shall not include those members of the Board who are not employees of the Company or a Related Company. Non-Incentive Stock Options ("Non-ISOs"): Options which are not intended to qualify as "Incentive Stock Options" under Section 422A of the Code. Option: The rights granted to an Employee to purchase Common Stock pursuant to the terms and conditions of an Option Agreement (see below). Option Agreement: The written agreement (and any amendment or supplement thereto) between the Company and an Employee designating the terms and conditions of an Option. Option Committee: With respect to grants of Options to Employees other than Officers and Directors of the Company, the Plan shall be administered by an Option Committee ("Option Committee") composed of the Board or at least three members of the Board. With respect to grants of Options to Officers or to Directors, the Plan shall be administered by the Board, if each member is a Disinterested Person, or by a committee, selected by the Board, consisting of two or more persons, each of whom is a Disinterested Person. Such committee may also be deemed an Option Committee. Option Shares: The shares of Common Stock underlying an Option granted to an Employee. Optionee: An Employee who has been granted an Option. Related Company: Any corporation that is a "parent corporation" or a "subsidiary corporation" with respect to the Company, as those terms are defined in Section 425 of the Code. The determination of whether a corporation is a Related Company shall be made without regard to whether the corporation or the relationship between the corporation and the Company now exists or comes into existence hereinafter. 2. Purpose and Scope. (a) The purpose of this Plan is to advance the interests of the Company and its stockholders by affording Employees an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in this Company. (b) This Plan authorizes the Option Committee to grant Options to purchase shares of Common Stock to Employees selected by the Option Committee while considering criteria such as employment position or other relationship with the Company, duties and responsibilities, ability, productivity, length of service or association, morale, interest in the Company, recommendations by supervisors, and other matters. 3. Administration of the Plan. The Plan shall be administered by the Option Committee. The Option Committee shall have the authority granted to it under this section and under each other section of the Plan. In accordance with and subject to the provisions of the Plan, the Option Committee shall select the Optionees, shall determine (i) the number of shares of Common Stock to be subject to each Option, (ii) the time at which each Option is to be granted, (iii) whether an Option shall be granted in exchange for the cancellation and termination of a previously granted optionor options under the Plan or otherwise, (iv) the purchase price for the Option Shares, (v) the option period, and (vi) the manner in which the Option becomes exercisable. In addition, the Option Committee shall fix such other terms of each Option as the Option Committee may deem necessary or desirable. The Option Committee shall determine the form of Option Agreement to evidence each Option. The Option Committee from time to time may adopt such rules and regulations for carrying out the purposes of the Plan as it may deem proper and in the best interests of the Company. The Option Committee shall keep minutes of its meeting and those minutes shall be distributed to every member of the Board. The Board may from time to time make such changes in and additions to the Plan as it may deem proper and in the best interest of the Company; provided, however, that no such change or addition shall impair any Option previously granted under the Plan, and that the approval by the affirmative votes of the holders of a majority of the Company's securities entitled to vote and represented at a meeting duly held in accordance with the applicable laws of the State of Delaware, shall be required for any amendment which would: (a) modify the eligibility requirements for receiving Options under the Plan; (b) increase the benefits accruing to Employees under the Plan; or (c) increase the number of shares of Common Stock that may be issued under the Plan. All actions taken and all interpretations and determinations made by the Option Committee in good faith (including determinations of Fair Market Value) shall be final and binding upon all Employees, the Company and all other interested persons. No member of the Option Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, and all members of the Option Committee shall, in addition to rights they may have if Directors of the Company, be fully protected by the Company with respect to any such action, determination or interpretation. 4. The Common Stock. The Board is authorized to appropriate, issue and sell for the purposes of the Plan, and the Option Committee is authorized to grant Options with respect to, a total number, not in excess of 2,000,000 shares of Common Stock, either treasury or authorized but unissued, or the number and kind of shares of stock or other securities which in accordance with Section 9 shall be substituted for the 2,000,000 shares or into which such 2,000,000 shares shall be adjusted. All or any unsold shares subject to an Option that for any reason expires or otherwise terminates may again be made subject to Options under the Plan. 5. Eligibility. Options which are intended to qualify as ISOs will be granted only to Key Employees. Key Employees and other Employees may hold more than one Option under the Plan and may hold Options under the Plan and options granted pursuant to other plans or otherwise. 6. Option Price. The Option Committee shall determine the purchase price for the Option Shares, provided that the purchase price to be paid by Optionees for the Option Shares which are intended to qualify as ISOs shall not be less than 100 percent of the Fair Market Value of the Option Shares on the Date of Grant. The purchase price to be paid by Optionees for Option Shares which are not intended to qualify as ISOs may be less than the Fair Market Value of the Option Shares on the Date of Grant. The purchase price for the Option Shares shall be a fixed, and cannot be a fluctuating, price. 7. Duration and Exercise of Options. (a) The option period shall commence on the Date of Grant and shall be as set by the Option Committee, but not to exceed 10 years in length. No Option shall be exercised for the period of six months following the Date of Grant; provided, however, that this limitation shall not apply to the exercise of an Option pursuant to the terms of the relevant Option Agreement upon the Optionee's death. (b) During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee; provided, that in the event of the legal disability of an Optionee, the guardian or personal representative of the Optionee may exercise the Option. However, if the Option is an ISO it may be exercised by the guardian or personal representative of the Optionee only if such guardian or personal representative obtains a ruling from the Internal Revenue Service or an opinion of counsel to the effect that neither the grant nor the exercise of such power is violative of Section 422A(b)(5) of the Code. Any opinion of counsel must be both from counsel and in a form acceptable to the Option Committee. (c) The Option Committee may determine whether any Option shall be exercisable as provided in Paragraph (a) of this Section 7 or whether the Options shall be exercisable in installments only; if the Option Committee determines the latter, it shall determine the number of installments and the percentage of the Option exercisable at each installment date. All such installments shall be cumulative. (d) If the Optionee ceases to be employed by either the Company or a Related Company because of the death or permanent and total disability of the Optionee, any Option held by the Optionee at the time his employment ceases may be exercised within 90 days after the date his employment ceased, but only to the extent that the Option was exercisable according to its terms on the date the Optionee's employment ceased. After such 90-day period, any unexercised portion of an Option shall expire. (e) Notwithstanding the provisions of Paragraph (d) of this Section 7, if an Optionee's employment by the Company or a Related Company ceased for any reason other than the Optionee's death or permanent and total disability, any unexercised portion of any Option held by the Optionee at the time his employment ceases may be exercised within 30 days after the date his employment ceased, but only to the extent that the Option was exercisable according to its terms on the date the Optionee's employment ceased. After such date, any unexercised portion of an Option shall expire. (f) Each Option shall be exercised in whole or in part by delivering to the office of the Treasurer of the Company written notice of the number of shares with respect to which the Option is to be exercised by paying in full the purchase price for the Option Shares purchased as set forth in Section 8; provided, that an Option may not be exercised in part unless the purchase price for the Option Shares purchased is at least $2,000. (g) No Option Shares may be sold, transferred or otherwise disposed of within six months of the Date of Grant by any person who is subject to the reporting requirements of Section 16(a) of the Exchange Act on the Date of Grant. 8. Payment for Option Shares. If the purchase price of the Option Shares purchased by any Optionee at one time exceeds $2,000, the Option Committee may permit all or part of the purchase price for the Option Shares to be paid by delivery to the Company for cancellation shares of the Company's Common Stock previously owned by the Optionee with a Fair market Value as of the date of payment equal to the portion of the purchase price for the Option Shares that the Optionee does not pay in cash. In the case of all other Option exercises, the purchase price shall be paid in cash or certified funds upon exercise of the Option. 9. Change in Stock, Adjustments, Etc. In the event that each of the outstanding shares of Common Stock (other than shares held by dissenting stockholders which are not changed or exchanged) should be changed into, or exchanged for, a different number or kind of shares of stock or other securities of the Company, or, if further changes or exchanges of any stock or other securities into which the Common Stock shall have been changed, or for which it shall have bene exchanged, shall be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividends, reclassification, split-up, combination of shares or otherwise), then there shall be substituted for each share of Common Stock that is subject to the Plan but not subject to an outstanding Option thereunder, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock (other than shares held by dissenting stockholders which are not changed or exchanged) shall be so changed or for which each outstanding share of Common Stock (other than shares held by dissenting shareholders) shall be exchanged. Any securities so substituted shall be subject to similar successive adjustments. In the event of any such changes or exchanges, the Option Committee shall determine whether, in order to prevent dilution or enlargement of rights, an adjustment should be made in the number, or kind, or option price of the shares or other securities then subject to an Option or Options granted pursuant to the Plan and the Option Committee shall make any such adjustment, and such adjustments shall be made and shall be effective and binding for all purposes of the Plan. 10. Relationship to Employment. Nothing contained in the Plan, or in any Option granted pursuant to the Plan, shall confer upon any Optionee any right with respect to continuance of employment by the Company, or interfere in any way with the right of the Company to terminate the Optionee's employment at any time. 11. Nontransferability of Option. No Option granted under the Plan shall be transferable by the Optionee, either voluntarily or involuntarily, except by will or the laws of descent and distribution, or except pursuant to a qualified domestic relations order as defined in the Code, the Employee Retirement Income Security Act, or rules promulgated thereunder. Except as provided in the preceding sentence, any attempt to transfer the Option shall void the Option. 12. Rights as a Stockholder. No person shall have any rights as a stockholder with respect to any share covered by an Option until that person shall become the holder of record of such share and, except as provided in Section 9, no adjustments shall be made for dividends or other distributions or other rights as to which there is an earlier record date. 13. Securities Laws Requirements. No Option Shares shall be issued unless and until, in the opinion of the Company, any applicable registration requirements of the Securities Act of 1933, as amended, any applicable listing requirements of any securities exchange on which stock of the same class is then listed, and any other requirements of law or of any regulatory bodies having jurisdiction over such issuance and delivery, have been fully complied with. Each Option and each Option Share certificate may be imprinted with legends reflecting federal and state securities laws, restrictions and conditions, and the Company may comply therewith and issue "stop transfer" instructions to its transfer agent and registrar in good faith without liability. 14. Disposition of Shares. Each Optionee, as a condition of exercise, shall represent, warrant and agree, in a form of written certificate approved by the Company, as follows: (a) that all Option Shares are being acquired solely for his own account and not on behalf of any other person or entity; (b) that no Option Shares will be sold or otherwise distributed in violation of the Securities Act of 1933, as amended, or any other applicable federal or state securities laws; (c) that if he is subject to reporting requirements under Section 16(a) of the Securities Exchange Act of 1934, as amended, he will (i) not violate Section 16(b) of the Exchange Act, (ii) furnish the Company with a copy of each Form 4 and Form 5 filed by him, and (iii) timely file all reports required under the federal securities laws; and (d) that he will report all sales of Option Shares to the Company in writing on a form prescribed by the Company. 15. Effective Date of Plan; Termination Date of Plan. Subject to the approval of the Plan by the affirmative vote of the holders of a majority of the Company's securities entitled to vote and represented at a meeting duly held in accordance with applicable law, the Plan shall be deemed effective as of May 5, 1987. The Plan shall terminate at midnight on the date that is ten years from such date, except as t Options previously granted and outstanding under the Plan at that time. No Options shall be granted after the date on which the Plan terminates. The Plan may be abandoned or terminated at any earlier time by the Board, except with respect to any Options then outstanding under the Plan. 16. Limitation on Amount of Option. With respect to ISOs, the aggregate Fair Market Value (determined as of the time the ISO is granted) of the stock as to which an ISO may first become exercisable in a particular calendar year may not exceed $100,000. 17. Ten Percent Shareholder Rule. With respect to ISO's, no Option may be granted to a Key Employee who, at the time the Option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any "parent corporation" or "subsidiary corporation", as those terms are defined in Section 425 of the Code, unless at the time the Option is granted the purchase price for the Option Shares is at least 110 percent of the Fair Market Value of the Option Shares on the Date of Grant and such Option by its terms is not exercisable after the expiration of five years from the Date of Grant. For purposes of the preceding sentence, stock ownership shall be determined as provide din Section 425 of the Code. 18. Withholding Taxes. The Company, or any Related Company, may take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company, or any Related Company, is required by any law or regulation or any governmental authority, whether federal, state r local, domestic or foreign, to withhold in connection with any Option including, but not limited to, the withholding of all or any portion of any payment or the withholding of issuance of Option Shares to be issued upon the exercise of any Option. 19. Effect of Changes in Control and Certain Reorganizations. (a) In the event of a Change in Control of the Company (as defined below), the Option Committee may, in its discretion, make any or all of the following adjustments: (i) provide that all Options granted pursuant to the Plan shall become exercisable immediately upon such Change in Control (or such other time as the Committee shall determine), subject to Section 16 with respect to ISOs; (ii) provide for the payment to an Optionee upon surrender of an Option (or portion thereof) of an amount in cash equal to the excess of (a) the higher of (I) the aggregate Fair Market Value of the Option Shares covered by such Option (or portion thereof) on the date of surrender or (II) the average price per share paid for the most highly priced one percent of the Common Stock acquired in connection with the Change in Control times the number of Option Shares covered by such Option (or portion thereof) over (b) the aggregate exercise price, except that in no event shall an Optionee have a right to receive with respect to any ISO an amount in excess of the Fair Market Value on the date of surrender of the total number of Option Shares with respect to which such Option is surrendered, less the exercise price which the Optionee would otherwise have been required to pay upon purchase of such Option Shares had he exercised the Option; (iii) make any other adjustments, or take such other action, as the Option Committee, in its discretion, shall deem appropriate. In the event that the Option Committee provides for the surrender of Options pursuant to clause (ii) above, to the extent any Option is surrendered, it shall be deemed to have been exercised for purposes of Section 4. For purposes of this Section 19, a "Change in Control" of the Company shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement; provided that, without limitation, a Change in Control shall be deemed to have occurred if (i) any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, or any syndicate or group deemed to be a person under Section 14(d)(2) of the Exchange Act, is or becomes the "beneficial owner" (within the meaning of Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder), directly or indirectly, of securities of the Company representing 35% or more of the combined voting power of the Company's then outstanding securities entitled to vote in the election of directors of the Company; or (ii) during any period of two consecutive years (not including any period prior to the adoption of this Plan), individuals who at the beginning of such period constituted the Board and any new directors, whose appointment by the Board or nomination for election by the Company's stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors at the beginning of the period or whose appointment or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. (b) In the event that (i) the Company is merged or consolidated with another corporation, (ii) one person becomes the beneficial owner of all of the issued and outstanding equity securities of the Company (for purposes of this Section 19(b), the terms "person" and "beneficial owner" shall have the meanings assigned to them in Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder), (iii) a division or subsidiary of the Company is acquired by another corporation, person or entity, (iv) all or substantially all of the assets of the Company are acquired by another corporation, (v) the Company is reorganized, dissolved or liquidated (each such event in (i), (ii), (iii), (iv) or (v) being hereinafter referred to as a "Reorganization Event"), or (vi) the Board shall propose that the Company enter into a Reorganization Event, then the Option Committee may, in its sole discretion, make any or all of the following adjustments: (A) by written notice to each Optionee provide that such Optionee's Options shall be terminated or cancelled, unless exercised within thirty (30) days (or such other period as the Option Committee shall determine) after the date of such notice; (B) subject to Section 16 with respect to ISOs, advance the dates upon which any or all outstanding Options shall be exercised; (C) provide for the payment upon termination or cancellation of an Option of an amount in cash or securities equal to the excess, if any, of the Fair Market Value f the Option Shares subject to the Option at the time of such termination or cancellation over the exercise price of such Option; and (D) make any other adjustments, or take such other action, as the Option Committee, in its discretion, shall deem appropriate. Any action taken by the Option Committee may be made conditional upon the consummation of the applicable Reorganization Event. 20. Other Provisions. (a) The use of a masculine gender in the Plan shall also include within its meaning the feminine, and the singular may include the plural, and the plural may include the singular, unless the context clearly indicates to the contrary. (b) Any expenses of administering the Plan shall be borne by the Company. (c) This Plan shall be construed to be in addition to any and all other compensation plans or programs. Neither the adoption of the Plan by the Board nor the submission of the Plan tot he stockholders of the Company for approval shall be construed as creating any limitations on the power of authority of the Board to adopt such other additional incentive or other compensation arrangements as the Board may deem necessary or desirable. (d) The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and the rights of any and all personnel having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State of Colorado. EX-99.BNON-DISCRETIO 3 USMX, INC. NON-DISCRETIONARY STOCK OPTION PLAN This Non-Discretionary Stock Option Plan (the "Plan") is adopted by USMX, Inc. (the "Company"), on October 7, 1991. 1. Definitions. Unless otherwise indicated or required by the particular context, the terms used in this Plan shall have the following meanings: Board: The Board of Directors of the Company. Code: The Internal Revenue Code of 1986, as amended. Common Stock: The $.001 par value common stock of the Company. Company: USMX, Inc., a corporation incorporated under the laws of Delaware, any current or future wholly owned subsidiaries of the Company, and any successors in interest by merger, operation of law, assignment or purchase of all or substantially all of the property, assets or business of the Company. Date Of Grant: The date on which an Option, as defined below, is granted under the Plan. Fair Market Value: Fair Market Value of the Common Stock as of a certain date shall be calculated as follows: (i) if there is a public market for the Common Stock, the Fair Market Value of the Common Stock shall not be less than the last reported sale price for the Common Stock on that date (or on the preceding stock market business day if such date is a Saturday, Sunday, or a holiday), on either a national or local over-the- counter market, as reported by The Denver Post, Denver, Colorado, or if not available there, in the Wall Street Journal; (ii) if no such published last sale price is available and a published bid price is available from one of those sources, then the Fair Market Value of the Common Stock shall not be less than such last reported bid price for the Common Stock on that date (or on the preceding stock market business day if such date is a Saturday, Sunday, or a holiday), and (iii) if no such published bid price is available, the Fair Market Value of the Common Stock shall not be less than the average of the bid prices quoted as of the close of business on that date (or on the preceding stock market business day if such date is a Saturday, Sunday, or a holiday) by any two independent persons or entities making a market for the Common Stock, and (iv) if there are no bid prices available, the Fair Market Value shall be as determined in good faith by the Board after such consultation with outside legal, accounting and other experts as the Board may deem advisable. Non-Employee Director: A person who is a member of the Board of Directors and who is not an employee of the Company. Option: The rights to purchase Common Stock granted pursuant to the terms and conditions of an Option Agreement (defined below). Option Agreement: The written agreement (including any amendments or supplements thereto) between the Company and a Non-Employee Director designating the terms and conditions of an Option. Option Shares: The shares of Common Stock underlying an Option granted pursuant to this Plan. Optionee: A Non-Employee Director who has been granted an Option. 2. Purpose And Scope. (a) The purpose of the Plan is to advance the interests of the Company and its shareholders by affording Non-Employee Directors, whose participation and guidance contributes to the successful operation of the Company, an opportunity for investment in the Company and the incentive advantages inherent in stock ownership in the Company. (b) This Plan provides that Options be granted to Non-Employee Directors according to the formula set forth in Section 3 of this Plan. 3. Operation Of The Plan. (a) Grant Of Options: Amount And Timing. Options to purchase 10,000 shares of Common Stock shall be granted under the Plan to each Non-Employee Director at the later to occur of (i) October 7, 1991 and (ii) the date he or she becomes a Non-Employee Director of the Company. In addition, effective October 1 of each year, commencing 1992, Options to purchase an additional 5,000 shares shall be granted to the Optionee provided that, at that time, he or she is a Non-Employee Director. All Options shall be exercisable only as set forth in Section 3(c) below and shall be subject to the other terms and conditions set forth in this Plan or otherwise established by the Company. (b) Option Exercise Price. The exercise price for the Options shall be the Fair Market Value of the Common Stock on the Date Of Grant. (c) Exercise. Each Option granted pursuant to this Plan shall be exercisable in full effective as of the Date of Grant, except as provided in Section 6 (c) below. (d) Term. Each Option shall expire ten years from the Date Of Grant, except that an Option will expire, if not exercised, 90 days after the Optionee ceases to be a director of the Company. (e) Amendments. This Plan may be changed or modified from time to time provided, however, that (A) no such change or modification shall impair any Option previously granted under the Plan, (B) the provisions relating to the amount, price and timing of the options shall not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act, or rules promulgated thereunder, and (C) the approval by the affirmative votes of the holders of a majority of shares of the Company's securities present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the state of Delaware, shall be required for any amendment which would do any of the following: (i) materially modify the eligibility requirements for receiving Options under the Plan; (ii) materially increase the benefits accruing to Non-Employee Directors under the Plan; or (iii) materially increase the number of shares of Common Stock that may be issued under the Plan. 4. Number of Shares. The Board is authorized to appropriate, issue and sell for the purposes of the Plan an aggregate maximum of 500,000 shares of Common Stock, including both treasury and newly issued shares, or the number and kind of shares of stock or other securities which in accordance with Section 8 shall be substituted for the 500,000 shares or into which such 500,000 shares shall be adjusted. All or any unsold shares subject to an Option, that for any reason expires or otherwise terminates before it has been exercised, again may be made subject to other Options under the Plan. 5. Eligibility. Options shall be granted under the Plan only to Non- Employee Directors provided that any Non-Employee Director may waive his right to participate in the Plan. 6. Exercise Of Options. (a) During the lifetime of the Optionee, the Option shall be exercisable only by the Optionee; provided that, subject to Sections 3(c) and 3(d), in the event of the legal disability of an Optionee, the guardian or personal representative of the Optionee may exercise the Option. (b) Each Option shall be exercised in whole or in part by delivering to the office of the Treasurer of the Company written notice of the number of shares with respect to which the Option is to be exercised and by paying in full the purchase price for the Option Shares purchased as set forth in Section 7 herein; provided, that an Option may not be exercised in part unless the purchase price for the Option Shares purchased is at least $1,000. (c) No Option may be exercised until the Plan is approved by the shareholders of the Company as provided in Section 14 below. (d) No Option Shares may be sold, transferred or otherwise disposed of for a period of at least six months following the Date Of Grant of the Option. (e) No Option Shares may be sold, transferred or otherwise disposed of for a period of at least six months following shareholder approval of the Plan. 7. Payment For Option Shares. (a) For any single purchase by an Optionee of Option Shares at a total purchase price in excess of $5,000, the Company, in its sole discretion, upon request by the Optionee, may permit all or part of the purchase price for the Option Shares to be paid by delivery to the Company for cancellation shares of the Common Stock previously owned by the Optionee ("Previously Owned Shares") with a Fair Market Value as of the date of the payment equal to the portion of the purchase price for the Option Shares that the Optionee does not pay in cash. Notwithstanding the above, an Optionee shall be permitted to exercise his Option by delivering Previously Owned Shares only if he has held, and provides appropriate evidence of such, the Previously Owned Shares for more than six months prior to the date of exercise. This period (the "Holding Period") may be extended by the Company acting in its sole discretion as is necessary, in the opinion of the Company, so that, under generally accepted accounting principles, no compensation shall be considered to have been or to be paid to the Optionee as a result of the exercise of the Option in this manner. At the time the Option is exercised, the Optionee shall provide an affidavit, and such other evidence and documents as the Company shall request, to establish the Optionee's Holding Period. As indicated above, an Optionee may deliver shares of Common Stock as part of the purchase price only if the Company, in its sole discretion agrees, on a case by case basis, to permit this form of payment. (b) If payment for the exercise of an Option is made other than by the delivery to the Company for cancellation of shares of the Common Stock, the purchase price shall be paid in cash or certified funds. 8. Change In Stock, Adjustments, Etc. In the event that each of the outstanding shares of Common Stock (other than shares held by dissenting shareholders which are not changed or exchanged) should be changed into, or exchanged for, a different number or kind of shares of stock or other securities of the Company, or if further changes or exchanges of any stock or other securities into which the Common Stock shall have been changed, or for which it shall have been exchanged, shall be made (whether by reason of merger, consolidation, reorganization, recapitalization, stock dividends, reclassification, split-up, combination of shares or otherwise), then there shall be substituted for each share of Common Stock that is subject to the Plan but not subject to an outstanding Option hereunder, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock (other than shares held by dissenting shareholders which are not changed or exchanged) shall be so changed or for which each outstanding share of Common Stock (other than shares held by dissenting shareholders) shall be so changed or for which each such share shall be exchanged. Any securities so substituted shall be subject to similar successive adjustments. In the event of any such changes or exchanges, (i) the Company shall adjust the number, or kind, or option price of the shares or other securities that are then subject to an Option or Options granted pursuant to the Plan in order to prevent dilution or enlargement of rights and (ii) such adjustments shall be effective and binding for all purposes of the Plan. 9. Status As Director. Nothing contained in the Plan, or in any Option granted or Option Shares issued pursuant to the Plan, (i) shall confer upon any Optionee any right with respect to continuance of his position as a director of the Company, or (ii) shall interfere in any way with the right of the Company at any time to elect not to continue or to terminate the Optionee's position as a director of the Company. 10. Nontransferability Of Option. No Option granted under the Plan shall be transferable by the Optionee, either voluntarily or involuntarily, except by will or by the laws of descent and distribution, or pursuant to a qualified domestic relations order as defined in the Code, the Employee Retirement Income Security Act, or rules promulgated thereunder. Except as provided in the preceding sentence, any attempt to transfer an Option shall void the Option. 11. Rights As A Shareholder. No person shall have any rights as a shareholder with respect to any share covered by an Option until that person shall become the holder of record of such share and, except as provided in Section 8, no adjustments shall be made for dividends or other distributions or other rights as to which there is an earlier record date. 12. Securities Laws Requirements. No Option Shares shall be issued unless and until, in the opinion of the Company, any applicable registration requirements of the Securities Act of 1933, as amended, any applicable listing requirements of any securities exchange on which stock of the same class is then listed, and any other requirement of law or of any regulatory bodies having jurisdiction over such issuance and delivery, have been fully complied with. Each Option Agreement and each Option Share certificate may be imprinted with legends reflecting federal and state securities laws restrictions and conditions, and the Company may comply therewith and issue "stop transfer" instructions to its transfer agent and registrar in good faith without liability. 13. Disposition Of Shares. To the extent reasonably requested by the Company, each Optionee, as a condition of exercise, shall represent, warrant and agree, in a form of written certificate approved by the Company, as follows: (a) that all Option Shares are being acquired solely for his own account and not on behalf of any other person or entity; (b) that no Option Share will be sold for at least six months following the Date Of Grant of the Option (c) that no Option Shares will be sold or otherwise distributed in violation of the Securities Act of 1933, as amended, or any other applicable federal or state securities laws; (d) that he will report all sales of Option Shares to the Company in writing on a form prescribed by the Company; and (e) that if he is subject to reporting require ments under Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) he will not violate Section 16(b) of the Exchange Act, (ii) he will furnish the Company with a copy of each Form 4 and Form 5 filed by him, and (iii) he will timely file all reports required under the federal securities laws. 14. Effective Date Of Plan; Termination Date Of Plan. The Plan shall be deemed effective October 7, 1991 and shall terminate at midnight on October 1, 2001, except as to Options previously granted and outstanding under the Plan at that time. No Options shall be granted after the date on which the Plan terminates. The Plan may be abandoned or terminated at any earlier time by the affirmative vote of the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Delaware, except with respect to any Options then outstanding under the Plan. If the adoption of this Plan is not approved by the affirmative vote of the holders of a majority of the shares of Common Stock present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of Delaware by October 7, 1992, then all Options granted shall terminate and the Plan shall be terminated. 15. Withholding Taxes. The Option Agreement shall provide that the Company may take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Company is required by any law or regulation or any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Option including, but not limited to, the withholding of all or any portion of any payment or the withholding of issuance of Option Shares to be issued upon the exercise of any Option. 16. Other Provisions. The following provisions are also in effect under the Plan: (a) The use of a masculine gender in the Plan shall also include within its meaning the feminine, and the singular may include the plural, and the plural may include the singular, unless the context clearly indicates to the contrary. (b) Any expenses of administering the Plan shall be borne by the Company. (c) This Plan shall be construed to be in addition to any and all other compensation plans or programs. The adoption of the Plan by the shareholders of the Company shall not be construed as creating any limitations on the power or authority of the Board to adopt such other additional incentive or other compensation arrangements as the Board may deem necessary or desirable. (d) The validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and the rights of any and all persons having or claiming to have an interest therein or thereunder shall be governed by and determined exclusively and solely in accordance with the laws of the State of Colorado. -----END PRIVACY-ENHANCED MESSAGE-----