SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
CADENCE RESOURCES CORPORATION
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
CADENCE RESOURCES CORPORATION
6 EAST ROSE STREET
WALLA WALLA, WA 99362
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, APRIL 20, 2004
---------------
NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of Stockholders
(the "Meeting") of CADENCE RESOURCES CORPORATION (the "Company"), will be held
at the Radisson Lexington, 511 Lexington Avenue, New York, New York 10017, on
Wednesday, April 20, 2004, at 1:00 P.M., to consider and act upon the following:
1. the election of five persons named in the accompanying Proxy
Statement to serve as directors of the Company for a term of one
year and until their successors are duly elected and qualified;
2. to approve the Company's 2004 Equity Incentive Plan, which
provides for the issuance of up to 1,000,000 shares of the
Company's common stock as bonus awards or restricted stock awards
or pursuant to options to directors, officers, employees and
consultants of the Company; and
3. to consider and transact such other business as may properly come
before the Meeting or any adjournment thereof.
A Proxy Statement, form of proxy and the Annual Report for the fiscal
year ended September 30, 2003 are enclosed herewith. Only holders of record of
Common Stock at the close of business on February 20, 2004 are entitled to
receive notice of and to attend the Meeting and any adjournments thereof. A
complete list of the stockholders entitled to vote will be available for
inspection by any stockholder, for any purpose germane to the Meeting, (i) at
least 10 days prior to the Meeting during ordinary business hours at the offices
of the Company and (ii) at the Meeting. If you do not expect to be present at
the Meeting, you are requested to fill in, date and sign the enclosed Proxy,
which is solicited by the Board of Directors of the Company, and to mail it
promptly in the enclosed envelope. If you vote by telephone or the Internet, you
do not need to return the proxy card. In the event you attend the Meeting in
person, you may, if you desire, revoke your Proxy and vote your shares in
person.
By Order of the Board of Directors
John P. Ryan
Chief Financial Officer
Dated: March 18, 2004
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IMPORTANT
THE RETURN OF YOUR SIGNED PROXY AS PROMPTLY AS POSSIBLE WILL GREATLY FACILITATE
ARRANGEMENTS FOR THE MEETING. NO POSTAGE IS REQUIRED IF THE PROXY IS RETURNED IN
THE ENVELOPE ENCLOSED FOR YOUR CONVENIENCE AND MAILED IN THE UNITED STATES. IF
YOU VOTE BY TELEPHONE OR THE INTERNET YOU DO NOT NEED TO RETURN THE PROXY CARD.
- --------------------------------------------------------------------------------
CADENCE RESOURCES CORPORATION
6 EAST ROSE STREET
WALLA WALLA, WA 99362
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
APRIL 20, 2004
----------------------------------------
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Cadence Resources Corporation (the
"Company"), to be voted at the Annual Meeting of Stockholders of the Company
(the "Meeting") which will be held at the Radisson Lexington, 511 Lexington
Avenue, New York, New York 10017 on Wednesday, April 20, 2004 at 1:00 P.M.,
local time, and any adjournment or adjournments thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting of Stockholders and in this
Proxy Statement.
The principal executive offices of the Company are located at 6 East
Rose Street, Walla Walla, WA 99362. The approximate date on which this Proxy
Statement and accompanying Proxy will first be sent or given to stockholders is
March 19, 2004.
A Proxy, in the enclosed form, which is properly executed, duly
returned to the Company and not revoked will be voted in accordance with the
instructions contained therein and, in the absence of specific instructions,
will be voted in favor of the proposals and in accordance with the judgment of
the person or persons voting the Proxy on any other matter that may be brought
before the Meeting. Each such Proxy granted may be revoked at any time
thereafter by writing to the Chief Financial Officer of the Company prior to the
Meeting, by execution and delivery of a subsequent proxy or by attendance and
voting in person at the Meeting, except as to any matter or matters upon which,
prior to such revocation, a vote shall have been cast pursuant to the authority
conferred by such Proxy. The cost of soliciting proxies will be borne by the
Company. Following the mailing of the proxy materials, solicitation of proxies
may be made by officers and employees of the Company, or anyone acting on their
behalf, by mail, telephone, telegram or personal interview.
VOTING SECURITIES
Stockholders of record as of the close of business on February 20, 2004
(the "Record Date") will be entitled to notice of, and to vote at, the Meeting
or any adjournments thereof. On the Record Date, there were 12,593,827
outstanding shares of the Company's common stock, $0.01 par value per share (the
"Common Stock"). Each holder of Common Stock is entitled to one vote for each
share held by such holder. The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of Common Stock is necessary to
constitute a quorum at the Meeting. Proxies submitted which contain abstentions
and broker non-votes will be deemed present at the Annual Meeting for
determining the presence of a quorum.
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Shares abstaining with respect to any matter will be considered votes
represented, entitled to vote and cast with respect to that matter. Shares
subject to broker non-votes with respect to any matter will be considered not
voted with respect to that matter.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of February 20, 2004, certain
information regarding the ownership of voting securities of the Company by each
stockholder known to the management of the Company to be (i) the beneficial
owner of more than 5% of the Company's outstanding Common Stock, (ii) the
directors of the Company, (iii) the current executive officers of the Company
named in the Summary Compensation Table herein under "Executive Compensation"
and (iv) all executive officers and directors as a group. The Company believes
that the beneficial owners of the Common Stock listed below, based on
information furnished by such owners, have sole investment and voting power with
respect to such shares.
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (2) OUTSTANDING SHARES (3)
------------------------------------------ -------------------------------- --------------------------
Howard Crosby ........................... 971,218 (4) 7.71%
John Ryan ............................... 746,734 (5) 5.93%
Kevin Stulp.............................. 425,450 (6) *
Jeffrey M. Christian..................... 80,000 (7) *
Glenn DeHekker........................... 80,000 (7) *
Thomas Kaplan............................ 2,410,992 (9) 19.14%
154 West 18th Street
New York, New York
Nathan A. Low Roth IRA and affiliates.... 2,261,992 (8) 17.82%
641 Lexington Avenue
New York, New York
All executive officers and directors .... 2,274,402 (10) 17.71%
as a group (5 persons)
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* Less than 1%
(1) Under the rules of the SEC, addresses are only given for holders of more
than 5% of the outstanding common stock of Cadence who are not officers
or directors of Cadence.
(2) Under the rules of the SEC, a person is deemed to be the beneficial owner
of a security if such person has or shares the power to vote or direct
the voting of such security or the power to dispose or direct the
disposition of such security. A person is also deemed to be a beneficial
owner of any securities if that person has the right to acquire
beneficial ownership within 60 days of the date hereof. Except as
otherwise indicated the named entities or individuals have sole voting
and investment power with respect to the shares of common stock
beneficially owned.
(3) Represents the number of shares of common stock beneficially owned as of
February 20, 2004 by each named person or group, expressed as a
percentage of the sum of all of (i) the shares of such class outstanding
as of such date, and (ii) the number of shares not outstanding, but
beneficially owned by such named person or group as of such date.
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(4) Includes 204,168 shares of common stock held by Crosby Enterprises, Inc.
and 29,000 shares of common stock owned by Dotson Exploration Company.
(5) Includes 190,750 shares of common stock owned by Nancy Martin-Ryan;
45,000 shares of common stock owned by Nancy Martin Ryan as custodian for
Karen Ryan; 45,000 shares of common stock owned by Nancy Martin Ryan as
custodian for Patrick Ryan; 150,000 shares owned by J.P. Ryan Company,
Inc.; 29,000 shares of common stock owned by Dotson Exploration Company;
and 87,500 shares of common stock owned by Andover Capital Corporation.
(6) Includes options currently exercisable for 100,000 shares of common
stock, 2,750 shares of common stock owned by Mr. Stulp's IRA, and 1,750
shares of common stock owned by a charitable remainder trust.
(7) Includes options currently exercisable for 75,000 shares of common stock.
(8) Includes 131,000 shares of common stock owned by Nathan A. Low,
individually, 40,000 shares of common stock held by the Nathan A. Low
Family Trust and options to purchase 100,000 shares of common stock owned
by Lisa Low as Custodian for Daniel Low, Michael Low, Gabriel Low and
Chantal Low.
(9) Consists of 480,811 shares of common stock owned by LCM Holdings LDC,
480,811 shares of common stock owned by Electrum Resources, LLC,
1,329,370 shares of common stock owned by Electrum Capital, LLC and
120,000 shares of common stock owned by CGT Management Ltd.
(10) Includes options currently exercisable for 250,000 shares of common
stock; 204,168 shares of common stock held by Crosby Enterprises, Inc.;
29,000 shares of common stock owned by Dotson Exploration Company;
190,750 shares of common stock owned by Nancy Martin-Ryan; 45,000 shares
of common stock owned by Nancy Martin Ryan as custodian for Karen Ryan;
45,000 shares of common stock owned by Nancy Martin Ryan as custodian for
Patrick Ryan; 150,000 shares owned by J.P. Ryan Company, Inc.; and 87,500
shares of common stock owned by Andover Capital Corporation; 5,000 shares
of common stock owned by Jeffrey M. Christian; and 5,000 shares of common
stock owned by Glenn DeHekker.
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ACTIONS TO BE TAKEN AT THE MEETING
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PROPOSAL 1
ELECTION OF DIRECTORS
--------------------------------------
Unless otherwise indicated, the shares represented by all Proxies
received by the Board of Directors will be voted at the Meeting in accordance
with their terms and, in the absence of contrary instructions, for the election
of Howard M. Crosby, John P. Ryan, Kevin Stulp, Glenn DeHekker and Jeffrey M.
Christian as directors to serve for a term of one year and/or until their
successors are elected or appointed and qualified.
The Board of Directors has no reason to expect that any of the nominees
will be unable to stand for election at the date of the Meeting. In the event
that a vacancy among the original nominees occurs prior to the Meeting, the
Proxies will be voted for a substitute nominee or nominees named by the Board of
Directors and for the remaining nominees. Directors are elected by a plurality
of the votes cast.
The following table sets forth information about each director, nominee
for director and executive officer of the Company.
NAME AGE POSITION
------------------------ -------- ---------------------------------
Howard M. Crosby 51 President, Treasurer and Director
John P. Ryan 42 Vice President, Secretary and
Director
Kevin Stulp 47 Director
Glenn DeHekker 48 Director
Jeffrey M. Christian 49 Director
Under the Company's Bylaws, the authorized number of directors of our
company is set at no fewer than three and no more than ten directors. We
currently have a board of directors with five members. Each director serves for
a term of one year that expires at the following annual shareholders' meeting.
Each officer serves at the pleasure of the board of directors and until a
successor has been qualified and appointed. There are no family relationships,
or other arrangements or understandings between or among any of the directors,
executive officers or other person pursuant to which such person was selected to
serve as a director or officer.
We did not conduct an annual meeting following the fiscal year ended
September 30, 2002. Therefore, Howard M. Crosby, John P. Ryan and Kevin Stulp
continue to serve beyond their elected term under provisions of the Utah Revised
Business Corporation Act providing that
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the existing directors continue to serve until their successors are elected or
appointed. Glenn DeHekker and Jeffrey M. Christian were appointed to the Board
of Directors in January of 2004. Set forth below is certain biographical
information regarding each of our directors and executive officers:
Mr. Crosby has served as our President and a director since February
1994. He has served as our treasurer since January 1998. Since 1989, Mr. Crosby
has been president of Crosby Enterprises, Inc., a family-owned business advisory
and public relations firm. Mr. Crosby received a B.A. degree from the University
of Idaho. Mr. Crosby is also an officer and director of White Mountain Titanium
Corporation., a publicly traded gold mining exploration company, and Dotson
Exploration Company and Nevada-Comstock Mining Company (formerly Caledonia
Silver-Lead Mines Company), both privately held companies.
Mr. Ryan has served as our Vice President of Corporate Development
since September 1996, as Secretary since October 1998 and as a member of our
board of directors since April 1997. Mr. Ryan is a degreed mining engineer. From
June 1996 to February 2000, Mr. Ryan served as Secretary and Director for
Metalline Mining Company and President and Director for Grand Central Silver
Mines. From August, 2000 to the present, he has served as a Director and the
Chief Financial Officer of Trend Mining Company, a publicly traded mineral
exploration and development company, from July, 2000 to the present, he has
served as a Director of Western Goldfields, Inc., a publicly traded gold mining
exploration company, and since February 2004 he has served as an officer and
director of White Mountain Titanium Corporation, a publicly trading mining
exploration company. Other companies with which Mr. Ryan holds an officer and/or
director position include Bio-Quant, Inc., Nevada-Comstock Mining Company,
Continental Timber Company, Inc., Rio Grande Resources, Inc., and Dotson
Exploration Company. Many of these companies have only minimal activity and
require only a small amount of Mr. Ryan's time. Mr. Ryan is a former U.S. Naval
Officer and obtained a B.S. in Mining Engineering from the University of Idaho
and a Juris Doctor from Boston College Law School.
Mr. Stulp has served as a director since March 1997. Since August 1995,
Mr. Stulp has been an independent consultant in the fields of volume electronics
and manufacturing, general business consulting, business strategy, business use
of the Internet, automation and integration through computers, and financial
analysis. From December 1983 to July 1995, Mr. Stulp held various positions with
Compaq Computer Corporation, including industrial engineer, new products
planner, manufacturing manager, director of manufacturing and director of
manufacturing reengineering. Mr. Stulp holds an M.B.A. and B.S. in Mechanical
Engineering, both from the University of Michigan, and a B.S. from Calvin
College, Grand Rapids, Michigan.
Mr. DeHekker is a professional engineer with 25 years experience in the
oil and gas industry throughout the United States, Canada, and overseas. He has
a B.Sc. in Mechanical Engineering from the University of Missouri and a M.Sc. in
Petroleum Engineering from Stanford University. From 1996 to 2001, Mr. DeHekker
held several senior management positions, firstly as Development Manager for
Marathon's multi-billion dollar project on Sakhalin Island in eastern Russia,
based out of Houston and Moscow, and secondly as Engineering, Geoscience, and
Operations Manager for Marathon's Canadian Operations, based out of Calgary.
Since 2001, Mr. DeHekker has been providing project management and consulting
services in oil and gas management, operations, and engineering.
-8-
Mr. Christian is the Managing Director of CPM Group, which he and
several associates created in June 1986, in a leveraged buyout of the Goldman
Sachs Commodities Research Group which they comprised. As Managing Director, Mr.
Christian is responsible for the total operation of CPM Group, supervising a
respected group of analysts, investment bankers, and dealers dedicated to
precious metals and commodities market research, consulting, and investment
banking. He is actively engaged in the research products of CPM Group, taking
primary responsibility for the long term (10 year) projections for the precious
metals and copper markets. Mr. Christian has a Bachelors of Journalism from the
University of Missouri and has engaged in post-graduate non-degree studies in
econometrics, international economics and finance, and international political
science. Mr. Christian is Chairman of Electronic Precious Metals, LLC, a
director of Trend Mining Company and Chief Financial Officer and director of
North American Emerald Mines, Inc.
Set forth below is certain biographical information about our primary
geological consultant. While not an employee of ours, he is under contract to
provide us with consulting services on a 75% of full-time basis.
Mr. Lucius C. Geer has served as our chief consulting geologist since
July 2001 and has been an independent geological consultant since 1971. Prior to
that he held positions as Chief of Exploration for Texas Crude, Inc., a private
Houston based oil and gas company. From 1966-1969 he was the Division
Exploration Manager for Signal Oil & Gas based in Los Angeles. From 1957-1966 he
was the Division Geophysicist for Union Oil of California (UNOCAL). Mr. Geer has
an M.S. in Geology from the University of Houston and a B.S. in Geology from
Mississippi State University.
COMPENSATION OF DIRECTORS
As of February 20, 2004, the Company compensates its directors in cash
and in shares of our common stock. The Company grants each director (employee
and non-employee) 5,000 shares of Common Stock per quarter of completed service.
In addition, Messrs. DeHekker and Christian will each receive (1) an option to
purchase 50,000 shares of Common Stock on the anniversary of their appointment
to the Board and (2) 2,500 restricted shares of common stock on the anniversary
of their appointment to any committee of the Board. Board members may be granted
stock options pursuant to Board recommendation and approval. The Company also
pays its non-employee directors $1,600 for each board meeting they attend in
person and $600 for each telephonic meeting and the Company's employee directors
$600 for each board meeting they attend in person.
During fiscal 2003, 225,000 shares of Common Stock were awarded to the
Company's directors as compensation. There are no contractual arrangements with
any member of the Board of Directors. In addition, the Company granted options
to purchase 200,000 shares of Common Stock to Kevin Stulp, a nonemployee
director at an exercise price of $0.75 per share. Mr. Stulp exercised 100,000 of
these options in fiscal year 2003. Mr. Stulp's remaining options expire on March
1, 2007. The Company also granted options to purchase 200,000 shares of Common
Stock to Guma Aguiar, who, at the time of grant was a director, at a price of
$1.35, which options expire on July 8, 2007. Mr. Aguiar resigned his position as
a director effective June 30, 2003.
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NONEMPLOYEE DIRECTOR OPTIONS
SEPTEMBER 30, 2003
SHARES OF COMMON STOCK
NAME UNDERLYING UNEXERCISED OPTIONS
------------------------------- ------------------------------
Kevin Stulp 100,000
CERTAIN INFORMATION ABOUT THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors is responsible for the management of the
Company. During the fiscal year ended September 30, 2003, the Board of Directors
of the Company held four (4) meetings. During the year ended September 30, 2003,
each director who was a director at the time a meeting was held attended at
least 75 percent of the aggregate of (i) the number of meetings of the Board of
Directors held during the period he served on the Board, and (ii) the number of
committee meetings held during the period he served on such committee. The Board
of Directors has a Compensation Committee, comprised of Messrs. Stulp, DeHekker
and Christian, and an Audit Committee, comprised of Messrs. Stulp, DeHekker and
Christian. The Board of Directors does not currently have a Nominating
Committee, but anticipates establishing a Nominating Committee prior to the
Company's next annual meeting. The Board of Directors does not believe that it
is necessary to have a Nominating Committee because it believes that the
functions of a Nominating Committee can be adequately performed by its
independent members. The independent members who participate in the
consideration of director nominees are Messrs. Stulp, DeHekker and Christian,
each of whom is "independent" under the listing standards of Nasdaq.
The Company recently appointed an Audit Committee whose function,
among other things, is to review the financial reports and other financial
information provided by the Company to any governmental body and the public; the
Company's system of internal controls regarding finance, accounting and legal
compliance that management and the Board may from time to time adopt; and the
Company's auditing, accounting and financial reporting processes generally. The
Audit Committee also appoints the independent auditors and approves fees and
other compensation to be paid to the independent auditors. The Audit Committee
does not currently operate under a written charter but comports with Section
3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The Company's
board of directors anticipates adopting an Audit Committee Charter in the next
few months. Each of the members of the Audit Committee meets the independence
requirements for audit committee members under the listing standards of the
Securities and Exchange Commission and Nasdaq. The Audit Committee did not exist
during the fiscal year ended September 30, 2003. Prior to the establishment of
an Audit Committee, the Company's Board of Directors performed the functions of
an Audit Committee. A report of the Board of Directors appears under the caption
"Board of Director's Report" below. The Audit Committee's financial expert is
Mr. Christian and Mr. Christian is independent pursuant to Item 7(d)(3)(iv) of
Schedule 14A.
The Company recently appointed a Compensation Committee whose
function, among other things, is to review and recommend to the Board of
Directors the appropriate compensation
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of executive officers of the Company and to grant options and other securities
to employees and consultants, as appropriate. The Compensation Committee did not
exist during the fiscal year ended September 30, 2003.
The functions of the Nominating Committee are performed by the
independent members of the Board of Directors. The independent members of the
Board of Directors will consider nominees recommended by stockholders of the
Company. For future elections, stockholders may forward the name, address and
biographical information of a potential nominee to Board of Directors of the
Cadence Resources Corporation, c/o the Cadence Resources Corporation, 6 East
Rose Street, P.O. BOX 2056, Walla Walla, WA 99362. This procedure for
stockholder nominees was implemented by the Board of Directors on March 3, 2004.
The Board of Directors did not previously have a policy with respect to
stockholder nominees. A nominee to the Board of Directors must have such
experience in business or financial matters as would make such nominee an asset
to the Board of Directors and may, under certain circumstances, be required to
be "independent", as such term is defined in the Nasdaq Marketplace Rules and
applicable SEC regulations. The independent members of the Board of Directors
will evaluate a potential nominee by personal interview, such interview to be
conducted by one or more of the independent members, and/or any other method the
independent members deem appropriate, which may, but need not, include a
questionnaire. The Board of Directors will not engage in an evaluation process
unless (i) there is a vacancy on the Board of Directors, (ii) a director is not
standing for re-election, or (iii) the independent members do not intend to
recommend the nomination of a sitting director for re-election.
The Board of Directors encourages all of its members to attend the
Company's annual meeting. Continued lack of attendance at annual meetings
without a valid excuse will be considered by the independent members of the
Board of Directors when determining those board members who will be recommended
to the Board of Directors for re-election.
STOCKHOLDER COMMUNICATIONS
Stockholders may communicate directly with the Board of Directors by
sending communications to Board of Directors of the Cadence Resources
Corporation, c/o the Cadence Resources Corporation, 6 East Rose Street, P.O. BOX
2056, Walla Walla, WA 99362. This procedure for stockholder communications was
implemented by the Board of Directors on March 3, 2004. The Board of Directors
did not previously have a policy with respect to stockholder communications.
CODE OF ETHICS
The Company has adopted a code of ethics that applies to its Chief
Executive Officer and its Chief Financial Officer. The Company has filed a copy
of its code of ethics as Exhibit 14 to its annual report on Form 10-K for the
fiscal year ending September 30, 2003.
REQUIRED VOTE
Each director will be elected by a plurality of the votes cast by the
stockholders present in person or represented by proxy at the Annual Meeting.
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THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION
OF EACH OF HOWARD M. CROSBY, JOHN P. RYAN, KEVIN STULP,
GLENN DEHEKKER AND JEFFREY M. CHRISTIAN
BOARD OF DIRECTOR'S REPORT
Williams & Webster, P.S. ("Williams and Webster") served as the
Company's independent public accountant for the year ended September 30, 2003. A
representative of Williams & Webster will not be available to respond to
questions during the Meeting.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent public accountant is responsible
for performing an independent audit of the consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Board's responsibility is to monitor and oversee these processes.
In this context, the Board reviewed the audited financial statements of the
Company for the fiscal year ended September 30, 2003 with management. Management
represented to the Board that the consolidated financial statements were
prepared in accordance with generally accepted accounting principles.
The Board discussed the consolidated financial statements with Williams
& Webster, and the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communications with Audit Committees) relating to the conduct
of the audit. The Board has also received written disclosures and a letter from
Williams & Webster regarding its independence from the Company as required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and discussed with Williams & Webster the independence of that firm.
The Board considered the compatibility of non-audit services with the
independence of Williams & Webster.
Based upon the above materials and discussions, the Audit Board of
Directors decided to include the audited financial statements in the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 2003. The
foregoing report was provided by the below members of the Board of Directors who
acted as an "Audit Committee" pursuant to Section 3(a)(58) of the Securities
Exchange Act of 1934, as amended, for the fiscal year ended September 30, 2003.
Howard M. Crosby
John P. Ryan
Kevin Stulp
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires certain
defined persons to file reports of and changes in beneficial ownership of a
registered security with the Securities and Exchange Commission and the National
Association of Securities Dealers in accordance
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with the rules and regulations promulgated by the Commission to implement the
provisions of Section 16. Under the regulatory procedure, officers, directors,
and persons who own more than ten percent of a registered class of a company's
equity securities are also required to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of
Forms 3 and 4 furnished to the Company during the fiscal years ended September
30, 2003, and Forms 5 furnished to the Company with respect to such fiscal year,
the Company's officers, directors and greater than 10% beneficial owners
complied with all Section 16(a) filing requirements except as follows: Mr.
Howard M. Crosby failed to timely file a Form 4 for transactions that occurred
on February 4, 2003, February 19, 2003 (two transactions), May 7, 2003, July 17,
2003 and September 15, 2003; Mr. John P. Ryan failed to timely file a Form 4 for
transactions that occurred on February 4, 2003, May 7, 2003, July 17, 2003 and
September 15, 2003 (two transactions); Mr. Kevin D. Stulp failed to timely file
a Form 4 for transactions that occurred on February 4, 2003, February 19, 2003,
May 7, 2003, July 17, 2003 and September 15, 2003; Crosby Enterprises, Inc.
failed to timely file a Form 4 for a transaction on September 15, 2003; Dotson
Exploration Company failed to timely file a Form 4 for a transaction on
September 15, 2003. Messrs. Crosby, Ryan, Stulp as well as Crosby Enterprises,
Inc. and Dotson Exploration Company each failed to timely file a Form 5 to
report these transactions, but are currently in the process of preparing and
filing a Form 5 to report them. Nathan A. Low failed to file a Form 3 when he
became a reporting person as a result of a transaction by the Nathan A. Low Roth
IRA on April 10, 2002 and failed to timely file a Form 4 for transactions that
occurred on October 18, 2002, February 19, 2003, July 17, 2003, October 1, 2003
and October 22, 2003. Nathan A. Low is preparing to file a Form 3 and a Form 4
to report his entrance in the reporting system and the unreported transactions.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following sets forth the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended September 30, 2003, 2002 and 2001 paid to the Company's Chief
Executive Officer ("CEO") and the registrant's other two executive officers who
were serving as executive officers at the end of the last completed fiscal year.
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SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-----------------------------------------------------------------------------------------
Securities
Other Restricted Under-
Name And Annual Stock Lying LTIP All Other
Principal Salary(1) Bonus Compensation Award(s) Options/ Payouts Compensation
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- ------------------ ---- ------------- ----- ------------ -------- ---------- ------- ------------
Howard M. Crosby 2003 $ 178,000(2) -- -- $ -- -- -- --
Chief Executive 2002 $ 93,000 (2) -- -- $ -- -- -- --
Officer 2001 $ 42,400(2) -- -- $ -- -- -- --
John P. Ryan 2003 $ 222,500(3) -- -- $ -- -- -- --
Vice President and 2002 $ 144,255(3) -- -- $ -- -- -- --
Secretary 2001 $ 42,400(3) -- -- $ -- -- -- --
Guma Aguiar 2003 $109,600(4) -- -- $ -- -- -- --
- ---------------
(1) Salary was structured to be paid part in cash and part in stock for all
three fiscal years shown. The stock portion, 20,000 shares per quarter
for the last two quarters of fiscal 2001 and for all four quarters of
fiscal 2002 and 2003, was accrued quarterly and valued as of the final
quotation on the last day of each quarter. Of the shares awarded, 5,000
shares per quarter were for executive compensation, and 15,000 shares per
quarter were for services as a director. The amounts reflect the total of
cash plus the value all shares received for services as an officer and
director.
(2) The cash portion of Mr. Crosby's salary for fiscal 2003 was $62,500, of
which he received $18,000 in fiscal 2003, payment of the remaining
$44,500 having been deferred until after the end of fiscal 2003. In
addition, he received 80,000 shares of our common stock, 20,000 per
quarter. These were valued at the closing price at the end of the quarter
for which the shares were awarded: $34,000 for the first quarter, $29,000
for the second quarter, $33,000 for the third quarter and $65,000 for the
fourth quarter, for a total of $161,000 in stock compensation and
$212,255 in total compensation. The cash portion of Mr. Crosby's salary
for fiscal 2002 was set at $51,255, which he elected to defer until the
Company had adequate production revenues to cover this salary.
Accordingly, he received this payment after the end of fiscal 2003. In
addition, he received 80,000 shares of our common stock, 20,000 per
quarter. These were valued at the closing price at the end of the quarter
for which the shares were awarded: $15,000 for the first quarter, $19,000
for the second quarter, $24,000 for the third quarter and $30,000 for the
fourth quarter, for a total of $88,400 in stock compensation and $139,655
total compensation. The cash portion of Mr. Crosby's salary for fiscal
2001 was set at $25,000. However, he received 83,500 shares of our common
stock in lieu thereof, which had a fair market value, when issued in
January 2002, of $25,000. In addition, he received 40,000 shares of our
common stock, 20,000 per quarter for each of the last two quarters of the
fiscal year. These were valued at the closing price at the end of the
quarter for which the shares were awarded: $11,000 for the third quarter
and $15,000 for the fourth quarter, for a total of $26,000 in stock
compensation and $51,000 in total compensation.
(3) The cash portion of Mr. Ryan's salary for fiscal 2003 was $62,500. In
addition, he received 80,000 shares of our common stock, 20,000 per
quarter. These were valued at the closing price at the end of the quarter
for which the shares were awarded: $34,000 for the first quarter, $29,000
for the second quarter, $33,000 for the third quarter and $65,000 for the
fourth quarter, for a total of $161,000 in stock compensation and
$212,255 in total compensation. The cash portion of Mr. Ryan's salary for
fiscal 2002 was $51,255, of which $6,255 was paid after the end of fiscal
2003. In addition, he received 80,000 shares of our common stock, 20,000
per quarter. These were valued at the closing price at the end of the
quarter for which the shares were awarded: $15,000 for the first quarter,
$19,000 for the second quarter, $24,000 for the third quarter and $30,000
for the fourth quarter, for a total of $88,400 in stock compensation and
$139,655 total compensation. The cash
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portion of Mr. Ryan's salary for fiscal 2001 was set at $25,000. However,
this was later paid through the issuance of 30,000 shares of our common
stock valued at $9,000 and the transfer of shares the Company owned in
Trend Mining Company valued at $16,000. In addition, he received 40,000
shares of our common stock, 20,000 per quarter for each of the last two
quarters of the fiscal year. These were valued at the closing price at
the end of the quarter for which the shares were awarded: $11,000 for the
third quarter and $15,000 for the fourth quarter, for a total of $26,000
in stock compensation and $51,000 in total compensation.
(4) Mr. Aguiar served as an executive officer and a director for the last
quarter of fiscal year 2002 and for the first three quarters of fiscal
year 2003 (through June 30, 2003). During fiscal year 2002 he received
$10,000 of cash compensation and deferred $5,000. During fiscal year 2003
through June 30, 2003 he was entitled to cash compensation of $45,000 of
which he received $15,000 in cash and deferred $30,000. In the final
period of fiscal year 2003 he was entitled to $15,000 of non-executive
compensation. In September 2003, and subject to a previous Board of
Directors decision, he received 66,667 shares of stock, which had an
agreed upon value of $50,000, for his past due deferred salary from
fiscal years 2002 and 2003. He resigned as an executive officer and
director effective June 30, 2003, but continues to work as an employee.
OPTION GRANTS
During fiscal 2003, no stock options were granted to the named
executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR-END
AND FISCAL YEAR-END OPTION VALUES TABLE
The following table contains information concerning the number of
shares acquired and value realized from the exercise of options during fiscal
2003 and the number of unexercised options held by the named executive officers
at September 30, 2003.
VALUE OF UNEXERCISED
NUMBER OF SHARES OF IN-THE-MONEY OPTIONS
COMMON STOCK UNDERLYING AT YEAR END (SEPTEMBER 30
UNEXERCISED OPTIONS 2003)(1)
AT YEAR END (SEPTEMBER 30) 2003 ($)
--------------------------------- -----------------------------------
SHARES
ACQUIRED
ON VALUE REALIZED
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ------------- --------------- --------------- ----------------- ---------------- ------------------
Howard M. Crosby 70,834 $ 141,668 -- -- -- --
John P. Ryan 36,834 $ 73,668 -- -- -- --
Guma Aguiar -- -- 200,000 -- $ 380,000 --
- ---------------
(1) Options are "in-the-money" if the market price of a share of common stock
exceeds the exercise price of the option.
The Company has no retirement, pension or profit sharing program for the
benefit of its directors, officers or other employees, but the Board of
Directors may recommend one or more such programs for adoption in the future.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the transactions described below, the Company did
not secure an independent determination of the fairness and reasonableness of
such transactions and arrangements with affiliates of the Company. In each
instance described below, the disinterested directors (either at or following
the time of the transaction) reviewed and approved the fairness and
reasonableness of the terms of the transaction. The Company believes that each
transaction was fair and reasonable to the Company and on terms at least as
favorable as could have been obtained from non-affiliates. Transactions between
any corporation and its officers and directors are subject to inherent conflicts
of interest.
Nevada-Comstock Mining Company, formerly Caledonia Silver-Lead Mines,
Inc., is owned approximately 1.2% by Howard Crosby, chief executive officer and
director, 1.2% by John Ryan, vice president and director, and 35% by the
Company. The Company had controlled unpatented mineral claims called the Kil
Group and West Mullan Group, which it sold during the fiscal year ended
September 30, 2002, to Caledonia in exchange for 3,501,980 shares of Caledonia's
common stock, par value $.10 per share. The Board of Directors valued the
Caledonia shares at $350,198. The board of directors deemed the value of Kil
Group and West Mullan Group to be de minimus, recording all but $20,000 of the
amount received as gain.
Messrs. Crosby and Ryan collectively own in excess of 40% of the stock
of Dotson Exploration Company and they are the sole officers and directors of
Dotson. Dotson owns 109,000 shares of the Company's shares of common stock.
During fiscal year 2002 and the first quarter of fiscal year 2003, the Company
repaid Dotson a loan in the amount of $10,000 and the Company made two loans to
Dotson, one for $35,000 and one for $20,000, each at an interest rate of 10% per
annum. Dotson transferred to the Company marketable securities of the common
stock of two unaffiliated companies, Enerphaze Corporation and The Williams
Companies, valued by the Board of Directors at $33,380 as partial payment of the
amount loaned. During the nine months ended June 30, 2003, Dotson repaid the
$20,000 loan in cash. Of the total amount of principal and interest Dotson owed
the Company, $57,100, the amount of $3,720 remained outstanding at September 30,
2003, which amount is payable on demand and bears interest at 10% per annum.
In September 2000, the Company, through its wholly owned subsidiary,
Celebration Mining Company, entered into a 5-year, $6,000 per year lease
agreement with Oxford Metallurgical, Inc., a company of which Messrs. Crosby and
Ryan collectively own a majority, on the Company's Palisades Group property
consisting of eight unpatented mineral claims. The lease permitted payment in
cash or 10,000 Oxford shares per $3,000 of lease payments. The Company
terminated the lease in fiscal 2002.
In October 2001, the Company issued 200,000 shares of its common stock
to Mr. Crosby for cash in the amount of $60,000. On January 15, 2002, the
Company issued 100,000 shares of its common stock to Mr. Crosby in payment of a
loan made to the Company in the principal amount of $30,000 in the November
2001. On January 22, 2002, Mr. Crosby made an additional loan of $30,000 bearing
interest at 8% for which the Company issued him 15,000 shares valued at $4,500
as an inducement to making the loan.
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On January 22, 2002, the Company transferred 41,667 shares of the
common stock it owned in Trend Mining Company, of which Mr. Ryan is a director,
to Mr. Ryan in payment of past due salary of $16,000. Further, in October 2001,
Mr. Ryan transferred marketable securities of Enerphaze Corporation valued at
$90,000 to the Company in exchange for 300,000 shares of the Company, which
shares are held by J.P. Ryan Company, Inc. held 100% by John Ryan, Andover
Capital Corporation held 100% by John Ryan, and Dotson Exploration Company.
In April 2002, Mr. Crosby purchased 83,334 the Company investment units
and Mr. Ryan purchased 43,334 the Company investment units at $0.30 per unit,
each unit consisting of one share of common stock and one warrant exercisable at
$0.30 (see also below description of additional purchases of units by
significant shareholders). The warrants contained a provision which allowed
cashless exercise when and if the Company common stock traded at or above $1.50
per share. Also, in April 2002, the Company issued to Mr. Ryan 6,800 shares of
its common stock in repayment of 6,800 shares of the Company's common stock
owned by Mr. Ryan that he had transferred to third parties to pay invoices of
the Company.
During fiscal 2003, Mr. Crosby made two loans to the Company. One loan
in December 2002 was in the principal amount of $70,000, bearing interest at 5%
and the other loan made in February 2003 was in the principal amount of $50,000
bearing interest at a rate of 8%. The Company issued 14,000 shares of its common
stock valued at $10,920, as an inducement to making the $70,000 loan and 20,000
shares valued at $15,600, as an inducement to making the $50,000 loan. The
$50,000 loan was one of three bridge loans, one for $50,000 from Kevin Stulp
(see below) and one for $100,000 from the Nathan A. Low Family Trust (see
below). The Company repaid $60,000 in cash subsequent to the end of the fiscal
year. In addition, the Company issued 4,000 shares of its common stock in
repayment of the remaining $10,000 principal amount outstanding on the $70,000
loan. The Company repaid $25,000 of the $50,000 loan in cash during fiscal 2003
and repaid the remaining $25,000 principal amount outstanding subsequent to the
end of the fiscal year. Mr. Crosby waived the interest on both loans, which the
Company has recorded as income.
In February 2003, Kevin Stulp, director, made a bridge loan to the
Company in the principal amount of $50,000, bearing interest of 8% per annum.
The Company issued 20,000 shares of its stock valued at $15,600, to Mr. Stulp as
an inducement to making the loan. In April 2003, the Company repaid $25,000 of
the $50,000 loan in cash and in July 2003, it issued 25,000 shares of its common
stock to repay the remaining $25,000 principal amount outstanding. Mr. Stulp
waived interest on this loan which the Company has recorded as income. In July
2003, Mr. Stulp exercised a warrant to purchase 100,000 shares of common stock
at $.75 per share.
In April 2002, the Nathan A. Low Roth IRA purchased 1,083,334 of the
investment units described above for $0.30 per unit, for a total of $325,000.
The Nathan A. Low Roth IRA gave the Company a non-interest bearing note for
$150,000 for the partial payment of the units. The due date was June 15, 2002
and the note was paid in full and on time.
In April 2002, entities controlled by Thomas Kaplan purchased 1,083,334
of the investment units described above for $0.30 per unit, for a total of
$325,000. These entities gave the Company two non-interest bearing notes for
$150,000 for the partial payment of the units. The due date for the notes was
June 15, 2002 and they were paid in full and on time.
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In October 2002, the Nathan A. Low Roth IRA and various entities
controlled by Thomas Kaplan exercised warrants acquired as part of the unit
offering referred to above. The exercise was done in separate cashless
transactions whereby each party surrendered a total of 175,676 shares of common
stock valued at $325,000 to exercise warrants for 1,083,334 shares of stock,
netting 907,658 shares.
In 2002, Nathan Low, a major shareholder of the Company, and the
Company decided to form a limited partnership to acquire and develop oil and
natural gas properties. Low planned to seek investors to invest as limited
partners in the partnership. On August 8, 2002, the Company formed Cadence
Resources Limited Partnership, with the Company as the sole general partner. Low
had not brought any investors to the partnership by the time the partnership was
ready to acquire oil and gas interests. Therefore, Low elected to provide the
initial funding, $250,000, for the first prospect, in the form of the purchase
of a limited partnership interest in the partnership. The Company paid Sunrise
Securities Corporation, an entity controlled by Low, a finders' fee on this
funding. Also, on August 1, 2002, Sunrise Securities Corporation, together with
Low and his assigns, the limited partnership and the Company entered into the
Side Letter Agreement of Certain Terms of Limited Partnership Drawdown Facility,
a $20 million funding agreement. This was intended to provide further equity
investments in the partnership. It was structured so that the Low parties had
the option, but not the obligation, to provide capital contributions to the
partnership. In partial consideration for entering into the drawdown facility,
the Low parties were given a right of first refusal to provide funding for any
drilling project contemplated by the partnership.
The Company and Low have agreed in principle as to the termination of
the drawdown facility, the repurchase of Low's limited partnership interest for
$250,000, dissolution of the partnership and related matters and in October
2003, Low received $250,000 from the Company for the repurchase. The following
description of the transactions with regard to the partnership should be read in
light of the foregoing disclosure.
In the formation of the partnership, the Company contributed $12,500 to
the partnership and Low, the limited partner, contributed $250,000 in cash. A
portion of the $250,000 was used to advance the drilling on the West Electra
Lake #1 well. For example, $24,552 was spent on seismic acquisition and
processing which covered the Virginia Reef #2B well and also the West Electra
Lake #1 well acreage. Also $26,105 of the limited partnership funds was spent on
the leasing of the West Electra Lake Prospect as well as $16,077 on preparatory
costs for the West Electra Lake #1 well. Prior to the limited partner's request
for repayment of the limited partner's contribution (see below), the Company had
granted the limited partner a 5% working interest in the #1 West Electra Lake
well. However, the limited partner has agreed to convey his working interest in
the West Electra Lake #1 well to the Company as part of the buyout of his
limited partnership interest by the Company.
Low also advanced $300,000 to the partnership to explore natural gas
interests in Michigan in the Black Bean Unit. As an inducement for this advance,
the Company issued Low 120,000 shares of common stock valued at $210,000. As an
additional inducement to making the $300,000 advance, Low was granted a 2.25%
working interest in each well in the Black Bean Unit in Michigan that was
drilled using the $300,000 until "unitized well payout," the point at which the
partnership receives 100% of its contribution back in the form of revenues from
the
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well unit. After unitized well payout, Low's working interest in these wells
will be reduced to a 2.00% working interest. The Company has repaid the $300,000
loan.
In February 2003, the Company gave a $100,000 note, as part of the
$200,000 bridge loans referenced above, to the Nathan A. Low Family Trust at an
interest rate of 8%. The Company issued 40,000 shares valued at $31,200 as an
inducement to making the loan. The principal on this note was repaid in full in
October 2003.
The Company issued approximately 1,721,400 shares of its common stock
in September and October 2003 in a brokered private placement. It paid sales
commissions of $376,565 in cash and options to purchase 162,140 shares for $2.50
per share to a broker, Sunrise Securities Corporation, a company owned by Nathan
Low. It also issued 11,000 shares of the Company common stock valued at $2.90
per share to Nathan Low in connection with the private placement.
CGT Management, Ltd., in which members of the Thomas Kaplan family have
an indirect interest, loaned the Company $300,000 in 2003 at 10% interest. As an
inducement for making the loan, the Company, in fiscal 2003, issued 120,000
shares valued at $168,000 to CGT Management. Mr. Kaplan disclaims beneficial
ownership of the shares under the Exchange Act. The $300,000 loan and interest
were repaid in full in October 2003.
In the ordinary course of the Company's business, the Company acquires
interests in exploratory and developmental oil and gas prospects and sells
interests in such prospects to unaffiliated third parties. In fiscal 2002, the
Company made available for sale to its executive officers, directors and
consultants a portion of working interests in the #1A well in Wilbarger County,
Texas on terms no less favorable to the Company than those at which interests
would otherwise have been sold to third party investors in that well. Messrs.
Crosby and Ryan each acquired from the Company a 6% working interest in the #1A
well in Wilbarger County, Texas for $40,800 in fiscal year 2002. Expenses are
deducted from the production checks and to date, production has been sufficient
to cover expenses. The Company sold these working interests to raise the capital
to drill the well.
Lucius C. Geer, a consultant to the Company who manages its
acquisition, exploration and production operations, has entered several
agreements with the Company. In October 2001, Geer entered into an agreement
with the Company under which the Company purchased from Geer and an associate of
Geer's, geological information for $30,000 cash and a 2% overriding royalty
interest each to Geer and his associate, in the Virgin Reef Prospect in
Wilbarger County, Texas. Effective December 31, 2001, the Company assigned Geer
a 2% overriding royalty interest in the oil, gas and mineral lease from the W.
T. Waggoner Estate in Wilbarger County, Texas. In April 2003, the Company
assigned Geer and an associate each a 1% overriding royalty interest in oil and
gas leases in Desoto Parish, Louisiana. Effective August 1, 2003, the Company
and Geer amended their February 1, 2002 Letter Agreement with respect to the
creation and funding of a geological and operations office to be staffed by Geer
and paid for by the Company. Under the agreement, Geer agreed to evaluate the
geological feasibility and land availability of agreed upon areas in order to
locate prospects that meet certain criteria. The agreement provides that Geer
will devote 75% of his time to his work for the Company for $7,500 per month. On
each lease that the Company acquires under the agreement, the Company must
assign Geer an overriding royalty interest of 2% of the sales price received for
all oil, gas
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and minerals from such lease, which amount is to be reduced proportionately if
the lease covers less than the full fee mineral estate.
INDEPENDENT AUDITORS
Williams & Webster has audited and reported upon the financial
statements of the Company for the fiscal year ended September 30, 2003. It is
currently anticipated that Williams & Webster will be selected by the Board of
Directors to examine and report on the financial statements of the Company for
the year ending September 30, 2004. Representatives of Williams & Webster are
not expected to be present at the Annual Meeting.
For the fiscal years ended September 30, 2002 and 2003, Williams &
Webster has billed the Company the following fees:
AUDIT FEES
For the fiscal years ended September 30, 2002 and September 30, 2003,
Williams & Webster billed the Company $58,678 and $97,290, respectively, for
services rendered for the audit of the Company's annual financial statements
included in its report on Form 10-KSB and the reviews of the financial
statements included in its reports on Form 10-QSB filed with the SEC.
AUDIT RELATED FEES
For each of the fiscal years ended February September 30, 2002 and
September 30, 2003, Williams & Webster billed the Company $0 and $35,075,
respectively, for assistance with SB-2 registration filings.
TAX FEES
For the fiscal years ended September 30, 2002 and September 30, 2003,
Williams & Webster billed the Company $4,939 and $0, respectively, in connection
with the preparation of tax returns and the provision of tax advice. The tax
returns for the Company for the fiscal year ended September 30,2003, has not
been completed as of yet. Therefore no billings have been made at the date of
this proxy statement.
ALL OTHER FEES
There were no other fees paid to Williams & Webster during the fiscal
years ended September 30, 2002 and September 30, 2003.
All of the above fees were pre-approved by the Board of Directors of
the Company.
The Audit Committee does not currently have any pre-approval policies.
The Board of Directors has considered whether the provision of
non-audit services by Williams & Webster is compatible with maintaining auditor
independence.
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-------------------------------------
PROPOSAL 2
APPROVAL OF THE ADOPTION OF THE
COMPANY'S 2004 EQUITY INCENTIVE PLAN
-------------------------------------
On February 9, 2004, the Board of Directors of the Company adopted,
subject to stockholder approval, the Company's 2004 Equity Incentive Plan (the
"Plan"). The Plan is intended to provide an incentive to employees (including
executive officers), and directors of and consultants to the Company and its
affiliates. The proceeds derived from the sale of shares will be used for
general corporate purposes of the Company. A copy of the Plan is attached hereto
as Exhibit A. The purpose of the Plan is to promote the interests of the Company
and its stockholders by enabling the Company to align the interests of selected
eligible persons under the Plan with the interests of the stockholders of the
Company. Under the Plan, the mutuality of interest between the Company and
eligible beneficiaries of the Plan is strengthened because such beneficiaries
have a proprietary interest in pursuing the Company's long-term growth and
financial success. In addition, by allowing employees, directors and consultants
to participate in the Company's success, the Company is better able to attract,
retain and reward quality employees, directors and consultants.
The Company does not have any other incentive or stock option plans
currently in effect. Upon their appointment to the Board of Directors of the
Company, Glenn DeHekker and Jeffrey M. Christian were each awarded the following
under the Plan, subject to stockholder approval of the Plan:
1. An option to purchase 75,000 shares of the Company's common
stock;
2. The right to receive an option to purchase 50,000 shares of the
Company's common stock on each twelve month anniversary of the
appointment of the director to the board;
3. 5,000 shares of restricted stock;
4. The right to receive 5,000 shares of restricted stock on the
last day of each calendar quarter; and
5. 2,500 shares of restricted stock on each twelve month
anniversary of the director's appointment to a committee of the Board of
Directors.
In addition, upon his employment, one employee was granted the
following under the Plan, subject to stockholder approval of the Plan:
1. An option to purchase 250,000 shares of the Company's common
stock;
2. The right to receive an option to purchase 50,000 shares of the
Company's common stock on each twelve month anniversary of his becoming
an employee of the Company; and
3. The right to receive 5,000 shares of restricted stock on the
last day of each calendar quarter.
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The table below sets forth certain information as of Cadence's fiscal
year ended September 30, 2003 regarding the shares of Cadence's common stock (i)
available for grant or granted under outstanding stock options or (ii) issuable
upon exercise of warrants granted as compensation for services.
NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
ISSUED UPON EXERCISE OF EXERCISE PRICE OF UNDER EQUITY COMPENSATION
OUTSTANDING OPTIONS, WARRANTS OUTSTANDING OPTIONS, PLANS (EXCLUDING SECURITIES IN
AND RIGHTS WARRANTS AND RIGHTS THE FIRST COLUMN OF THIS TABLE)
- ---------------------------- -------------------------------- ----------------------- --------------------------------
Compensatory warrants or -0- -0- -0-
options approved by
security holders
Compensatory warrants or
options not approved by
security holders 1,174,640 $1.45 -0-
Please see notes 8 and 9 to the Company's financial statements in the
Company's annual report which is enclosed with this proxy statement for
additional information on the compensatory options and warrants.
The following is a summary of certain material features of the Plan.
GENERAL
The aggregate number of shares of Common Stock that may be granted, or
for which options may be granted, under the Plan shall not exceed 1,000,000
shares of Common Stock. Any shares of Common Stock subject to an equity award
which for any reason expires or otherwise is terminated shall again become
available for issuance under the Plan.
TYPES OF AWARDS
The Plan provides for the grant of (i) "incentive stock options"
("ISOs") within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) non-qualified stock options (which are stock
options that do not qualify as ISOs ("NQSOs")), and (iii) stock bonuses (each, a
"Stock Bonus") or restricted stock ("Restricted Stock") awards.
ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Administrators").
The Administrators of the Plan may, from time to time, consistent with
the purposes of the Plan, grant options to such employees (including officers
and directors who are employees), and directors who are not employees of, and
consultants to, the Company or any of its affiliates
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as the Administrators may determine in their sole discretion. Such options
granted shall cover such number of shares of Common Stock as the Administrators
may determine in their sole discretion. In addition, the Administrators may
issue Stock Bonuses or Restricted Stock to eligible employee or non-employee
grantees.
TERMS AND CONDITIONS OF STOCK BONUS AWARDS AND RESTRICTED STOCK AWARDS
Stock bonuses or restricted stock awards granted under the Plan will be
subject to, among other things, the following terms and conditions:
(a) The purchase price, if any, for any Common Stock granted under the
Plan shall be such amount as the Administrators determine. The
Administrators may determine that eligible participants in the Plan may
be awarded Common Stock in consideration for past services rendered to
the Company or an affiliate of the Company or for the benefit of the
Company or an affiliate of the Company.
(b) Any purchase price shall be paid either (i) in cash or (ii) if
authorized by the Administrators, (a) with previously acquired
securities of the Company, (b) according to a deferred payment or other
arrangement with the optionee, (c) in any other form of legal
consideration that may be acceptable to the Administrators, or (d) in
any combination of the foregoing.
(c) No shares of Common Stock granted under the Plan shall be
transferable other than by will or the laws of descent and
distribution, and such shares may be disposed of during the lifetime of
the grantee only by the grantee or his or her legal representatives.
TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan will be subject to, among other things,
the following terms and conditions:
(a) The exercise price of the shares of Common Stock under each option
shall be determined by the Administrators in their sole discretion. The
exercise price of an ISO shall not be less than 100% of the fair market
value of the Company's Common Stock subject to such option on the date
of grant; and provided further, however, that if, at the time an ISO is
granted, the optionee owns stock having more than 10% of the total
combined voting power of all classes of stock of the Company or any of
its subsidiaries, the exercise price of such ISO shall not be less than
110% of the fair market value of the Common Stock subject to such ISO
on the date of grant. The exercise price of a NQSO shall not be less
than the fair market value of the Company's Common Stock subject to
such option on the date of grant.
(b) Each option granted pursuant to the Plan shall be for such term as
established by the Administrators, in their sole discretion, at or
before the time such option is granted; provided, however, that the
term of each option granted pursuant to the Plan shall be for a
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period not exceeding ten (10) years from the date of grant thereof, and
provided further, that if, at the time an ISO is granted, the optionee
owns stock having more than 10% of the total combined voting power of
all classes of stock of the Company or any of its subsidiaries, the
term of the ISO shall be for a period not exceeding five (5) years from
the date of grant.
(c) Except as provided in the applicable Equity Award Agreement, an
optionee whose relationship with the Company or any of its subsidiaries
is terminated by reason of permanent physical disability may exercise
his or her option, to the extent exercisable at the time of such
termination, within six months thereafter, but in no event after the
expiration of the term of the option.
(d) Except as provided in the applicable Equity Award Agreement, in the
case of death of the optionee while an employee, director or consultant
of the Company or any of its subsidiaries, the optionee's legal
representative or beneficiary may exercise the option, to the extent
exercisable on the date of death, within twelve months of the date of
death, but in no event after the expiration of the term of the option.
(e) No option granted under the Plan shall be transferable other than
by will or the laws of descent and distribution (unless, with respect
to an NQSO, the relevant Equity Award Agreement provides otherwise),
and options may be exercised during the lifetime of the optionee only
by the optionee or the optionee's legal representatives.
HOW OPTIONS ARE EXERCISED
An option (or any part or installment thereof), to the extent then
exercisable, is to be exercised by giving written notice to the Company, stating
which option is being exercised, specifying the number of shares of Common Stock
as to which such option is being exercised and accompanied by payment of the
exercise price thereof. The exercise price is to be paid either (i) in cash or
(ii) if authorized by the Administrators, (a) with previously acquired
securities of the Company, (b) according to a deferred payment or other
arrangement between the Company and the optionee, (c) in any other form of legal
consideration that may be acceptable to the Administrators, or (d) in any
combination of the foregoing.
The Company may withhold cash and/or shares of the Company's Common
Stock having an aggregate value on the date the option is exercised equal to the
amount which the Company determines is necessary to meet its obligation to
withhold any federal, state and/or local taxes or other amounts incurred by
reason of the grant or exercise of an option or the disposition of the option or
shares acquired pursuant to the exercise of the option. Alternatively, the
Company may require the optionee to pay the Company such amount in cash promptly
upon demand.
ADJUSTMENTS UPON CHANGES IN COMMON STOCK
If any change is made in the Common Stock subject to the Plan, through
a merger, consolidation, reorganization, recapitalization, reincorporation,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
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consideration by the Company, the Plan will be appropriately adjusted in the
class and maximum number of shares subject to the Plan, and the outstanding
equity awards will be appropriately adjusted in the class and number of shares
subject to and the exercise price of such outstanding equity awards. Such
adjustments shall be made by the Administrators at the time of the change in the
Common Stock, whether or not specifically provided for in any outstanding equity
award. The Administrators' determination shall be final, binding and conclusive.
AMENDMENT AND TERMINATION OF THE PLAN
No awards may be granted under the Plan after February 8, 2014. The
Board of Directors, without further approval of the Company's stockholders, may
at any time suspend or terminate the Plan.
The Administrators may from time-to-time amend or modify the Plan;
provided, however, that no amendment or modification may become effective
without approval of the amendment or modification by the stockholders if
stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable. No such amendment shall adversely affect any outstanding equity award
without the holder's written consent.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a general summary of certain material federal income
tax consequences of the grant and exercise of ISOs and NQSOs (collectively, the
"Options") and the receipt and disposition of Stock Bonuses and Restricted Stock
under the Plan and the sale of any underlying security. The Options, Stock
Bonuses and Restricted Stock that may be awarded under the Plan are collectively
referred to herein as "Awards." This description is based on current law which
is subject to change, possibly with retroactive effect. This discussion does not
purport to address all tax considerations relating to the issuance and exercise
of any Awards, or resulting from the application of special rules to a
particular Award recipient (including a recipient subject to the reporting and
short-swing profit provisions under Section 16 of the Securities Exchange Act of
1934, as amended, or a recipient who is not an individual U.S. citizen or
permanent resident), as well as applicable state, local, foreign and other tax
consequences inherent in the ownership of Awards and exercise thereof and the
ownership and disposition of any underlying security. An Award recipient should
consult with his own tax advisors with respect to the tax consequences inherent
in the ownership and exercise of Awards and the ownership and disposition of any
underlying security.
ISOS EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant or
exercise of an ISO. The optionee's tax basis in the shares acquired upon the
exercise of an ISO with cash will be equal to the exercise price paid by the
optionee for such shares.
If the Common Stock received upon exercise of an ISO is disposed of
more than one year after the date of transfer of such stock to the optionee and
more than two years from the date of grant of the option, the optionee will
recognize long-term capital gain or loss on such disposition
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equal to the difference between the selling price and the optionee's basis in
the Common Stock, and the Company will not be entitled to a deduction. Long-term
capital gain is generally subject to more favorable tax treatment than
short-term capital gain or ordinary income.
If the Common Stock received upon the exercise of an ISO is disposed of
prior to the end of the two-years-from-grant/one-year-after-transfer holding
period (a "disqualifying disposition"), the excess (if any) of the fair market
value of the stock on the date of transfer of such stock to the optionee over
the exercise price (but not in excess of the gain realized on the sale of the
Common Stock) will be taxed to the optionee as ordinary income in the year of
such disposition, and the Company generally will be entitled to a deduction in
the year of disposition equal to such amount. Any additional gain or any loss
recognized by the optionee on such disposition will be short-term or long-term
capital gain or loss, as the case may be, depending upon the period for which
the stock was held.
NQSOS EXERCISED WITH CASH
No taxable income will be recognized by an optionee upon the grant of
an NQSO. Upon the exercise of an NQSO, the excess of the fair market value of
the Common Stock received at the time of exercise over the exercise price
therefor will be taxed as ordinary income, and the Company will generally be
entitled to a corresponding deduction. The optionee's tax basis in the Common
Stock acquired upon the exercise of such NQSO will be equal to the exercise
price paid by the optionee for such stock plus the amount of ordinary income so
recognized.
Any gain or loss recognized by the optionee on a subsequent disposition
of shares purchased pursuant to an NQSO will be short-term or long-term capital
gain or loss, depending upon the period during which such shares were held. The
amount of such gain will be equal to the difference between the selling price
and the optionee's tax basis in the shares.
EXERCISE OF OPTIONS USING PREVIOUSLY ACQUIRED SHARES
In general, if an optionee's previously acquired shares in the Company
are used in full or partial payment of the exercise price of an Option (whether
an ISO or an NQSO), such optionee will not recognize gain or loss on the
exercise of that Option to the extent the optionee received Common Stock which,
on the date of exercise, has a fair market value equal to the fair market value
of the shares surrendered in exchange (the Common Stock an optionee receives in
the exchange is referred to as "Replacement Shares"). If the Option exercised is
an ISO, or if the Option exercised is an NQSO and the shares used upon the
exercise were acquired by exercise of an ISO, the Replacement Shares received
therefor are treated as having been acquired by the exercise of an ISO.
If an ISO is exercised with shares that were previously acquired by
exercise of an ISO but which were not held for the required two-years-from-grant
one-year-after-exercise holding period (described above), the optionee will be
treated as having made a "disqualifying disposition" of the previously acquired
shares. In such case, the optionee would recognize ordinary income equal to the
difference between the fair market value of those shares on the date of exercise
of the prior ISO and the amount paid for those shares (but not more than the
gain
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realized). Special rules apply in determining which shares are considered to
have been disposed of and in allocating the basis among the shares.
An optionee will have a total tax basis in the Replacement Shares
equal to the tax basis of the previously owned shares surrendered, increased by
any ordinary income required to be recognized on the disqualifying disposition
of the previously owned shares of the Company. The optionee's holding period for
the Replacement Shares generally will include the holding period for the
surrendered shares.
ALTERNATIVE MINIMUM TAX
In addition to the federal income tax consequences described above, an
optionee who exercises an ISO may be subject to the alternative minimum tax,
which is payable only to the extent it exceeds the optionee's regular tax
liability. For this purpose, upon the exercise of an ISO, the excess of the fair
market value of the Common Stock over the exercise price is an adjustment which
increases the optionee's alternative minimum taxable income. In addition, the
optionee's basis in such stock is increased by such amount for purposes of
computing the gain or loss on disposition of the stock for alternative minimum
tax purposes. If the optionee is required to pay an alternative minimum tax, the
amount of such tax which is attributable to deferral preferences (including the
ISO adjustment) is allowable as a tax credit against the optionee's regular tax
liability (net of other non-refundable credits) in subsequent years. To the
extent the credit is not used, it is carried forward. An optionee holding an ISO
should consult with his tax advisors concerning the applicability and effect on
the optionee of the alternative minimum tax.
STOCK BONUS
The receipt by any beneficiary of the Plan of a Stock Bonus will give
rise to ordinary income that will be reportable by such beneficiary in the year
of receipt in an amount equal to the fair market value of the Common Stock
issued as a Stock Bonus.
RESTRICTED STOCK
Generally, the grant of Restricted Stock will not result in taxable
income to the recipient or a deduction for the Company. The value of the
Restricted Stock (less any amount paid by the recipient upon the grant) will be
taxable to the recipient in the year in which the restrictions lapse.
Alternatively, a recipient of Restricted Stock may elect to treat as
compensation income in the year of grant the fair market value of the Restricted
Stock on the date of grant (less any amount paid by the recipient therefor), by
making an election within 30 days after the date of grant. If such an election
is made and the Restricted Stock is subsequently forfeited to the Company, the
recipient will be allowed only a capital loss deduction in connection with such
forfeiture. The Company generally will be entitled to a deduction equal to the
amount of ordinary income recognized by the recipient in the tax year such
income is recognized. Any subsequent gain realized by the recipient who has made
such an election upon the sale of the Restricted Stock will be subject to
federal income tax at long-term capital gains tax rates if the stock has been
held for more than one year.
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PAYROLL TAXES ON COMPENSATION INCOME
Except as provided below in respect of a "disqualifying disposition" of
an ISO, the compensation income recognized by the recipient of an Award (as
described above) generally will be subject to federal and applicable state
income and employment (social security) taxes. The Company will be responsible
for withholding the applicable taxes and remitting such taxes to the respective
government authorities. Currently, no employment taxes (including withholding
thereof) apply with respect to ordinary income realized with respect to a
"disqualifying disposition" of Common Stock acquired pursuant to the exercise of
an ISO. As the payor of such income, the Company will also have certain
reporting obligations. As provided in a separate Equity Award Agreement that
each recipient of an Award will be required to execute, the Company reserves the
right to withhold the applicable taxes from the amounts of any cash payments or
the issuance of Common Stock to each recipient. As an alternative, the Company
may require Award recipients to pay to the Company in cash the amount equal to
the taxes required to be withheld. Subject to the discussion of backup
withholding below, no withholding requirements will apply in respect of awards
of NQSOs, Stock Bonuses or Restricted Stock to non-employee directors or
consultants.
BACKUP WITHHOLDING
Grantees who are not employees of the Company and who fail to complete
and timely furnish to the Company Form W-9 may be subject to backup withholding
of federal income tax at a 28% federal income tax rate with respect to the
amount of compensation income realized by such grantee. To prevent such backup
withholding, each non-employee grantee must provide the Company such person's
correct taxpayer identification number and certify that such person is not
subject to backup withholding of federal income tax by completing and signing
Form W-9. Unless each non-employee grantee timely provides the requisite
certification, backup withholding at the 28% tax rate will be required with
respect to any compensation income of such grantee. The amount withheld will be
allowed as a credit against such grantee's federal income tax liability for the
applicable taxable year, and may entitle such grantee to a refund under certain
circumstances.
REQUIRED VOTE
Approval of the Plan requires the affirmative vote of the holders of
the majority of the shares of Common Stock present, in person or by proxy, at
the Annual Meeting and entitled to vote on this proposal.
THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE APPROVAL OF
THE COMPANY'S 2004 EQUITY INCENTIVE PLAN
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STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be included in the Company's proxy
statement and form of proxy for presentation at the 2005 Annual Meeting of
Stockholders (the "2005 Meeting") pursuant to Rule 14a-8 ("Rule 14a-8"), as
promulgated under the Securities Exchange Act of 1934, must be received by the
Company not later than December 10, 2004. As to any proposals submitted for
presentation at the 2005 Meeting outside the processes of Rule 14a-8, the
proxies named in the form of proxy for the 2005 Meeting will be entitled to
exercise discretionary authority on that proposal unless the Company receives
notice of the matter on or before February 23, 2005. However, even if such
notice is timely received, such proxies nevertheless may be entitled to exercise
discretionary authority on that matter to the extent permitted by the Securities
and Exchange Commission regulations.
Any stockholder proposals, as well as any questions relating thereto,
should be directed to the Chief Financial Officer of the Company at Cadence
Resources Corporation, 6 East Rose Street, P.O. BOX 2056, Walla Walla, WA 99362.
OTHER MATTERS
Management does not intend to bring before the Meeting any matters
other than those specifically described above and knows of no matters other than
the foregoing to come before the Meeting. If any other matters or motions
properly come before the Meeting, it is the intention of the persons named in
the accompanying Proxy to vote such Proxy in accordance with their judgment on
such matters or motions, including any matters dealing with the conduct of the
Meeting.
An annual report to stockholders for the year ended September 30, 2003
is being furnished herewith to each stockholder as of the Record Date. Copies of
the Company's Annual Report on Form 10-K will be provided free of charge upon
written request to:
Cadence Resources Corporation
6 East Rose Street
Walla Walla, WA 99362
Attn: John P. Ryan
In addition, copies of any exhibits to the Annual Report on Form 10-K
will be provided for a nominal charge to stockholders who make a written request
to the Company at the above address.
By Order of the Board of Directors
John P. Ryan
Chief Financial Officer
March 18, 2004
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EXHIBIT A
---------
CADENCE RESOURCES CORPORATION
2004 EQUITY INCENTIVE PLAN
ARTICLE I
ESTABLISHMENT AND TERM
SECTION 1.01 ESTABLISHMENT; DEFINITIONS. This Plan was adopted by the
Board on February 9, 2004, subject to the approval by the stockholders of the
Company. All capitalized terms used in this Plan are defined in Appendix A
attached to the Plan.
SECTION 1.02 TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on February 8, 2014,
which shall be within ten (10) years from the date the Plan is adopted by the
Board or approved by the stockholders of the Company, whichever is earlier. No
Equity Awards may be granted under the Plan while the Plan is suspended or after
it is terminated. Rights and obligations under any Equity Award granted while
the Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Equity Award was
granted.
ARTICLE II
STRUCTURE AND PURPOSE
SECTION 2.01 STRUCTURE OF PLAN. The Equity Awards issued under the Plan
shall be either, in the discretion of the Board, (a) Options granted pursuant to
Article VI of the Plan, including Incentive Stock Options and Non-statutory
Stock Options, or (b) Stock bonuses or restricted Stock awards granted pursuant
to Article VII of the Plan. All Options shall be designated as Incentive Stock
Options or Non-statutory Stock Options at the time of grant.
SECTION 2.02 PURPOSE. The purpose of the Plan is to promote the
interests of the Company by aligning the interests of selected eligible persons
under the Plan with the interests of the stockholders of the Company and by
providing to such persons an opportunity to obtain the benefits from ownership
of the Company's Stock through the granting to such persons of Equity Awards.
The Company, through the use of the Plan, seeks to attract and retain
the services of Employees, Directors and Consultants, and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
ARTICLE III
ADMINISTRATION
SECTION 3.01 BOARD; DELEGATION TO COMMITTEE. The Plan shall be
administered by the Board unless and until the Board delegates administration to
a Committee. The Board may delegate administration of the Plan to a Committee
composed of two or more members of the Board each of whom is an Outside
Director. If administration is delegated to a Committee, the Committee shall
have, in administering the Plan, all of the powers that were possessed by the
Board prior to such delegation, subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. If administration is delegated to a Committee, all references
in this Plan to the Board shall thereafter be to the Committee. The Board may
abolish the Committee at any time and re-vest in the Board the administration of
the Plan.
SECTION 3.02 ADMINISTRATION. The Board shall have the power, consistent
with the express provisions of the Plan:
(a) To determine from time to time which of the eligible persons under
the Plan shall be granted Equity Awards;
(b) To determine whether an Equity Award shall be an Incentive Stock
Option, a Non-statutory Stock Option, a Stock bonus, a right to purchase
restricted Stock, or a combination of the foregoing;
(c) To determine how and when each Equity Award shall be granted, the
provisions of each Equity Award granted, including the time or times when a
person shall be permitted to receive Stock pursuant to an Equity Award, and the
number of shares with respect to which an Equity Award shall be granted to each
such person;
(d) To construe and interpret the Plan and Equity Awards granted under
it, and to establish, amend and revoke rules and regulations for the
administration of such Plan and Equity Awards;
(e) To correct any defect, omission or inconsistency in the Plan or in
any Equity Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective;
(f) To amend the Plan or an Equity Award as provided in Article XI; and
(g) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
that are not in conflict with the provisions of the Plan.
ARTICLE IV
ELIGIBILITY
SECTION 4.01 PERSONS ELIGIBLE FOR EQUITY AWARDS. Incentive Stock
Options may be granted only to Employees. Equity Awards other than Incentive
Stock Options may be granted only to Employees, Directors or Consultants.
ARTICLE V
SHARES SUBJECT TO THE PLAN
SECTION 5.01 Subject to the provisions of Article VIII relating to
adjustments upon changes in Stock, no more than 1,000,000 shares of Stock may be
issued pursuant to Equity Awards. If any Equity Award shall for any reason
expire or otherwise terminate, in whole or in part, without having been
exercised in full, the Stock not acquired under such Equity Award shall revert
to and again become available for issuance under the Plan. The Stock subject to
the Plan may be unissued shares or reacquired shares, bought on the market or
otherwise.
ARTICLE VI
TERMS OF OPTIONS.
SECTION 6.01 FORM OF OPTION. Subject to the provisions of the Plan,
each Option shall be in such form and shall contain such terms and conditions as
the Board shall determine. The provisions of separate Options need not be
identical.
SECTION 6.02 TERM. No Option shall be exercisable after the expiration
of ten (10) years from the date it was granted.
SECTION 6.03 EXERCISE PRICE. The exercise price of each Incentive Stock
Option shall be not less than one hundred percent (100%) of the Fair Market
Value of the Stock subject to the Option on the date the Option is granted. The
exercise price of each Non-statutory Stock Option shall be not less than the
Fair Market Value of the Stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a Non-statutory Stock Option) may be granted with an exercise price
lower than that otherwise provided in this Section 6.03 if such Option is
granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
SECTION 6.04 PAYMENT. The purchase price of Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (a) in cash at the time the Option is exercised, or (b) at
the discretion of the Board or the Committee, determined at the time of the
grant of the Option, (1) by delivery to the Company of other equity
securities of the Company, (2) according to a deferred payment or other
arrangement with the person to whom the Option is granted or to whom the Option
is transferred pursuant to Section 6.05, (3) in any other form of legal
consideration that may be acceptable to the Board, or (4) any combination of the
foregoing.
SECTION 6.05 TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. Unless otherwise provided in the
Equity Award Agreement, a Non-statutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order.
SECTION 6.06 VESTING. The total number of shares of Stock subject to an
Option may, but need not, be vested or allotted in periodic installments (which
may, but need not, be equal). The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may be based on
performance or other criteria) as the Board may deem appropriate.
SECTION 6.07 TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. Unless otherwise provided in the Equity Award Agreement relating to
an Option, in the event of a Termination (other than upon the Optionee's death
or Disability), the Optionee may exercise his or her Option (to the extent that
the Optionee was entitled to exercise it at the date of Termination) but only
within such period of time ending on the earlier of (a) the date that is ninety
(90) days after the date of Termination, or (b) the expiration of the term of
the Option as set forth in the Equity Award Agreement.
SECTION 6.08 DISABILITY OF OPTIONEE. Unless otherwise provided in the
Equity Award Agreement relating to an Option, in the event of a Termination as a
result of the Optionee's Disability, the Optionee may exercise his or her Option
(to the extent that the Optionee was entitled to exercise it at the date of
Termination), but only within such period of time ending on the earlier of (a)
the date six (6) months after the date of Termination, or (b) the expiration of
the term of the Option as set forth in the Equity Award Agreement.
SECTION 6.09 DEATH OF OPTIONEE. Unless otherwise provided in the Equity
Award Agreement relating to an Option, in the event of a Termination as a result
of the Optionee's death, the Option may be exercised (to the extent the Optionee
was entitled to exercise it at the date of Termination) by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only within the period ending on the earlier of (a) the date
twelve (12) months after the date of Termination, or (b) the expiration of the
term of the Option as set forth in the Equity Award Agreement.
SECTION 6.10 INCENTIVE STOCK OPTION LIMITATIONS. The following
limitations shall apply to a grant of an Incentive Stock Option:
(a) Notwithstanding the provisions of Sections 6.02 and 6.03, if, at
the time of the grant of an Incentive Stock Option, the Optionee owns (or is
deemed to own pursuant to Section 424(d) of the Code) equity securities
possessing more than ten percent (10%) of the total combined voting power of all
classes of equity securities of the Company or of any of its Affiliates, the
exercise price of such Incentive Stock Option shall be at least one-hundred and
ten percent (110%) of the Fair Market Value of such Stock on the date of grant
and the Incentive Stock Option shall terminate on the date that is within five
(5) years after the date of grant.
(b) If the aggregate Fair Market Value (determined at the time of
grant) of Stock with respect to which Incentive Stock Options are exercisable
for the first time by the Optionee during any calendar year under all plans of
the Company and its Affiliates exceeds one-hundred thousand dollars ($100,000),
the Options or portions thereof that exceed such limit (according to the order
in which they were granted) shall be treated as Non-statutory Stock Options.
ARTICLE VII
TERMS OF STOCK BONUSES AND RESTRICTED STOCK AWARDS
SECTION 7.01 FORM OF STOCK BONUS OR RESTRICTED STOCK AWARD. Subject to
the provisions of the Plan, each Stock bonus or restricted Stock award shall be
in such form and shall contain such terms and conditions as the Board shall
determine. The provisions of separate stock bonuses or restricted stock awards
need not be identical.
SECTION 7.02 PURCHASE PRICE. The purchase price, if any, for any Stock
granted as a Stock bonus or restricted Stock award shall be such amount as the
Board shall determine and designate in the Equity Award Agreement.
Notwithstanding the foregoing, the Board may determine that eligible
participants in the Plan may be awarded Stock in consideration for past services
rendered to the Company or an Affiliate thereof or for the benefit of the
Company or an Affiliate thereof.
SECTION 7.03 TRANSFERABILITY. Unless otherwise provided in the Equity
Award Agreement, Stock awarded or purchased pursuant to this Article VII may not
be transferred to any person, except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, until any
restrictions on transfer set forth in the Equity Award Agreement lapse.
SECTION 7.04 PAYMENT. The purchase price, if any, of Stock acquired
pursuant to a Stock bonus or restricted Stock award shall be paid, to the extent
permitted by applicable statutes and regulations, either (a) in cash, or (b) at
the discretion of the Board or the Committee, determined at the time of the
grant of the Stock award, (1) by delivery to the Company of other equity
securities of the Company, (2) according to a deferred payment or other
arrangement with the person to whom the Stock award is granted or to whom the
Option is transferred pursuant to Section 7.03, (3) by electing to receive the
Stock in lieu of other compensation payable to the person by the Company or an
Affiliate
thereof or for the benefit of the Company or an Affiliate thereof, (4)
in consideration for past services rendered by the person to the Company or for
its benefit, (5) in any other form of legal consideration that may be acceptable
to the Board, or (6) any combination of the foregoing.
SECTION 7.05 VESTING. Shares of Stock sold or awarded under Article VII
of the Plan may, but need not, be subject to a repurchase option or right of
first refusal in favor of the Company.
ARTICLE VIII
ADJUSTMENTS UPON CHANGES IN STOCK
SECTION 8.01 CHANGE IN STOCK. If any change is made in the Stock
subject to the Plan, through a merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company, the Plan will be appropriately adjusted
in the class(es) and maximum number of shares subject to the Plan pursuant to
Article V, and the outstanding Equity Awards will be appropriately adjusted in
the class(es) and number of shares subject to and the exercise price of such
outstanding Equity Awards. Such adjustments shall be made by the Board at the
time of the change in the Stock, whether or not specifically provided for in any
outstanding Equity Award. The Board's determination shall be final, binding and
conclusive.
ARTICLE IX
COVENANTS OF THE COMPANY
SECTION 9.01 RESERVATION OF STOCK. The Company shall reserve from its
authorized but unissued Stock the number of shares of Stock issuable pursuant to
outstanding Equity Awards.
SECTION 9.02 REGULATORY AUTHORITY. The Company shall seek to obtain
from each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of Stock upon the exercise
of outstanding Equity Awards, PROVIDED, HOWEVER, that this undertaking shall not
require the Company to register under the Securities Act of 1933, as amended,
either the Plan, any Equity Award or any Stock issued or issuable pursuant to
any such Equity Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority for the
lawful issuance and sale of Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Stock upon exercise of such
Equity Awards unless and until such authority is obtained.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01 ACCELERATION OF VESTING. Notwithstanding any provision in
any Equity Award Agreement, the Board may, in its discretion, accelerate the
time at which an Equity Award may first be exercised or the time during which an
Equity Award or any part thereof will vest.
SECTION 10.02 STOCKHOLDER RIGHTS. Except as set forth in the Equity
Award Agreement, no holder of any Equity Award shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any Stock subject
to such Equity Award unless and until such person has satisfied all requirements
for vesting or exercise of the Equity Award pursuant to its terms.
SECTION 10.03 EMPLOYMENT OR OTHER SERVICES. Nothing in the Plan, any
Equity Award Agreement or any instrument executed pursuant thereto shall (a)
confer upon any Employee or other holder of an Equity Award any right to
continue in the employ of the Company or any Affiliate, (b) confer upon any
Director or Consultant or other holder of an Equity Award any right to continue
acting as a Director or Consultant, (c) affect the right of the Company or any
Affiliate to terminate the employment of any Employee with or without cause, (d)
affect the right of the Company's Board of Directors and/or the Company's
stockholders to remove any Director pursuant to the terms of the Company's
charter documents and the provisions of applicable law, or (e) affect the right
of the Company to terminate the relationship of any Consultant pursuant to the
terms of such Consultant's agreement with the Company or Affiliate.
SECTION 10.04 SECURITIES LAW REQUIREMENTS. The Company may require any
person to whom an Equity Award is granted, or any person to whom an Equity Award
is transferred, as a condition of exercising or acquiring Stock under any Equity
Award, to give written assurances satisfactory to the Company (a) as to such
person's knowledge and experience in financial and business matters, (b) that he
or she is capable of evaluating, alone or together with a purchaser
representative, the merits and risks of exercising the Equity Award, and (c)
that such person is acquiring the Stock subject to the Equity Award for such
person's own account and not with any view to a distribution of the Stock. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Stock.
SECTION 10.05 TAX WITHHOLDING. The Company shall have the right to
deduct any applicable taxes from any Equity Award (including with respect to any
Stock issued thereunder) transferred hereunder and to take such other action as
is necessary in the opinion of the Board to satisfy the Company's tax
obligations in connection with the Plan. If provided for in an Equity Award
Agreement, the holder of an Equity Award may be permitted to satisfy any
federal, state or local tax withholding or payment obligation relating to the
exercise or acquisition of Stock under an Equity Award by (a) tendering a cash
payment, (b) authorizing the Company to withhold shares from the shares of the
Stock otherwise issuable to such person as a result of the exercise or
acquisition of Stock under the Equity Award, (c) delivering to the Company
unencumbered shares of equity securities of the Company held by such person by,
or (d) any combination of the foregoing.
SECTION 10.06 UNFUNDED PLAN. The Plan shall be unfunded unless and
until the Board or the Committee (if designated) determines otherwise. Unless
the Board or the Committee determines otherwise, (a) the Company shall not be
required to segregate any assets that may at any time be represented by cash,
Stock, other securities or rights thereto, nor shall the Plan be construed as
providing for such segregation, nor shall the Company, the Board or the
Committee be deemed to be a trustee of any cash, Stock, other securities or
rights thereto; (b) any liability of the Company to any participant in the Plan
or any beneficiary thereof with respect to awards granted under the Plan shall
be based solely upon contractual obligations that may be created by the Plan and
any applicable Equity Award Agreement; and (c) no such obligation shall be
deemed secured by any pledge or other encumbrance on any property of the
Company.
ARTICLE XI
AMENDMENT OF THE PLAN AND EQUITY AWARDS
SECTION 11.01 AMENDMENT OF PLAN; STOCKHOLDER APPROVAL. The Board may at
any time terminate, and from time-to-time may amend or modify, the Plan;
provided, however, that no amendment or modification may become effective
without approval of the amendment or modification by the stockholders if
stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable. No such amendment shall adversely affect any outstanding Equity Award
without the holder's written consent.
SECTION 11.02 CHANGES IN LAW. The Board may amend the Plan as it deems
necessary or advisable to provide eligible Employees, Directors or Consultants
with the maximum benefits provided or to be provided under the provisions of the
Plan relating to Incentive Stock Options and to bring the Plan or Incentive
Stock Options granted under the Plan into compliance therewith. The Board may
also, in its discretion, amend the Plan to take into account changes in law and
tax and accounting rules (including any pooling-of-interest rules), as well as
other developments, and to grant Equity Awards that qualify for beneficial
treatment under such rules.
APPENDIX A
DEFINITIONS
"AFFILIATE" means any parent corporation or subsidiary corporation, whether now
or hereafter existing, as those terms are defined in Sections 424(e) and (f),
respectively, of the Code.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder.
"COMMITTEE" means a Committee appointed by the Board in accordance with Section
3.01 of the Plan.
"COMPANY" means Cadence Resources Corporation, a Utah corporation.
"CONSULTANT" means any person, including an advisor, engaged by the Company or
an Affiliate to render bona fide consulting services (other than services in
connection with the offer or sale of securities in a capital-raising
transaction) and who is compensated for such services, PROVIDED, HOWEVER, that
the term "Consultant" shall not include Directors who are paid only a director's
fee by the Company or who are not compensated by the Company for their services
as Directors.
"DIRECTOR" means a member of the Board.
"DISABILITY" means the permanent and total physical inability, as determined in
good faith by the Board, to serve in the person's capacity as an Employee,
Director or Consultant, for a continuous period anticipated to last at least
twelve (12) months.
"EMPLOYEE" means any person, including officers, employed by the Company or any
Affiliate of the Company. Neither service as a Director nor payment of a
director's fee by the Company shall by itself constitute "employment" by the
Company.
"EQUITY AWARD" means any right granted under the Plan, including any Option, any
Stock bonus or any right to purchase restricted Stock.
"EQUITY AWARD AGREEMENT" means a written agreement between the Company and a
holder of an Equity Award evidencing the terms and conditions of an individual
Equity Award grant. Each Equity Award Agreement shall be subject to the terms
and conditions of the Plan.
"FAIR MARKET VALUE" means, as of any date, the value of the Stock determined as
follows:
If the Stock is listed on any established stock exchange or a national
market system, including without limitation the Nasdaq National Market or Nasdaq
Small Cap Market, the Fair Market Value of a share of Stock shall be the last
sales price for the Stock (or the closing bid, if no sales were reported)as
quoted on such system or exchange, as reported in the WALL STREET JOURNAL or
such other source as the Board deems reliable.
In the absence of an established market for the Stock, the Fair Market
Value shall be determined in good faith by the Board or the Committee (if
designated).
"INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
"NON-STATUTORY STOCK OPTION" means an Option not intended to qualify as an
Incentive Stock Option.
"OPTION" means a stock option granted pursuant to the Plan.
"OPTIONEE" means an Employee, Director or Consultant who holds an outstanding
Option.
"OUTSIDE DIRECTOR" means a Director who is a "non-employee director" within the
meaning of Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of
1934, as amended, and (a) is not a current Employee of the Company or an
"affiliated corporation" (within the meaning of Treasury regulations promulgated
under Section 162(m) of the Code), is not a former Employee of the Company or an
"affiliated corporation" receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an "affiliated corporation" at any time, and is not currently receiving
direct or indirect remuneration from the Company or an "affiliated corporation"
for services in any capacity other than as a Director, as set forth in Treasury
Regulation ss. 1.162-27(e)(3).
"PLAN" means this Equity Incentive Plan.
"STOCK" means the Company's Common Stock, $0.01 par value.
"TERMINATION" means the termination or interruption of an Employee's, Director's
or Consultant's employment or relationship with the Company. The Board, in its
sole discretion, may determine whether a Termination has occurred in the case
of: any leave of absence approved by the Board, including sick leave, military
leave, or any other personal leave.
PROXY PROXY
- ----- -----
CADENCE RESOURCES CORPORATION
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS)
The undersigned holder of Common Stock of CADENCE RESOURCES
CORPORATION, revoking all proxies heretofore given, hereby constitutes and
appoints Howard M. Crosby and John P. Ryan, and each of them, Proxies, with full
power of substitution, for the undersigned and in the name, place and stead of
the undersigned, to vote all of the undersigned's shares of said stock,
according to the number of votes and with all the powers the undersigned would
possess if personally present, at the Annual Meeting of Stockholders of CADENCE
RESOURCES CORPORATION, to be held at the Radisson Lexington, 511 Lexington
Avenue, New York, New York 10017 on Wednesday, April 20, 2004, at 1:00 P.M., and
at any adjournments or postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Meeting
and Proxy Statement relating to the meeting and hereby revokes any proxy or
proxies heretofore given.
Each properly executed Proxy will be voted in accordance with the
specifications made on the reverse side of this Proxy and in the discretion of
the Proxies on any other matter that may properly come before the meeting. Where
no choice is specified, this Proxy will be voted FOR all listed nominees to
serve as directors and FOR Proposal 2.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
__________________ ______________ PLEASE MARK YOUR CHOICE LIKE |X|
ACCOUNT NUMBER COMMON THIS IN BLUE OR BLACK INK:
Will attend the meeting |_|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL
LISTED NOMINEES AND FOR PROPOSAL 2
(1) Election of five directors
Nominees:
Howard M. Crosby Glenn DeHekker
John P. Ryan Jeffrey M. Christian
Kevin Stulp
FOR all nominees listed WITHHOLD AUTHORITY to vote
(EXCEPT AS MARKED TO THE CONTRARY) for all listed nominees above
[ ] [ ]
(Instruction: To withhold authority to vote for any individual nominee, circle
that nominee's name in the list provided above.)
(2) Approval of the Company's 2004 Equity FOR AGAINST ABSTAIN
Incentive Plan.
[ ] [ ] [ ]
(3) In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Annual Meeting.
Dated ____________________, 2004
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Signature(s)
(Signatures should conform to
names as registered. For jointly
owned shares, each owner should
sign. When signing as attorney,
executor, administrator, trustee,
guardian or officer of a
corporation, please give full
title.)
PLEASE MARK AND SIGN ABOVE AND RETURN PROMPTLY