WESTERN GOLDFIELDS, INC.
1575 Delucchi Lane, Suite 116
Reno, Nevada 89502
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14F-1 THEREUNDER
INTRODUCTION
This Information Statement is being mailed on or about March 6,
2006 to the holders of record at the close of business on February 28, 2006 (the
"Record Date") of common stock, par value $0.01 per share (the "Common Stock"),
of Western Goldfields, Inc., an Idaho corporation (the "Company"), in accordance
with the requirements of Section 14(f) of the Securities Exchange Act of 1934,
as amended (the `Exchange Act"), and Rule 14f-1 promulgated thereunder. This
Information Statement is being delivered in connection with resignation of James
Mancuso and the appointment by the then remaining directors of Randall Oliphant,
Martyn Konig and Vahan Kololian to the board of directors of the Company. The
resignation of Mr. Mancuso and the appointment of Messrs. Oliphant and Konig
became effective on February 13, 2006 and the appointment of Mr. Kololian will
become effective eleven days after mailing this Information Statement to
shareholders of the Company as of the Record Date.
WE ARE NOT SOLICITING YOUR PROXY.
NO VOTE OR OTHER ACTION BY THE COMPANY'S SECURITYHOLDERS
IS REQUIRED IN RESPONSE TO THIS INFORMATION STATEMENT.
CHANGE OF CONTROL
As of the Record Date, the Company had approximately 59,743,051
outstanding shares of Common Stock. Holders of shares of Common Stock are
entitled to one vote per share on all matters for which the securityholders are
entitled to vote.
On February 13, 2005, the Company closed (the "Initial Closing")
an initial tranche of $3,700,000 of a total of a $6,000,000 non-brokered private
placement (the "Private Placement"), pursuant to a securities purchase agreement
(the "Initial Purchase Agreement") with accredited investors, including officers
and directors of the Company (the "Initial Investors"). Pursuant to the Initial
Purchase Agreement the Company sold 12,333,333 units (the "Initial Units") at
the Initial Closing, each Initial Unit consisting of one share of the Common
Stock, and one half of one warrant (the "Warrant") to purchase one share of
Common Stock for a period of two years at an exercise price of $0.45. The
Private Placement was sold for $0.30 per Initial Unit, for gross proceeds of
$3,700,000.
On February 17, 2005, the Company closed (the "Final Closing," and
collectively with the Initial Closing, the "Closings") the final $2,300,000 of
the Private Placement, pursuant to a securities purchase agreement (the "Final
Purchase Agreement," and collectively with the Initial Purchase Agreement, the
"Purchase Agreements") with accredited investors, including officers and
directors of the Company (the "Final Investors"). Pursuant to the Final Purchase
Agreement the Company sold 7,666,667 units (the "Final Units") at the Final
Closing, each Final Unit consisting of one share of Common Stock, and one half
of one Warrant purchase one share of Common Stock for a period of two years at
an exercise price of $0.45. The Private Placement was sold for $0.30 per Final
Unit, for gross proceeds of $2,300,000.
Immediately following the Initial Closing of the Private Placement
(i) James Mancuso, one of the three members of the Company' Board of Directors,
resigned, (ii) the size of the Company's Board of Directors was increased to
five persons and (iii) Randall Oliphant and Martyn Konig were named as
directors of the Company, to serve with Gerald Ruth and Douglas Newby, who
continue as directors. In addition, eleven days after mailing this Information
Statement to shareholders of the Company as of the Record Date, Vahan Kololian
will become a director of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to
the beneficial ownership of the Company's equity securities as of March 3, 2006
by:
o each securityholder known by the Company to be the beneficial owner of
more than 5% of the Company's outstanding securities;
o each current director and each person that will become a director
following the mailing of this information statement to the
shareholders of the Company on the Record Date;
o each of the executive officers of the Company; and
o all current directors and executive officers as a group.
Unless otherwise specified, the address of each of the persons set
forth below is in care of Western Goldfields, Inc., 1575 Delucchi Lane, Suite
116, Reno, Nevada 89502.
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NAME AND ADDRESS AMOUNT AND NATURE OF BENEFICIAL
OF BENEFICIAL OWNER OWNERSHIP(1) PERCENT OF OUTSTANDING SHARES
------------------- ------------------------------- -----------------------------
Randall Oliphant 4,583,333(2) 7.41%
Ray Threlked 916,667(3) 1.52%
Brian Penny 833,332(4) 1.38%
Paul Semple 233,333(5) 0.39%
Graham Desson 166,667(6) 0.28%
Martyn Konig 749,999(7) 1.25%
Gerald Ruth 1,934,585(8) 3.18%
Douglas Newby 1,004,334(9) 1.66%
Lawrence O'Connor 809,586(10) 1.34%
Vahan Kololian* 1,500,001(11) 2.48%
Latitude Resources Plc.(Formerly 7,500,000(12) 12.05%
Latin American Copper Plc.)
RAB Special Situations (Master) Fund 6,342,933(13) 9.99%
Limited
Newmont Mining Corporation 3,914,278(14) 6.50%
Investec Bank (UK) Limited 11,250,000(15) 17.72%
All executive officers and directors 12,731,837(2)(3)(4)(5)(6)(7)(8) 18.99%
as a group (10 persons) (9)(10)(11)
* Incoming director, effective eleven days after mailing this Information
Statement to shareholders of the Company as of the Record Date.
(1) 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.
(2) Includes options to purchase 833,333 shares of Common Stock, 2,500,000
shares of Common stock owned by Rockcliff Group Limited and warrants to
purchase 1,250,000 shares of Common Stock owned by Rockcliff Group
Limited. The options and warrants will become exercisable upon the
approval by the shareholders of the Company of an amendment to the
Company's Articles of Incorporation increasing the number of authorized
shares of Common Stock in an amount greater than 115,000,000 shares.
(3) Includes options to purchase 416,666 shares of Common Stock and
warrants to purchase 166,667 shares of Common Stock. The options and
warrants and will become exercisable upon the approval by the
shareholders of the Company of an amendment to the Company's Articles
of
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Incorporation increasing the number of authorized shares of Common
Stock in an amount greater than 115,000,000 shares.
(4) Includes options to purchase 333,333 shares of Common Stock and
warrants to purchase 166,666 shares of Common Stock. The options and
warrants will become exercisable upon the approval by the shareholders
of the Company of an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Common
Stock in an amount greater than 115,000,000 shares.
(5) Includes options to purchase 233,333 shares of Common Stock. The
options will become exercisable upon the approval by the shareholders
of the Company of an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Common
Stock in an amount greater than 115,000,000.
(6) Includes options to purchase 166,667 shares of Common Stock. The
options will become exercisable upon the approval by the shareholders
of the Company of an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Common
Stock in an amount greater than 115,000,000 shares.
(7) Includes options to purchase 250,000 shares of Common Stock and
warrants to purchase 166,666 shares of Common Stock. The options and
warrants will become exercisable upon the approval by the shareholders
of the Company of an amendment to the Company's Articles of
Incorporation increasing the number of authorized shares of Common
Stock in an amount greater than 115,000,000 shares.
(8) Includes options to purchase 600,000 shares of Common Stock, 341,001
shares of Common Stock and warrants to purchase 166,667 shares of
Common Stock owned by Muriel Ruth (mother) and 551,917 shares of Common
Stock and warrants to purchase 275,000 shares of Common Stock by Sandra
Meddick-Ruth (spouse). Warrants to purchase 316,667 shares of Common
Stock will become exercisable upon the approval by the shareholders of
the Company of an amendment to the Company's Articles of Incorporation
increasing the number of authorized shares of Common Stock in an amount
greater than 115,000,000 shares.
(9) Includes 179,334 shares of Common Stock and warrants to purchase
225,000 shares of Common Stock held by Proteus Capital Corp. Mr. Newby
is the President of Proteus Capital Corp. Also includes options to
purchase 600,000 shares of Common Stock.
(10) Includes options to purchase 775,000 shares of Common Stock.
(11) Includes options to purchase 250,000 shares of Common Stock, 833,333
shares of Common Stock owned by TerraNova Partners L.P. and warrants to
purchase 416,667 shares of Common Stock owned by TerraNova Partners
L.P. The options and warrants will become exercisable upon the approval
by the shareholders of the Company of an amendment to the Company's
Articles of Incorporation increasing the number of authorized shares of
Common Stock in an amount greater than 115,000,000.
(12) Includes warrants to purchase 2,500,000 shares of Common Stock. We have
been advised that Michael Fielding is the Managing Director of Obelisk
Management Consultants Ltd. with dispositive and voting power over the
shares held by Latitude Resources Plc. The address of Obelisk
Management Consultants Ltd. is 8-10 Devonshire Place, St. Hellier,
Jersey, Channel Islands, Great Britain, JE23RD.
(13) Includes 2,595,853 shares of Common Stock, 1,000,000 shares of
Preferred Stock convertible into 2,941,176 shares of Common Stock and
warrants to acquire 500,000 shares of Preferred Stock, each share
convertible into 2.94176 shares of Common Stock. Under the terms of the
warrants and the preferred stock, in no event shall such securities be
converted into Common Stock, if after giving effect to such conversion,
the holder would, in aggregate, beneficially own common stock of the
issuer in excess of 9.99% of the issued and outstanding Common Stock,
within the meaning of Rule 13d-1 of the Securities Exchange Act of
1934, as amended. Therefore, the beneficial
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ownership does not include 664,684 shares of Common Stock issuable upon
conversion of the preferred stock warrant. We have been advised that
William P. Richards is the director of the holder, with dispositive and
voting power over the shares held by RAB Special Situations (Master)
Fund Limited. The address of RAB Special Situations (Master) Fund
Limited is c/o RAB Capital, 1 Adam Street, London WC2N 6LE, United
Kingdom.
(14) Includes warrants to purchase 459,810 shares of Common Stock. The board
of directors of Newmont Mining Corporation has dispositive and voting
power over the shares held by Newmont Mining Corporation. The address
of Newmont Mining Corporation is 1700 Lincoln Street, Denver, Colorado
80203.
(15) Includes warrants to purchase 3,750,000 shares of Common Stock. The
board of directors of Investec Bank (UK) Limited has dispositive and
voting power over the shares held by Investec Bank (UK) Limited. The
address of Investec Bank (UK) Limited is 2 Gresham Street, London EC2V
7 QP United Kingdom.
CHANGES TO THE BOARD OF DIRECTORS
Immediately following the Initial Closing of the Private Placement
(i) James Mancuso, one of the three members of the Company's Board of Directors,
resigned, (ii) the size of the Company's Board of Directors was increased to
five persons and (iii) Randall Oliphant and Martyn Konig were named as directors
of the Company, to serve with Gerald Ruth and Douglas Newby, who continue as
directors. In addition, eleven days after mailing this Information Statement to
shareholders of the Company as of the Record Date, Vahan Kololian will become a
director of the Company.
To the best of the Company's knowledge, except as set forth below,
none of the incoming directors is currently a director, holds any position with
the Company, or has been involved in any transactions with the Company or any of
its directors, executive officers, affiliates or associates which are required
to be disclosed pursuant to the rules and regulations of the Securities and
Exchange Commission. To the best of the Company's knowledge, none of the
designees has been convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors, or has been a party to any judicial or
administrative proceeding during the past five years, except for matters that
were dismissed without sanction or settlement, that resulted in a judgment,
decree or final order enjoining the person from future violations of, or
prohibiting activities subject to, federal or state securities laws, or a
finding of any violation of federal or state securities laws.
DIRECTORS AND EXECUTIVE OFFICERS
Immediately following the Initial Closing (i) James Mancuso, one
of the three members of the Company's Board of Directors, resigned; (ii) each of
the following officers of the Company submitted their resignations: Douglas
Newby, as Chairman of the Board, President and Chief Executive Officer and Becky
Corigliano as Chief Financial Officer, Secretary and Treasurer; and (iii) the
following individuals were elected as officers of the Company: Randall Oliphant
- - Chairman of the Board; Raymond Threlkeld - President and Chief Executive
Officer; Brian Penny - Chief Financial Officer; Paul Semple - Vice President of
Projects and Graham Desson Controller and Secretary.
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PRIOR TO THE PRIVATE PLACEMENT
The following table lists the individuals who served as officers
or directors of the Company prior to the Initial Closing of the Private
Placement.
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
Douglas Newby 47 Chairman of the Board, Chief Executive Officer and President
Becky Corigliano 41 Chief Financial Officer, Secretary and Treasurer
Lawrence O'Connor 45 Vice President Operations
Gerald Ruth 47 Director
James Mancuso 73 Director
AFTER THE PRIVATE PLACEMENT
The following table lists the individuals who have been (or will
be, as applicable) appointed as officers or directors of the Company after the
Initial Closing of the Private Placement.
NAME AGE POSITION(S) WITH THE COMPANY
- ---- --- ----------------------------
Randall Oliphant 46 Chairman of the Board
Ray Threlkeld 59 President and Chief Executive Officer
Brian Penny 43 Chief Financial Officer
Lawrence O'Connor 45 Vice President Operations
Paul Semple 45 Vice President of Projects
Graham Desson 58 Controller and Secretary
Martyn Konig 48 Director
Gerald Ruth 47 Director
Douglas Newby 47 Director
Vahan Kololian 52 Director(1)
- -------------------
(1) Incoming director, effective eleven days after mailing this Information
Statement to shareholders of the Company as of the Record Date.
RANDALL OLIPHANT, age 46, has been the Chairman and CEO of
Rockcliff Group Limited, a private corporation actively involved with its
shareholdings, primarily in the mining sector, including Silver Bear Resources
Inc since September 2004. Mr. Oliphant is on the Advisory Board of Metalmark
Capital LLC (formerly Morgan Stanley Capital Partners) and since February 2005
has served on the Board of Western Oil Sands Inc. Since 2003 Mr. Oliphant has
served on the boards of a number of private companies and not-for-profit
organizations. From March 1999 to February 2003, he was the President and CEO of
Barrick Gold Corporation. Mr. Oliphant is a Chartered Accountant.
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RAYMOND W. THRELKELD, age 59, has over 30 years of mineral
industry experience ranging from discovery, feasibility study, development
management, operations management, and corporate officer. Since July 2005, Mr.
Threlkeld has been the Chief Operating Officer of Silver Bear Resources Inc., a
private mineral resource company. From 1996 to 2005 Mr. Threlkeld held various
senior management positions in precious metal mine development with Barrick Gold
Corporation and Coeur d'Alene Mines Corporation including the development of the
Pierina Mine in Peru, the Bulyanhulu Mine in Tanzania and the Veladero Mine
located in Argentina. Mr. Threlkeld has had exploration acquisition success in
the Western United States in addition to the management and project development
experience sited above.
BRIAN PENNY, age 43, has over 20 years of experience in mine
finance and accounting. Since January 2005 Mr. Penny has been the Chief
Financial Officer of Silver Bear Resources Inc., a private mineral resource
company. Since 2004 Mr. Penny has been and Director of, and chairs, the Audit
Committees of Equinox Minerals Limited and Baffinland Iron Mines Corporation and
since 2005 has been and Director of, and chairs, the Audit Committee of Alamos
Gold Inc. While serving as Chief Financial Officer (1993 - 2004) with Kinross
Gold Corporation, Mr. Penny was responsible for all finance, banking, hedging
and financial reporting activities including the financial due diligence
surrounding a U.S. $1.3 billion merger with TVX Gold Inc. and Echo Bay Mines
Ltd. Mr. Penny is a Certified Management Accountant.
PAUL SEMPLE, age 45, has 23 years of experience in the mining
industry and has focused on feasibility studies, project development and
operations of precious and base metals deposits. From 2001 until 2006 Mr. Semple
has been President of PG Semple Consulting and President of Penguin Automated
Systems Inc. Mr. Semple has spent much of his time with Kilborn (later
SNC-Lavalin) where he was involved in all aspects of project development from
initial studies through to construction and operations. During this time, Mr.
Semple held various positions including Vice President and General Manager, SNC
Lavalin Engineers and Constructors. Mr. Semple is a Professional Engineer.
GRAHAM DESSON, age 58, has served as Controller of Silver Bear
Resources Inc., a private Canadian company engaged in mining exploration in the
Russian Federation since May 2005. From 2004 to May 2005, Mr. Desson was an
independent consultant. From 2001 to 2004 Mr. Desson was engaged as a financial
consultant and then served as Director - Treasury of Biovail Corporation, a
public pharmaceutical company. Mr. Desson is a Chartered Accountant.
MARTYN KONIG, age 48, has 20 years experience in investment
banking and commodity markets. Since January 2005 Mr. Konig has served as CEO of
AIM listed Latitude Resources Plc. Since June 2001 Mr. Konig has served as
Non-Executive Chairman of EBT Mobile China. He has extensive experience in the
natural resource sector, which includes senior management responsibility in
resource finance and commodity trading operations at various international
investment banks. Mr. Konig was a main Board Director of NM Rothschild for 15
years and held senior positions at Goldman Sachs and UBS. Mr. Konig is a
Barrister and Fellow of the Chartered Institute of Bankers.
GERALD RUTH, age 47, has served as a Director since May 2004.
Since 2003, Mr. Ruth has been an independent consultant providing strategic
corporate advisory services focusing on capital markets and corporate finance.
From 1988 to 2003, Mr. Ruth held various positions at the Toronto Stock
Exchange, where he served as Head of Listings from 1997 to 2003 and was
responsible for leading and directing all operations, policy development, and
general management within the Listings group. Previously, Mr. Ruth was Listings
Manager from 1990 to 1996 where he was responsible for managing original listing
applications at the exchange. From 1988 to 1990, Mr. Ruth held the position of
Investigator, Member Regulation where he was responsible for investigating
matters of compliance with exchange requirements. Mr. Ruth is a Chartered
Accountant.
DOUGLAS NEWBY, age 47, has served as a Director of the Company
since March 1, 2005. From October 2005 to February 2006 Mr. Newby was Chairman
of the Board, President and Chief Financial Officer of the Company, from March
1, 2005 to October 2005 was Executive Vice President of the Company and in March
2005 served as interim Chief Financial Officer. Between January 2004 and
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March 2005, Mr. Newby served as Vice-President of Cadence Resource Corporation,
an oil and gas exploration and development corporation. Mr. Newby has been
President of Proteus Capital Corp., a corporate advisory firm that specializes
in the natural resource industries, since July 2001. Mr. Newby served as
Managing Director of Proteus Consultants Ltd. from January 1991 to July 2001 and
Managing Partner of Moyes Newby & Co., Inc. from April 1994 to December 1998,
both of which provided corporate advisory services primarily to the
international energy and mining industries. Before forming Proteus Consultants
Ltd., Mr. Newby held senior positions with the investment banking firms of S.G.
Warburg & Co., Inc., Morgan Grenfell & Co., and James Capel & Co.
VAHAN KOLOLIAN, age 52, is the founder and Managing Partner of
TerraNova Partners LP, which invests in the industrial, services and resource
sectors. Since 2002 Mr. Kololian has been Chairman of Precinda Corporation, a
private manufacturing company. Mr. Kololian started his career in investment
banking in 1990 with Burns Fry Limited (now BMO Nesbitt Burns). Since 1990 he
has held leadership positions in private equity partnerships. Mr. Kololian also
serves on the boards of the following public companies, Terra Nova Acquisition
Corporation and Manicouagan Minerals Inc. Mr. Kololian is a Member of the Law
Society of Upper Canada.
LAWRENCE O'CONNOR, age 45, has served as Vice President Operations
of the Company since January 2004. Mr. O'Connor has over 20 years experience in
the natural resources industry spanning field exploration programs, production
geology in surface and underground mines, mine engineering, and operations
general management including mine startup. Mr. O'Connor co-founded Nevada Colca
Gold, Inc. and was President from August 1997 until January 2004. Mr. O'Connor
was General Manager of Eldorado Gold Corporations La Colorada mine in Mexico
from June 1994 until July 1997. Mr. O'Connor has successfully managed mining and
exploration programs in Mexico, East Africa and the United States.
LEGAL PROCEEDINGS
There is no material pending litigation by or against the Company.
To the Company's knowledge, no director, officer or affiliate of
the Company, and no owner of record or beneficial owner of more than five
percent (5%) of the securities of the Company, or any associate of any such
director, officer or security holder is a party adverse to the Company or has a
material interest adverse to the Company in reference to pending litigation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None of the Company's directors or officers, nor any of the
incoming directors, nor any person who beneficially owns, directly or
indirectly, shares carrying more than 10% of the voting rights attached to the
Company's outstanding shares, nor any of the Company's promoters, nor any
relative or spouse of any of the foregoing persons, other than has any material
interest, direct or indirect, in any transaction since January 1, 2005 or in any
presently proposed transaction that, in either case, has affected, or will
materially affect, the Company. None of the Company's directors or officers, nor
any incoming director is indebted to the Company.
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 2005 the Company's Audit
Committee, Compensation Committee and Corporate Governance Committee consisted
of James Mancuso, Douglas Newby and Gerald Ruth. As a result of the resignation
of James Mancuso from the Company's Board, Messrs. Newby and Ruth are the sole
remaining members of these committees. During fiscal year ended December 31,
2005 the Company's Technical Committee consisted of Thomas E. Callicrate and
James Mancuso. As a result of the resignation of Thomas E. Callicrate and James
Mancuso from the Company's
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Board in 2005 and 2006, respectively, there are no remaining members of this
committee. The Company intends to establish new a Audit Committee and a new
Compensation Governance Environmental Health and Safety Committee promptly after
this Information Statement is furnished to the Company shareholders as of the
Record Date and Mr. Kololian takes office. It is anticipated that the new Audit
Committee and the new Compensation Governance Environmental Health and Safety
Committee will consist of the following three directors: Martyn Koning, Gerald
Ruth and Vahan Kololian.
NOMINATIONS FOR DIRECTORS
Upon the establishment of a new governance committee, the Board
will adopt a formal policy regarding qualifications of director candidates.
Currently, in evaluating director nominees, the Board considers a variety of
factors, including the appropriate size of the Company's Board of Directors; the
needs of the Company with respect to the particular talents and experience of
its directors; the knowledge, skills and experience of nominees, including
experience in the gold industry, finance, administration or public service, in
light of prevailing business conditions and the knowledge, skills and experience
already possessed by other members of the Board; experience with accounting
rules and practices; and the desire to balance the benefit of continuity with
the periodic injection of the fresh perspective provided by new Board members.
To date, the Company has not engaged third parties to identify or
evaluate or assist in identifying potential nominees, although the Company
reserves the right in the future to retain a third party search firm, if
necessary.
During the fiscal year ended December 31, 2005, the Company's
Board met two times and the Audit Committee met once. Due to the size of the
Board compensation, governance and technical matters were addressed by written
consent of the Board.
The Company's Board of Directors does not currently provide a
process for securityholders to send communications to the Board of Directors as
the Company management believes that until this point it has been premature
given the limited liquidity of the common stock of the Company to develop such
process.
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EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation for services in all capacities to the Company for the fiscal years
ended December 31, 2005, 2004 and 2003 paid to the Company's Chief Executive
Officer and executive officers who served during the last completed fiscal year.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
----------------------------
AWARDS
----------------------------
SECURITIES
UNDERLYING
OPTIONS/ ALL OTHER
ANNUAL COMPENSATION SAR'S COMPENSATION
------------------- ----- ------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS
- --------------------------- ---- ---------- -----
Douglas Newby 2005 -- -- 150,000 $104,750
Chairman of the Board, 2004 -- -- 450,000 $81,290
President and Chief Executive
Officer 2003 -- -- -- --
Becky Corigliano(6) 2005 $84,060 -- 450,000 --
Chief Financial Officer 2004 -- -- -- --
Secretary and Treasurer 2003 -- -- -- --
Lawrence O'Connor 2005 $107,995 -- 200,000 --
Vice President Operations 2004 $98,535 -- 575,000 --
Thomas Mancuso(1) 2005 $123,460 -- 200,000 --
2004 $116,300 -- 400,000 --
2003 $68,000 -- -- $6,000(2)
Thomas Callicrate(3) 2005 $100,250 -- 200,000 --
2004 $93,300 -- 400,000 --
2003 $58,200(4) -- -- $16,750(5)
(1) Mr. Mancuso resigned as a Director and President effective October 25,
2005.
(2) Consists of 20,000 units, comprised of one share of Common Sock and one
warrant to purchase one share of Common Stock at $0.45 per share,
valued at $0.30 per share at the time of issuance.
(3) Mr. Callicrate resigned as a Director and Vice President of Exploration
effective October 25, 2005.
(4) Consists of consulting fees paid to Mountain Gold Exploration, Inc., of
which Mr. Callicrate is the President, Secretary and Director, and
salary paid directly to Mr. Callicrate. Mr. Callicrate was a Director
from August 2002 to October 2005 and Vice President of Exploration from
November 2003 to October 2005.
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(5) Consists of 55,832 units, comprised of one share of Common Stock and
one warrant to purchase one share of Common Stock. The units were
issued to Mountain Gold Exploration, Inc. of which Mr. Callicrate is
the President, Secretary and Director.
(6) Ms. Corigliano resigned as Chief Financial Officer, Secretary and
Treasurer on February 13, 2006.
OPTION GRANTS IN LAST FISCAL YEAR (JANUARY 1, 2005 - DECEMBER 31, 2005)
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE
SECURITIES OPTIONS VALUE AT ASSUMED
UNDERLYING GRANTED TO ANNUAL RATE OF STOCK
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED THE FISCAL YEAR PRICE DATE OPTION TERM
- ---- ---------------------------------------------------------------------------------------
5% 10%
-- ---
Douglas Newby 75,000 4.5% $0.40 2010/04/15 $0.51 $0.60
75,000 4.5% $0.40 2011/04/15 $0.53 $0.64
Becky Corigliano 50,000 3.0% $0.50 2008/03/07 $0.67 $0.82
100,000 6.0% $0.50 2008/09/07 $0.67 $0.82
100,000 6.0% $0.50 2009/03/07 $0.67 $0.82
100,000 6.0% $0.40 2010/04/15 $0.51 $0.60
100,000 6.0% $0.40 2011/04/15 $0.53 $0.64
Thomas Mancuso 100,000 6.0% $0.40 2010/04/15 $0.51 $0.60
100,000 6.0% $0.40 2011/04/15 $0.53 $0.64
Thomas Callicrate 100,000 6.0% $0.40 2010/04/15 $0.51 $0.60
100,000 6.0% $0.40 2011/04/15 $0.53 $0.64
Lawrence O'Connor 100,000 6.0% $0.40 2010/04/15 $0.51 $0.60
100,000 6.0% $0.40 2011/04/15 $0.53 $0.64
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 by the named
executive officers during fiscal 2005 and the number of unexercised options held
by the named executive officers at December 31, 2005.
NUMBER OF SHARES OF COMMON STOCK
UNDERLYING UNEXERCISED OPTIONS AT YEAR END VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
(DECEMBER 31, 2005) AT YEAR END (DECEMBER 31, 2005 (1)
------------------------------------------ ----------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Douglas Newby 525,000 75,000 -- --
Becky Corigliano 350,000 100,000 -- --
Thomas Mancuso 500,000 100,000 -- --
Thomas Callicrate 500,000 100,000 -- --
Lawrence O'Connor 675,000 100,000 -- --
(1) Options are "in-the-money" if the market price of a share of common
stock exceeds the exercise price of the option.
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COMPENSATION OF DIRECTORS
The Company has in the past compensated its directors in cash and
in shares of Common Stock, and has generally in the past granted options to
Directors upon joining the Board. The Company has established a compensation
plan for its non-management directors. The Chairman receives $7,500 per quarter,
and non-management directors receive $5,000 per quarter. The Company reimburses
the Directors for out of pocket expenses.
During the fiscal year ended December 31, 2005, Gerald Ruth, James
Mancuso and Douglas Newby each received options to purchase 150,000 shares of
Common Stock at an exercise price of $0.40 per share.
BONUSES AND DEFERRED COMPENSATION
The Company does not have any bonus, deferred compensation or
retirement plan. There were no bonuses paid in 2005.
STOCK OPTIONS
The Company's Board of Directors chose to make option or warrant
awards to select officers, directors, consultants, or shareholder/investors in
order to induce them to assist it in implementing its business plan and to
provide long term additional incentive. These options or warrants, as awarded,
were not awarded pursuant to a plan but are specific individual awards with
varying terms and conditions. In some instances, the Board of Directors reserved
the right to cancel these awards for non-performance or other reasons, or
established a vesting schedule pursuant to which the award is earned.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
Lawrence O'Connor has an employment contract which provides for a
base annual salary of $108,000 subject to annual review by the compensation
committee of the Company. In the event of a change in control where the Company
is acquired by another company or merges with another company which results in a
change of management Lawrence O'Connor is entitled to severance in an amount
equal to 150% of his current base salary plus one month of additional severance
for each year of employment.
COMPENSATION COMMITTEE REPORT
Compensation Philosophy. The philosophy of the Company's
Compensation Committee for the fiscal year ended December 31, 2005 was to
provide competitive levels of compensation that are appropriate given the
performance and commitment of the Company's executive officers compared with
similarly situated executives in gold mining industry; link management's pay to
the achievement of the Company's annual and long-term performance goals; and
assist the Company in attracting and retaining qualified management. However,
because of the limited number of companies that can be compared to the Company
in terms of stage of resource development, net income, and similar items, a
significant amount of subjectivity was involved in the decisions of the
Compensation Committee.
Base Salaries. Base salaries for management employees are
determined initially by evaluating the responsibilities of the position held and
the experience of the individual, and by reference to the competitive
marketplace for management services, including a comparison of base salaries for
comparable positions at comparable companies within the gold industry. Annual
salary adjustments are determined by evaluating the competitive marketplace, the
performance of the Company, the performance
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of the executive, and any increased responsibilities assumed by the executive.
The Committee believes the base salaries of executive officers are at or below
those of similarly situated executives in the gold industry.
Bonus Arrangement. To encourage and reward outstanding corporate
and individual performance, the Company from time to time considers awarding
merit bonuses to its executive officers, based on the Company's operating
results and the achievement of certain defined major business objectives.
Compensation of Chief Executive Officer. The amount of the Chief
Executive Officer's compensation for the fiscal year ended December 31, 2005 was
determined in accordance with the principles discussed in the foregoing
paragraphs and was based upon a subjective evaluation by the Committee of the
leadership demonstrated by Mr. Newby during the fiscal year.
Respectfully Submitted,
Gerald Ruth
AUDIT COMMITTEE
The Audit Committee's principal responsibilities consist of: (i)
recommending the selection of independent auditors; (ii) reviewing the scope of
the audit conducted by the auditors, as well as the audit itself; (iii)
reviewing matters concerning financial reporting, accounting and audit
procedures, and policies generally, and (iv) monitoring the independence and
performance of our independent auditors.
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 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, 4 and 5 furnished to the Company between January 1, 2005 through
March 3, 2006, the Company's officers, directors and greater than 10% beneficial
owners complied with all Section 16(a) filing requirements except as follows:
Thomas Callicrate filed a late Form 4 for two transactions that occurred on
November 5, 2004 and April 4, 2005; Douglas Newby filed a late Form 4 for the
one transaction that occurred on December 3, 2004; Becky Corigliano filed a late
Form 4 for the one transaction that occurred on March 7, 2005; and Newmont
Mining Corp. filed a late Form 3 for a transaction that occurred on December 1,
2004.
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