SCHEDULE
14A
(Rule
14a-101)
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. )
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the Registrant [
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Preliminary
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Confidential,
for Use of the Commission Only
(as
permitted by Rule 14a-6(e)(2))
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[
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Under Rule 14a-12
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GoldSpring,
Inc.
(Name
of
Registrant as Specified In Its Charter)
_____________________________________________________________
(Name
of
Person(s) Filing Proxy Statement, if Other Than the Registrant)
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of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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of each class of securities to which transaction
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Aggregate
number of securities to which transaction applies:
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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
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calculated and state how it was determined):
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maximum aggregate value of transaction:
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
_______________,
2005
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The
Annual Meeting of Shareholders of GoldSpring, Inc., a Florida corporation,
will
be held at 1:30 p.m., on ___________________, 2005, at the Best Western PIÑON
PLAZA in Carson City, Nevada for the following purposes:
1. To
elect
five directors.
2. To
vote
on the approval of our 2005 Stock Option and Incentive Plan.
3. To
vote
on a proposal to authorize Serial Preferred Stock.
4. To
vote
on a proposal to authorize additional Common Stock..
5. To
ratify
the Company's selection of Jewett Schwartz & Associates to be the Company's
independent Auditor.
6. To
transact such other business as may properly come before the meeting or any
adjournment or adjournments thereof.
The
foregoing items of business are more fully described in the proxy statement
accompanying this notice.
Only
shareholders of record at the close of business on Friday, September 2, 2005,
are entitled to notice of and to vote at the meeting.
All
shareholders are cordially invited to attend the meeting in person. To assure
your representation at the meeting, however, you are urged to mark, sign,
date,
and return the enclosed proxy as promptly as possible in the postage-prepaid
envelope enclosed for that purpose. Any shareholder of record attending the
meeting may vote in person even if the shareholder previously has returned
a
proxy.
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Sincerely,
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________________________
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Scottsdale,
Arizona
__________,
2005
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Lisa
Boksenbaum
Secretary
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GOLDSPRING,
INC.
P.O.
Box 1118
Virginia
City, NV 89440
VOTING
AND OTHER MATTERS
General
The
enclosed proxy is solicited on behalf of GoldSpring, Inc., a Florida corporation
(the "Company"), by our Board of Directors for use at an Annual Meeting of
Shareholders to be held on ______________, 2005 at 1:30 p.m., or at any
adjournment thereof, for the purposes set forth in this proxy statement and
in
the accompanying meeting notice. The meeting will be held at the Best Western
PIÑON PLAZA in Carson City, Nevada.
These
proxy solicitation materials were first mailed on or about ____________,
2005 to
all shareholders entitled to vote at the meeting.
Voting
Securities and Voting Rights
Shareholders
of record at the close of business on September 2, 2005, which we have set
as
the record date, are entitled to notice of and to vote at the meeting. On
the
record date, there were issued and outstanding _______________ shares of
our
common stock, $0.001 par value per share.
The
presence, in person or by proxy, of the holders of a majority of the total
number of shares of common stock outstanding constitutes a quorum for the
transaction of business at the meeting. Each shareholder voting at the meeting,
either in person or by proxy, may cast one vote per share of common stock
held
on all matters to be voted on at the meeting. Assuming that a quorum is present,
the persons receiving the highest number of "for" votes of common stock of
our
Company present in person or represented by proxy at the meeting and entitled
to
vote (a plurality) will be elected as directors. The approval of
the
proposal to authorize Serial Preferred Stock requires the affirmative vote
of a
majority of our outstanding shares of common stock. Assuming a quorum is
present, the affirmative vote of a majority of the shares of our common stock
present in person or represented by proxy at the meeting and entitled to
vote is
required for the approval of our 2005 Stock Option and Incentive Plan and
the
ratification of the selection of Jewett Schwartz & Associates to be the
Company's independent auditor.
Votes
cast by proxy or in person at the meeting will be tabulated by the election
inspectors appointed for the meeting and will determine whether a quorum
is
present. The election inspectors will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of
a
quorum, but as unvoted for purposes of determining the approval of any matter
submitted to the shareholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote
on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
Voting
of Proxies
When
a
proxy is properly executed and returned, the shares it represents will be
voted
at the meeting as directed. If no specification is indicated, the shares
will be
voted (1) "for" the election of the nominees for directors set forth in this
proxy statement; (2) for each of the proposals set forth in this proxy
statement; and (3) as the persons specified in the proxy deem advisable on
any
such other matters as may come before the meeting.
Revocability
of Proxies
Any
shareholder giving a proxy may revoke the proxy at any time before its use
by
delivering to us either a written notice of revocation, by delivering to
us a
duly executed proxy bearing a later date, or by attending the meeting and
voting
in person.
Solicitation
We
will
bear the cost of this solicitation. In addition, we may reimburse brokerage
firms and other persons representing beneficial owners of shares for expenses
incurred in forwarding solicitation materials to such beneficial owners.
Proxies
also may be solicited by certain of our directors and officers, personally
or by
telephone or e-mail, without additional compensation. We have engaged the
services of Innisfree M&A Incorporated, or Innisfree, a proxy solicitation
firm, to assist us in soliciting proxies by mail, personally and by telephone.
We anticipate the cost of such services to be $9,000, plus a charge of $5.50
per
telephone call and reimbursement of expenses incurred by Innisfree.
Annual
Report and Other Matters
Our
2004
Annual Report to Shareholders, which was mailed to shareholders with or
preceding this proxy statement, contains financial and other information
about
our Company, but is not incorporated into this proxy statement and is not
to be
considered a part of these proxy soliciting materials or subject to Regulations
14A or 14C or to the liabilities of Section 18 of the Securities Exchange
Act of
1934. The information contained in the "Compensation Committee Report on
Executive Compensation," "Audit Committee Report," and "Performance Graph"
below
shall not be deemed "filed" with the Securities and Exchange Commission (“SEC”)
or subject to Regulations 14A or 14C or to the liabilities of Section 18
of the
Exchange Act.
We
will provide upon written request, without charge to each shareholder of
record
as of the record date, a copy of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2004 as filed with the SEC. Any exhibits listed in
the
Form 10-K report also will be furnished upon request at the actual expense
we
incur in furnishing such exhibits. Any such requests should be directed to
our
Company's Secretary at our executive offices set forth in this proxy
statement.
BACKGROUND
OF THE MEETING
Legal
Proceedings
The
State Court Case
On
November 9, 2004, we filed a lawsuit in Maricopa County (Arizona) Superior
Court
against defendants Stephen B. Parent, Ron Haswell, Walter Doyle, Seth Shaw,
Antonio Treminio, together with their spouses, and Ecovery, Inc., a Nevada
corporation, or Ecovery.
The
12-count complaint alleges claims for violations of Arizona’s racketeering act,
state-law securities fraud (primary and secondary liability), common-law
fraud,
negligent misrepresentation, breach of fiduciary duty, negligence/gross
negligence, breach of contract, unjust enrichment/restitution, theft/conversion,
conspiracy liability, and injunctive relief. In essence, the complaint alleges
that Stephen Parent misrepresented the value of certain placer mining claims
that his company, Ecovery, sold to us in 2003 in exchange for approximately
99,000,000 shares of our stock; that Ecovery no longer had good title to
the
mining claims when they were sold to us; that Mr. Parent and the other
named defendants conspired to defraud us out of approximately 24,000,000
shares
of our stock; and that Mr. Parent misappropriated more than $300,000 in company
funds.
On
November 29, 2004, we moved for a temporary restraining order, or TRO,
prohibiting Mr. Parent and his spouse from selling, transferring, assigning,
or
otherwise disposing of up to approximately 123,000,000 shares of our stock
in
their possession. After a hearing, at which the Parents appeared through
counsel, the Honorable Anna M. Baca granted the motion, conditioned on the
posting of an $8 million bond. We did not post the bond, and the TRO was
subsequently dissolved.
On
or
about December 9, 2004, Mr. Parent and fellow GoldSpring directors Jerrie
W.
Gasch and Purnendu K. Rana Medhi purportedly seized control of our company.
Afterward, the Parent-led GoldSpring purported to fire Greenberg Traurig,
LLP,
or GT, as counsel for our company in this litigation and to hire Ronan &
Firestone, PLC, or Ronan, as substitute counsel. Thereafter, on December
22,
2004, Ronan filed a stipulation to dismiss the lawsuit, purportedly on behalf
of
our company. Also on December 22, 2004, the Parents filed their answer, in
which
they generally denied the allegations of the complaint.
On
December 29, 2004, GT filed a motion on behalf of our company to strike the
stipulation to dismiss that Ronan had filed. Judge Baca heard oral argument
on
the motion on February 2, 2005 and took the matter under advisement. Further
oral argument was heard on March 22, 2005. In light of the preliminary
injunction that was issued in a related shareholder action in federal district
court (discussed below), and the resolutions passed by our Board of Directors
on
February 22, 2005, Judge Baca granted the motion in an Order dated March
22,
2005 and struck Ronan’s purported stipulation to dismiss.
In
the
same ruling, Judge Baca said that “there are serious conflicts in the continued
representation of the Parents in this lawsuit by Gust Rosenfeld.” The Court was
referring to the fact that Parent had hired Gust Rosenfeld as our counsel
after
purportedly taking over our company on December 9, 2004. The Court therefore
ordered further briefing on whether Gust Rosenfeld should be disqualified
as the
Parents’ counsel. Shortly thereafter, on March 28, 2005, Gust Rosenfeld
voluntarily withdrew as the Parents’ counsel. The Parents have since retained
new counsel. The discovery process is currently ongoing.
Mr.
Treminio has since been dismissed from the suit in accordance with the terms
of
a prior settlement agreement between Mr Treminio and GoldSpring, Inc..
Mr. Shaw filed an answer, in
pro per,
on
April 6, 2005, and generally denied the allegations of the complaint. Mr.
Haswell and Mr. Doyle have filed answers and generally denied the allegations
of
the complaint. Ecovery, Inc. has not yet responded to the complaint.
The
Federal Court Case
Background
Stephen
B. Parent and several others purporting to represent a majority of the
shareholders of our company adopted Consent Resolutions in Lieu of a Special
Meeting of Shareholder’s dated December 9, 2004, and Mr. Parent, Jerrie W.
Gasch, and Purnendu K. Rana Medhi, each of whom served as a director of our
company until Mr. Medhi’s resignation in April 2005, adopted Directors’ Consent
Resolutions (together the “December Consent Resolutions”) dated December 10,
2004. Taken together, the December Consent Resolutions, by their purported
terms, removed John F. Cook, Robert T. Faber, Leslie L. Cahan, Todd S. Brown,
Christopher L. Aguilar, Stanley A. Hirschman, and Phil E. Pearce as directors,
rescinded the restructuring of a $10 million financing transaction entered
into
in March 2004, removed Mr. Faber as President of our company, named Mr. Parent
as President of our company and his wife as Secretary of our company, designated
Mr. Parent as the sole signing officer of our company’s bank accounts, and
terminated our company’s legal counsel.
On
December 22, 2004, Robert T. Faber and Leslie L. Cahan (collectively, the
“plaintiffs”), who are shareholders and directors of our company, filed a
lawsuit in the United States District Court for the District of Arizona,
entitled Robert T. Faber, et al. v. Stephen B. Parent, et al., No.
CV04-2960-PHX-EHC (“the Litigation”). The plaintiffs asserted claims in both
their individual capacities and derivatively, on behalf of our company, against
directors Stephen B. Parent, Jerrie W. Gasch, and Purnendu K. Rana Medhi
(collectively, the “defendants”), alleging that, by adopting the Consent
Resolutions, the defendants had unlawfully orchestrated an illegal coup to
wrest
control of our company from its current officers and directors. As discussed
below, Messrs. Gasch and Medhi no longer support the Parent-led
board.
The
Temporary Restraining Order
Following
a hearing on December 22, 2004, at which the Court heard evidence and argument
of counsel, the Honorable Earl H. Carroll issued a December 23, 2004 Order
Granting Plaintiffs’ Motion for Temporary Restraining Order, or TRO. The TRO
precluded defendants and their agents from (1) making any withdrawals from
any
bank accounts of our company, other than reasonable withdrawals necessary
to the
daily operations of the business; (2) rescinding or interfering in any way
with
any transactions approved by our company’s Board of Directors prior to December
9, 2004; (3) entering into any contracts or agreements with third parties
on
behalf of our company or disposing of or transferring any property or assets
of
our company; and (4) issuing or otherwise transferring any stock or debentures.
The
Court
subsequently continued the TRO through February 15, 2005 and confirmed that
none
of the defendants were to receive any payments from our company during the
pendency of the TRO. Despite the Court’s Order, the defendants have since
produced business records of our company demonstrating that, after adopting
the
December Consent Resolutions, the defendants arranged for our company to
pay
them a collective total of $38,721, including $20,869 in payments to Stephen
Parent.
The
Preliminary Injunction and Notice of Appeal
Following
additional hearings in which the Court heard witness testimony and evidence,
the
Court issued an Order on February 15, 2005 granting plaintiffs’ Motion for a
Preliminary Injunction. The Preliminary Injunction ordered the reinstatement
of
our company’s Board of Directors as it existed prior to December 10, 2004. As a
result of the Court’s Order, John F. Cook, Robert T. Faber, Christopher L.
Aguilar, Todd S. Brown, Leslie L. Cahan, Stanley A. Hirschman, and Phil E.
Pearce have been reinstated as directors. Stephen B. Parent, Jerrie W. Gasch,
and Purnendu K. Rana Medhi remained directors until Mr. Medhi’s resignation in
April 2005. The Court’s February 15 Order also stayed the implementation of the
Consent Resolutions, and directed us to hold a special shareholders meeting
within 30 days.
In
concluding that the Preliminary Injunction should issue, the Court stated,
“The
Court is specifically concerned about the irreparable injury that would occur
to
GoldSpring and its shareholders and investors if Defendants [Mr. Parent,
his
wife, Jerrie W. Gasch, and Purnendu K. Rana Medhi] are permitted to manage
the
corporation. There is substantial evidence of Parent’s wrongdoing in his former
position as CEO of GoldSpring, such as his misappropriation of corporate
assets
for his personal use. The Defendants’ attempt to rescind the [financing]
transaction that was approved at the Board of Directors meeting on November
30,
2004 could adversely impact GoldSpring’s ability to meet its obligations under
the agreement. Rescission of the refinancing transaction would prove detrimental
for GoldSpring because the corporation would be forced to pay the $200,000.00
monthly penalty for failing to file the S-1 Registration with the SEC within
ninety (90) days of the March 22, 2004 agreement between GoldSpring and [various
investors]. This penalty had accrued to over $1,000,000.00 as of November
30,
2004.”
Thereafter,
the defendants filed a motion for reconsideration in which they asked that
the
Preliminary Injunction be dissolved or, alternatively, that the Court clarify
the injunction order and require the plaintiffs to post a bond. On February
25,
2005, the Court held a hearing on the defendants’ motion for reconsideration.
The Court denied the defendants’ requests to dissolve the Preliminary Injunction
and to require the posting of a bond. In response to defendants’ request for
clarification of the injunction order, the Court ordered that our company
is not
to issue additional shares prior to the special shareholders meeting, and
that
the record date for the special shareholders meeting shall be December 9,
2004.
Our
company believed that this ruling would disenfranchise the investors that
participated in the November 30, 2004 restructuring transaction by preventing
them from receiving and voting the shares they are entitled to receive through
the conversion of their notes. A December 9, 2004 record date would also
have
disenfranchised all shareholders that acquired their stock on the open market
after December 9, 2004.
Therefore,
on February 28, 2005, our company filed a legal memorandum with the Court
addressing these issues. In it, we pointed out that applicable federal
securities laws require us to provide shareholders with current financial
statements, which will not be available until March 31, 2005, and that Florida
law and our company’s bylaws require that a record date be fixed in advance
rather than in the past. On March 14, 2005, the Court held a hearing on these
issues. After hearing argument of counsel, the Court indicated that it agreed
with our position.
Accordingly,
on March 17, 2005, the Court vacated its earlier Order directing us to hold
a
special shareholders meeting and setting December 9, 2004 as the record date
for
purposes of that meeting. The Court also vacated the provision of its February
25 Order prohibiting us from issuing additional shares. Finally, the Court
reaffirmed its earlier Order reinstating our Board of Directors as it existed
prior to December 10, 2004. In doing so, the Court ordered that the reinstated
board shall remain in place until the Court orders otherwise.
On
April
13, 2005, a notice of appeal was filed on behalf of the Parents, the Gaschs,
and
the Medhis seeking to reverse the Court’s March 17 Order. On April 21, 2005, the
Gaschs moved to dismiss their appeal. On June 10, 2005, the Parents filed
their
opening appellate brief. The response to the Parents’ opening brief is due on
August 9, 2005.
The
Investors’ Motion to Intervene
On
March
2, 2005, Longview Fund LP, Longview Equity Fund, Longview International Equity
Fund, and Alpha Capital AG (collectively, the “Investors”) moved to intervene in
the litigation. In doing so, the Investors sought to dissolve the portion
of the
Court’s February 25, 2005 Order that prohibited our company from issuing stock
to them under the refinancing transaction.
In
their
motion to intervene, the Investors alleged that they are holders of more
than $3
million of Convertible Notes issued by us, which they received pursuant to
the
transaction in March 2004. The Investors further alleged that, under the
terms
of the Convertible Notes, they are entitled to convert the notes, in whole
or in
part, into our stock at any time. The Investors contended that, by preventing
us
from issuing stock, the Court’s February 25 Order is a de facto preliminary
injunction in favor of the defendants, and effectively deprived the Investors
of
much of the benefits to which they are contractually entitled. Because the
defendants had not met the requirements for injunctive relief, the Investors
argued, that portion of the Court’s Order should be dissolved. Alternatively,
the Investors asked the Court to order the defendants to post a $3.5 million
bond to protect the Investors against any damages stemming from the de facto
injunction.
On
March
7, 2005, the defendants filed their response to the Investors’ motion. They
contended that Judge Carroll’s February 25 Order was not an injunction and, in
any event, that the Investors had failed to meet the requirements for
intervention. Accordingly, they argued that the motion should be denied.
On
March
18, 2005, the Court issued an Order denying the Investors’ motion as moot. The
Court reasoned that, since its March 17 Order lifted the prohibition on the
issuance of additional shares of our stock, the Investors had, in essence,
already received the relief they requested in their motion to intervene.
Therefore, the issues raised in that motion had become moot.
The
Company’s Motion Re: the Gust Rosenfeld Retainer
After
purportedly seizing control of our company on December 9, 2004, Stephen Parent,
acting as the putative president of GoldSpring, authorized the payment of
a
$250,000 retainer to the law firm of Gust Rosenfeld using funds of our company.
On March 1, 2005, we filed a motion for an order requiring Gust Rosenfeld
to
provide a detailed accounting of its use of these funds and to refund the
unused
portion.
On
March
14, 2005, Gust Rosenfeld sent us a refund check for $83,903.38 and a “ledger”
showing how the firm spent the other $166,096.62. Among other things, the
ledger
revealed that Gust Rosenfeld withdrew approximately $109,000 as payment for
its
attorneys’ fees and costs. The ledger also showed payments to other lawyers and
outside vendors totaling approximately $57,000. Included in this amount were
two
“refund” payments to Stephen Parent totaling $21,000.
We
have
filed a reply brief asking the Court to order Gust Rosenfeld to provide a
more
detailed accounting of its expenditures, including billing invoices for legal
services it purportedly rendered to our company. We have also asked the Court
to
require Gust Rosenfeld to provide a written explanation for the payments
to
other lawyers and outside vendors, as well as the so-called refund payments
to
Parent.
The
“New” Consent Resolutions
On
March
21, 2005, defendants Stephen and Judith Parent filed a “Motion for Order” asking
the Court to remove certain directors of our company’s Board of Directors.
Attached to the motion was a “Consent in Lieu of a Special Meeting of the
Shareholders of GoldSpring, Inc.,” dated March 18, 2005 (the “March Consent”).
The March Consent was nearly identical to the one adopted by the Parents
and
others on December 9, 2004. It purported to remove directors Robert T. Faber,
John F. Cook, Leslie L. Cahan, Todd S. Brown, Christopher L. Aguilar, Stanley
A.
Hirschman, and Phillip E. Pierce as directors of our company. The March Consent
was signed by shareholders Stephen Parent; Judith Parent; Aztech Environmental
Industries, Inc.; Jasmine House, LLC; Frontline 2001, LLC; Jubilee Investment
Trust PLC; Ronald M. Haswell; Mark and Jennifer Ward; Walter T. Plummer;
Lynn
Zollinger; Maia Ray; and Rita Hardy.
On
March
25, 2005, our company and the plaintiffs filed a joint response to the Parents’
Motion for Order. In it, we argued that (1) the shareholders who signed the
March Consent did not hold a majority of our company’s stock, which rendered the
Consent ineffective; (2) the Parents solicited more than ten shareholders,
and
therefore violated Securities and Exchange Commission Rule 14a; and (3) the
Parents cannot obtain the relief they seek because they have not asserted
an
affirmative claim in court.
The
Parents filed a reply and supplemental reply on March 20, 2005, and April
11,
2005, respectively. In the reply, the Parents argued that the shareholders
who
signed the Consent do, in fact, hold a majority of the outstanding shares
as of
the date it was executed, and that any shares issued after that date are
not to
be counted. They also denied having solicited more than ten persons and denied
any obligation to state an affirmative claim before seeking the relief asked
for
in their motion. In their supplemental reply, the Parents referred to our
company’s recent Form 8-K filing (the “8-K”) with the Securities and Exchange
Commission. In the 8-K, we disclosed that our company had issued (1) 59,203,918
shares of restricted common stock in connection with the Settlement Agreement
Regarding Failure to File a Registration Statement; (2) six secured convertible
notes in an aggregate amount of $6,584,005 in connection with the Settlement
Agreement Regarding Mandatory Redemption Payment; and (3) convertible notes
in
the amount of $403,175 in connection with the Settlement Agreement Regarding
Failure to deliver shares due upon conversion. The Parents contended that
the
transactions referred to in the 8-K constituted an unfair dilution of the
“non-Merriman shareholders’” stock holdings.
On
April
20, 2005, we filed a Supplemental Notice to inform the Court that Messrs.
Gasch
and Medhi do not support the March Consent. In addition, we informed the
Court
that Mr. Gasch had signed a Declaration that (1) Mr. Gasch never agreed to
serve
on the proposed board of directors contemplated by the March Consent, (2)
that
Mr. Gasch does not support the March Consent and, if the March Consent
constituted a valid shareholder resolution (which we do not believe) Mr.
Gasch
would immediately vote to reinstate the entire Board of Directors as it
currently exists, (3) Mr. Gasch denounces and rescinds the purported Director’s
Consent Resolutions dated December 10, 2004 and no longer supports any of
the
resolutions or purported corporate actions contemplated in that purported
consent, and (4) Mr. Gasch has terminated Gust Rosenfeld as his counsel because
he no longer wishes to be associated with or jointed represented by Mr. Parent.
Mr. Medhi also informed us that he resigned as a director of our Board of
Directors as currently constituted and as a member of the board of directors
designated by earlier consent resolution. We informed the Court that these
developments constitute additional reasons to deny the Parents’
motion.
PROPOSAL
1: ELECTION OF DIRECTORS
Nominees
Our
certificate of incorporation and bylaws provide that the number of directors
shall be fixed from time to time by resolution of our Board of Directors.
Currently, the number of directors is fixed at nine, but the board has fixed
the
number at five following this meeting since our Board of Directors is not
recommending Stephen B. Parent, Jerrie W. Gasch, John F. Cook, Robert T.
Faber
or Leslie L. Cahan for election. Directors are elected for a term of one
year
and hold office until their successors have been elected and
qualified.
A
board
of five directors is to be elected at the meeting. Unless otherwise instructed,
the proxy holders will vote the proxies received by them for the nominees
named
below. Each of the nominees, other than Mr. Nance, currently is a director
of
our Company. In the event that any nominee is unable or declines to serve
as a
director at the time of the meeting, the proxies will be voted for any nominee
designated by the current Board of Directors to fill the vacancy. It is not
expected that any nominee will be unable or will decline to serve as a
director.
The
Board of Directors recommends a vote "for" the nominees named
below.
The
following table sets forth certain information regarding our directors and
the
nominees for directors:
|
Name
|
Age
|
Position
|
|
|
|
|
|
Christopher
L. Aguilar
|
42
|
Director
|
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Todd
S. Brown
|
49
|
Director
|
|
Stanley
A. Hirschman
|
58
|
Director
|
|
Bill
Nance
|
60
|
Director
|
|
Phil
E. Pearce
|
74
|
Director
|
Christopher
L. Aguilar has been a director of our Company since October 2004. Mr. Aguilar
has been the General Counsel and Chief Compliance Officer of Merriman Curhan
Ford & Co., a securities brokerage and investment banking subsidiary of MCF
Corporation since March 2000. During the same period of time, he also served
as
General Counsel and Secretary of MCF Corporation, the publicly traded financial
services holding Company that provides institutional sales and trading,
research, investment banking, corporate services, and asset management services
through its wholly owned subsidiaries. From August 1995 to March 2000, Mr.
Aguilar was a partner at Bradley, Curley & Asiano, a law firm located in San
Francisco, California. Mr. Aguilar is an adjunct professor at the University
of
California, Hastings College of the Law.
Todd
S.
Brown has been a director of our Company since October 2004. Mr. Brown has
been
a senior financial executive with Brown Capital Advisors, Inc., an advisory
services Company providing a wide range of services, including strategic
planning, transactional assistance, due diligence, and financial management
since 1999. Prior to joining Brown Capital Advisors, Mr. Brown was
Senior
Vice President, Chief Financial Officer, and a director of the Phoenix
Restaurant Group, Inc. from 1994 to 1999. Mr. Brown previously was employed
by
an international accounting firm for 14 years, most recently as a senior
manager.
Stanley
A. Hirschman has been a director of our Company since October 2004. Mr.
Hirschman has served since 1996 as President of CPointe Associates, Inc.,
an
executive management consulting firm that specializes in solutions for companies
with emerging technology-based products. He is Chairman of the Board of Bravo
Foods International, a director of 5G Wireless Communications and iWorld
Projects & Systems, an advisor to Redwood Grove Capital Management, LLP, and
former chairman of Mustang Software, Inc. Prior to establishing CPointe
Associates in 1996, he was Vice President Operations of Software Etc., Inc.,
a
396 retail store software chain. He also held senior management positions
with
T.J. Maxx, Gap Stores, and Banana Republic.
William
J. Nance is a nominee for director of our Company. Mr. Nance is a Certified
Public Accountant and private consultant to the real estate and banking
industries. He is also President of Century Plaza Printers, Inc. Mr. Nance
is
also a Director of Intergroup Corporation, Santa Fe and Portsmouth.
Phil
E.
Pearce has been a director of our Company since October 2004. Mr. Pearce
has
been an independent business consultant with Phil E. Pearce & Associates and
Chairman of Financial Express Corporation since 1990. Prior to this, Mr.
Pearce
was Senior Vice President and a director of E.F. Hutton, and was chairman
of the
Board of Governors of the National Association of Securities Dealers, where
he
was closely involved in the formation of the Nasdaq Stock Market. He had
also
been a governor of the New York Exchange and a member of The Advisory Council
to
the Securities and Exchange Commission on the Institutional Study of the
Stock
Markets. Mr. Pearce is a graduate of the University of South Carolina and
the
Wharton School of Investment Banking at the University of
Pennsylvania.
Executive
Officers
Robert
T.
Faber has served as President and Chief Executive Officer of our Company
since
September 2004 and Chief Financial Officer since June 2003. Mr. Faber served
from 2002 until 2003 as Vice President of United Site Services, Inc., a
privately held service consolidator in the waste service industry. Additionally,
Mr. Faber served as an executive with Allied Waste Industries from
2001
until 2002, overseeing a $1.2 billion multi-state area and served as Chief
Financial Officer with Frontier Waste Services, LLC from 1999 until 2001.
Prior
to joining Frontier Waste, Mr. Faber spent 17 years with Waste Management,
Inc.,
a publicly traded environmental services company, during which time he served
in
senior positions both internationally and domestically. Mr. Faber’s
positions included Director of Finance of Waste Management’s $1.4 billion
multi-country International operations based in London, England and Vice
President and Controller for several $100 million plus multi-state market
areas.
Mr. Faber is a certified public accountant.
Information
Relating to Corporate Governance and the Board of
Directors
Our
Board
of Directors has determined, after considering all the relevant facts and
circumstances, that Messrs. Brown, Hirschman, Pearce and Nance are independent
directors, as “independence” is defined by Nasdaq, because they have no
relationship with us that would interfere with their exercise of independent
judgment. Mr. Cook is a consultant to our Company, Mr. Aguilar is an officer
of
our principal investment banking firm, Mr. Faber currently serves as an officer
of our Company and Mr Parent formerly served as an officer; so Messrs. Cook,
Aguilar, Faber and Parent are not considered independent. Mr. Gasch, currently
a
director of our Company, is also an independent director.
Our
bylaws authorize our Board of Directors to appoint among its members one
or more
committees, each consisting of one or more directors. Our Board of Directors
has
established three standing committees: an Audit Committee, a Compensation
Committee, and a Nominations and Corporate Governance Committee. A majority
of
the members of our Audit Committee, Compensation Committee, and Nominations
and
Corporate Governance Committee consist of independent directors.
Our
Board
of Directors has adopted charters for the Audit, Compensation, and Nominations
and Corporate Governance Committees describing the authority and
responsibilities delegated to each committee by the board. Our Board of
Directors has also adopted Corporate Governance Guidelines, a Code of Conduct,
and a Code of Ethics for the CEO and Senior Financial Officers. We do not
post
on our website the charters of our Audit, Compensation, and Nominations and
Corporate Governance Committees. The charters of our Audit and Nominations
and
Corporate Governance Committees are appended hereto. The charters of our
Audit,
Compensation and Nominations and Corporate Governance committees are available
in print to any stockholder requesting a copy in writing from our corporate
secretary at our executive offices set forth in this proxy
statement.
We
regularly schedule executive sessions at which independent directors meet
without the presence or participation of management. The presiding director
of
such executive session rotates among the Chairs of the Audit Committee,
Compensation Committee, and the Nominations and Corporate Governance
Committee.
Interested
parties may communicate with our Board of Directors or specific members of
our
Board of Directors, including our independent directors and the members of
our
various board committees, by submitting a letter addressed to the Board of
Directors of GoldSpring, Inc. c/o any specified individual director or directors
at the address listed herein. Any such letters are sent to the indicated
directors.
The
Audit Committee
The
purpose of the Audit Committee is to oversee the financial and reporting
processes of our Company and the audits of the financial statements of our
Company and to provide assistance to our Board of Directors with respect
to the
oversight of the integrity of the financial statements of our Company, our
Company’s compliance with legal and regulatory matters, the independent
auditor’s qualifications and independence, and the performance of our Company’s
independent auditor. The primary responsibilities of the Audit Committee
are set
forth in its charter and include various matters with respect to the oversight
of our Company’s accounting and financial reporting process and audits of the
financial statements of our Company on behalf of our Board of Directors.
The
Audit Committee also selects the independent auditor to conduct the annual
audit
of the financial statements of our Company; reviews the proposed scope of
such
audit; reviews accounting and financial controls of our Company with the
independent auditor and our financial accounting staff; and reviews and approves
transactions between us and our directors, officers, and their affiliates.
The
Audit
Committee currently consists of Messrs. Brown, Hirschman, and Pearce, each
of
whom is an independent director of our Company under Rule 4200(a)(15) of
the
NASD's listing standards as well as under rules adopted by the SEC pursuant
to
the Sarbanes-Oxley Act of 2002. The Board of Directors has determined that
Mr.
Brown (whose background is detailed above) qualifies as an “audit committee
financial expert” in accordance with applicable rules and regulations of the
SEC. Mr. Brown serves as the Chairman of the Audit Committee.
The
Compensation Committee
The
purpose of the Compensation Committee includes determining, or recommending
to
our Board of Directors for determination, the compensation of the Chief
Executive Officer and other executive officers of our Company and discharging
the responsibilities of our Board of Directors relating to compensation programs
of our Company. The Compensation Committee currently consists of Messrs.
Brown,
Hirschman, and Pearce, with Mr. Hirschman serving as Chairman.
The
Nominations and Corporate Governance Committee
The
purposes of the Nominations and Corporate Governance Committee include the
selection or recommendation to the Board of Directors of nominees to stand
for
election as directors at each election of directors, the oversight of the
selection and composition of committees of the Board of Directors, the oversight
of the evaluations of the Board of Directors and management, and the development
and recommendation to the Board of Directors of a set of corporate governance
principles applicable to our Company. The Nominations and Corporate Governance
Committee has a written charter. The Nominations and Corporate Governance
Committee currently consists of Messrs. Aguilar, Brown, Hirschman, and Pearce,
with Mr. Aguilar serving as Chairman. All nominees for the Board of Directors
approved by the Nominations and Corporate Governance Committee are currently
directors of the Company, other than Mr. Nance. Mr. Nance was recommended
by a
non-management director.
The
Nominations and Corporate Governance Committee will consider persons recommended
by stockholders for inclusion as nominees for election to our Board of Directors
if the names, biographical data, and qualifications of such persons are
submitted in writing in a timely manner addressed and delivered to our Company’s
corporate secretary at the address listed herein. The Nominations and Corporate
Governance Committee identifies and evaluates nominees for our Board of
Directors, including nominees recommended by stockholders, based on numerous
factors it considers appropriate, some of which may include strength of
character, mature judgment, career specialization, relevant technical skills,
diversity, and the extent to which the nominee would fill a present need
on our
Board of Directors. As discussed above, the members of the Nominations and
Corporate Governance Committee are independent, as that term is defined by
Nasdaq.
The
Board
of Directors held a total of five meetings during the fiscal year ended December
31, 2004. The Audit Committee met separately at one meeting during the fiscal
year ended December 31, 2004. The Compensation Committee held a total of
one
meeting during the fiscal year ended December 31, 2004. The Nominations and
Corporate Governance Committee did not meet during the fiscal year ended
December 31, 2004. Each of our directors attended at least 75% of the aggregate
of (1) the total number of meetings of our Board of Directors held during
fiscal
2004, and (2) the total number of meetings held by all committees of our
Board
of Directors on which such person served during fiscal 2004. We do not have
a
policy regarding director attendance at the annual meeting of shareholders.
last
year, three out of five of the members of our Board of Directors attended
the
annual meeting of shareholders.
Compensation
of Directors
The
Chair
of the Audit Committee receives $4,000 a month, while other non-employee
directors, other than Mr. Cook, receive $3,000 a month as compensation for
their
service on the Board of Directors. We also reimburse the members of our Board
of
Directors for actual expenses incurred in attending board meetings. Board
members who are also employees or officers of our Company do not receive
compensation for their services as directors.
John
F.
Cook, the Chairman of our Board of Directors, has a consulting agreement
with
us. We pay Mr. Cook for his professional mining consulting services at a
rate of
$500 per day. Mr. Cook does not receive additional compensation for Board
service.
EXECUTIVE
COMPENSATION
The
following table sets forth, for the periods indicated, the total compensation
for services provided to us in all capacities by our Chief Executive Officer.
No
other executive officer received aggregate compensation exceeding $100,000
during 2004.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
All
Other
|
|
|
|
|
Annual
Compensation(1)
|
|
Underlying
|
|
Compensation
|
|
|
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Options
(#)(2)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
T. Faber(2)
President
and Chief Executive Officer; Chief Financial Officer
|
|
2004
2003
|
|
$
|
121,500
33,000
|
|
$
|
10,000
0
|
|
|
0
0
|
|
$
|
0
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen
Bruce Parent,
Former
Chairman and CEO(3)
|
|
2004
2003
|
|
$
|
81,500
35,000
|
|
$
|
10,000
0
|
|
|
0
0
|
|
$
|
0
0
|
|
__________________
|
(1)
|
Executive
officers received certain perquisites, the value of which did not
exceed
the lesser of $50,000 or 10% of that officer’s salary and bonus during
fiscal 2004.
|
|
(2)
|
Mr.
Faber has served as President and Chief Executive Officer since
September
2004 and Chief Financial Officer since June
2003.
|
|
(3)
|
Mr.
Parent served as Chairman and Chief Executive Officer from March
2004
until September 2004.
|
Stock
Options
We
did
not grant stock options to directors, officers, or employees in 2004. There
were
no shares of common stock underlying unexercised stock options at December
31,
2004.
Employment
Agreements
We
have
an employment agreement with Robert T. Faber extending through August 2009.
The
employment agreement provides for Mr. Faber to serve as our Chief Financial
Officer and was not modified after Mr. Faber was appointed President and
Chief
Executive Officer. The employment agreement provides for base compensation
of
$120,000 per year, subject to increases to up to $200,000 per year if our
Company achieves designated revenue levels. The employment agreement also
provides for incentive compensation as determined by our board of directors.
In
addition, the employment agreement provides for Mr. Faber to be granted options
to purchase shares of our common stock at prices ranging from $.50 to $2.00
per
share. Mr. Faber is entitled to use of a Company car, contributions to a
401(k)
plan, and life insurance coverage.
The
employment agreement with Mr. Faber contains a covenant not to compete with
our
Company for a period of two years immediately following termination of
employment. We may terminate Mr. Faber for “cause” as defined in the employment
agreement. We will be required to pay Mr. Faber’s compensation during the term
of the agreement if we terminate him without cause.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our directors, officers, and persons that
own
more than 10% of a registered class of our Company's equity securities to
file
reports of ownership and changes in ownership with the SEC. Directors, officers,
and greater than 10% stockholders are required by SEC regulations to furnish
our
Company with copies of all Section 16(a) forms they file.
Based
solely upon our review of the copies of such forms received by us during
the
fiscal year ended December 31, 2004, and written representations that no
other
reports were required, we believe that each person who, at any time during
such
fiscal year, was a director, officer, or beneficial owner of more than 10%
of
our common stock complied with all Section 16(a) filing requirements during
such
fiscal year.
EQUITY
COMPENSATION PLAN INFORMATION
The
following table sets forth information with respect to our common stock that
may
be issued upon the exercise of stock options under our incentive stock option
plans as of December 31, 2004.
|
Plan
Category
|
|
(a)
Number of
Securities
to be
Issued
Upon Exercise
of
Outstanding
Options,
Warrants,
and
Rights
|
|
(b)
Weighted-
Average
Exercise
Price
of Outstanding
Options,
Warrants,
and
Rights
|
|
(c)
Number of Securities
Remaining
Available for
Future
Issuance Under
Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column(a))
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation
Plans
Approved by
Stockholders
|
|
|
0
|
|
$
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
Compensation
Plans
Not Approved
By
Stockholders
|
|
|
0
|
|
$
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
$
|
0
|
|
|
0
|
|
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our
Compensation Committee consists of Messrs. Brown, Hirschman, and Pearce.
No
interlocking relationship exists between any member of our Board of Directors
or
our Compensation Committee and any member of the Board of Directors or
Compensation Committee of any other company.
AUDIT
COMMITTEE REPORT
The
Board
of Directors has appointed an Audit Committee consisting of three directors.
The
current members of the Audit Committee are Todd S. Brown, Stanley A. Hirschman,
and Phil E. Pearce. Each of the committee members is "independent" of our
Company and management, as that term is defined in Nasdaq rules.
The
primary responsibility of the committee is to assist the Board of Directors
in
fulfilling its responsibility to oversee management’s conduct of our Company’s
financial reporting process, including overseeing the financial reports and
other financial information provided by our Company to governmental or
regulatory bodies (such as the SEC), the public, and other users thereof;
our
Company’s systems of internal accounting and financial controls; and the annual
independent audit of our Company’s financial statements.
Management
has the primary responsibility for the financial statements and the reporting
process, including the systems of internal controls. The independent auditor
is
responsible for auditing the financial statements and expressing an opinion
on
the conformity of those audited financial statements with accounting principles
generally accepted in the United States.
In
fulfilling its oversight responsibilities, the committee reviewed and discussed
the audited financial statements with management and the independent auditor.
The committee discussed with the independent auditor the matters required
to be
discussed by Statement of Auditing Standards No. 61. This included a discussion
of the auditor’s judgments as to the quality, not just the acceptability, of our
Company’s accounting principles and such other matters as are required to be
discussed with the committee under generally accepted auditing standards.
In
addition, the committee received from the independent auditor written
disclosures and the letter required by Independence Standards Board Standard
No.
1. The committee also discussed with the independent auditor the auditor’s
independence from management and our Company, including the matters covered
by
the written disclosures and letter provided by the independent auditor, and
considered the compatibility of non-audit services with auditor
independence.
The
committee discussed with the independent auditor the overall scope and plans
for
its audits. The committee met with the independent auditor, with and without
management present, to discuss the results of its audit, its consideration
of
our Company's internal controls, and the overall quality of the financial
reporting. The committee held four meetings with management of our Company,
all
of which were attended by our independent auditor, with respect to the Company's
financial statements and audit or quarterly review procedures.
Based
on
the reviews and discussions referred to above, the committee recommended
to the
Board of Directors, and the board approved, that the audited financial
statements be included in our Company's Annual Report on Form 10-K for the
year
ended December 31, 2004 for filing with the SEC. The committee also has selected
our Company’s independent auditor.
The
Board
of Directors has adopted a written charter for the Audit Committee, which
is an
appendix to this proxy statement.
The
report has been furnished by the Audit Committee of the Board of
Directors.
Todd
S.
Brown, Chairman
Stanley
A. Hirschman
Phil
E.
Pearce
PRINCIPAL
SHAREHOLDERS
The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of __________ by (1) each person who is
known
by us to be the beneficial owner of more than five percent of our issued
and
outstanding shares of common stock, (2) each of our directors and executive
officers, and (3) all directors and officers as a group.
|
Name
of Beneficial Owner
|
|
Shares
Beneficially Owned(2)
|
|
|
|
Number
|
|
Percent
|
|
|
|
|
|
|
|
Directors
and Executive Officers:
|
|
|
|
|
|
John
F. Cook
3155
Hwy 37 RR2
Roslin,
Ontario K0K 2Y0
Canada
|
|
6,750,000
|
|
2.9%
|
|
|
|
|
|
|
|
Robert
T. Faber
16639
N. 55th Place
Scottsdale,
AZ 85254
|
|
1,950,000
|
|
0.8%
|
|
|
|
|
|
|
|
Lisa
S. Boksenbaum
8072
E. Maria Dr.
Scottsdale,
AZ 85255
|
|
10,000
|
|
0.0%
|
|
|
|
|
|
|
|
Christopher
L. Aguilar
301
H Macalla Court
Yerba
Buena Island
San
Francisco, CA 94130
|
|
157,775
|
|
0.1%
|
|
|
|
|
|
|
|
Todd
S. Brown
11435
N. St. Andrew Way
Scottsdale,
AZ 85254
|
|
―
|
|
0.0%
|
|
|
|
|
|
|
|
Leslie
L. Cahan
11878
N. 80th Place
Scottsdale,
Arizona 85260
|
|
9,000,000
|
|
3.8%
|
|
|
|
|
|
|
|
Jerrie
W. Gasch
3174
Luyung Drive, #2
Rancho
Cordova, CA 95742
|
|
330,000
|
|
0.1%
|
|
|
|
|
|
|
|
Stanley
A. Hirschman
5960
W. Parker Road #278—279
Plano,
TX 75093
|
|
―(3)
|
|
0.0%
|
|
|
|
|
|
|
|
Stephen
B. Parent
16706
N. 109th Way
Scottsdale,
AZ 85255
|
|
45,962,750
|
|
19.6%
|
|
|
|
|
|
|
|
Phil
E. Pearce
6624
GlenLeaf Ct.
Charlotte,
NC 28270
|
|
―(3)
|
|
0.0%
|
|
Name
of Beneficial Owner
|
|
Shares
Beneficially Owned(2)
|
|
|
|
Number
|
|
Percent
|
| |
|
|
|
|
|
Non-director,
non-officer 5% Shareholders:
|
|
|
|
|
|
Longview
Equity Fund and Longview International
c/o
Redwood Grove Capital Management
600
Montgomery Street, 44th Floor
San
Francisco, CA 94111
|
|
16,687,982
|
|
6.82%
|
|
|
|
|
|
|
|
Jubliee
Investment Trust
Pearl
Corporate Finance Limited
One
Great Cumberland Place
London
W1H 7AL
|
|
39,606,000
|
|
16.9%
|
|
|
|
|
|
|
|
John
W. Winfield
c/o
Intergroup Corp.
820
Moraga Drive
Los
Angeles, CA 90049
|
|
38,305,722
|
|
15.75%
|
|
|
|
|
|
|
_______________
|
(1)
|
Except
as otherwise indicated, each person named in the table has sole
voting and
investment power with respect to all common stock beneficially
owned,
subject to applicable community property laws. The numbers and
percentages
shown include the shares of common stock actually owned as of March
31,
2004 and the shares of common stock that the identified person
or group
had the right to acquire within 60 days of such
date.
|
|
(2)
|
The
percentages shown are calculated based on 234,567,757 shares of
common
stock outstanding on March 31, 2005. In calculating the percentage
of
ownership, all shares of common stock that the identified person
or group
had the right to acquire within 60 days of March 31, 2005 upon
the
exercise of options are deemed to be outstanding for the purpose
of
computing the percentage of the shares of common stock owned by
that
person or group, but are not deemed to be outstanding for the purpose
of
computing the percentage of the shares of common stock owned by
any other
person or group.
|
|
(3)
|
Does
not include any shares beneficially owned by Longwood Equity Fund
and
Longwood International. Messrs. Hirschman and Pearce each own 0.5%
of
Redwood Capital Management, the management Company for the Longwood
entities.
|
PROPOSAL
2: APPROVAL OUR 2005 STOCK OPTION
AND
INCENTIVE PLAN
Our
2005
Stock Option and Incentive Plan was adopted by our Board of Directors on
__________, __. The full text of the 2005 Stock Option and Incentive Plan
is
included as Appendix
B
to this
proxy statement. Our 2005 Stock Option and Incentive Plan is designed to
attract, motivate, retain, and reward our executives, employees, officers,
directors, and independent contractors by providing such persons with annual
and
long-term performance incentives to expend their maximum efforts in the creation
of stockholder value.
Our
Board
of Directors believes that it is in the best interests of our Company to
adopt
the 2005 Stock Option and Incentive Plan.
Our
Board of Directors recommends a vote “for” the proposal to approve the 2005
Stock Option and Incentive Plan.
Description
of the 2005 Stock Option and Incentive Plan
Our
2005
Stock Option and Incentive Plan is designed to attract, motivate, retain,
and
reward our executives, employees, officers, directors, and independent
contractors by providing such persons with annual and long-term performance
incentives to expend their maximum efforts in the creation of stockholder
value.
Under the 2005 Stock Option and Incentive Plan, an aggregate number of shares
of
common stock equal to 4,000,000 shares of common stock is available for issuance
pursuant to options granted to acquire common stock, the direct granting
of
restricted common stock and deferred stock, and the granting of dividend
equivalents. The number of available shares will be increased by number of
shares with respect to which awards previously granted under the plan are
terminated without being exercised, expire, are forfeited or cancelled, do
not
vest, or are surrendered in payment of any awards or any tax withholding
with
respect thereto. The plan also provides for adjustment of the number of shares
for which awards may be granted, the number of shares subject to outstanding
awards, and the applicable exercise price of outstanding awards in the event
of
any increase or decrease in the number of issued and outstanding shares of
our
common stock as a result of one or more reorganizations, recapitalizations,
stock splits, reverse stock splits, or stock dividends.
The
2005
Stock Option and Incentive Plan may be administered by the Board of Directors
or
a committee of the board. The Board of Directors or committee will determine
the
persons to receive awards, the type and number of awards to be granted, the
vesting and exercisability of the award, and any other conditions to which
the
award is subject. Awards may be settled in the form of cash, shares of common
stock, other awards, or other property in the discretion of the Board of
Directors or committee.
The
Board
of Directors or committee, in its discretion, may accelerate the exercisability,
the lapsing of restrictions, or the expiration of deferral or vesting periods
of
any award, and such accelerated exercisability, lapse, expiration, and, if
so
provided in the award agreement, vesting will occur automatically in the
case of
a “change in control” of our Company. In the event of a “change in control” of
our Company, all awards of restricted stock will vest, and all awards of
options
will become exercisable, unless (i) such restricted stock awards and options
are
assumed by a successor entity or a parent or subsidiary of a successor entity;
or (ii) a majority of the Board of Directors determines that the "change
in
control" will not trigger these provisions.
The
Board
of Directors may amend, alter, suspend, discontinue, or terminate the 2005
Stock
Option and Incentive Plan or the committee’s authority to grant awards without
further stockholder approval, except stockholder approval must be obtained
for
any amendment or alteration if such approval is required by law or regulation
or
under the rules of any stock exchange or quotation system on which shares
of our
common stock are then listed or quoted. Unless terminated earlier by the
Board
of Directors, the 2005 Stock Option and Incentive Plan will terminate at
such
time as no shares of common stock remain available for issuance under the
plan
and our Company has no further rights or obligations with respect to outstanding
awards under the plan.
Federal
Income Tax Consequences
Certain
options to be granted under the 2005 Stock Option and Incentive Plan are
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code. Accordingly, there is no taxable income to an employee when
an
incentive stock option is granted to him or her or when that option is
exercised. The amount by which the fair market value of the shares at the
time
of exercise exceeds the exercise price generally is treated as an item of
preference in computing the alternate minimum taxable income of the
optionholder. If an optionholder exercises an incentive stock option and
does
not dispose of the shares within either two years after the date of the grant
of
the option or one year of the date the shares were transferred to the
optionholder, any gain realized upon disposition will be taxable to the
optionholder as a capital gain. If the optionholder does not satisfy the
applicable holding periods, however, the difference between the exercise
price
and the fair market value of the shares on the date of exercise of the option
will be taxed as ordinary income, and the balance of the gain, if any, will
be
taxed as capital gain. If the shares are disposed of before the expiration
of
the one-year and two-year periods and the amount realized is less than the
fair
market value of the shares at the date of exercise, the employee's ordinary
income is limited to the amount realized less the exercise price paid. We
will
be entitled to a tax deduction only to the extent the optionholder has ordinary
income upon the sale or other disposition of the shares received when the
option
is exercised.
The
2005
Stock Option and Incentive Plan also provides for the issuance of non-qualified
options and stock awards. The income tax consequences of non-qualified options
and stock awards are governed by Section 83 of the Internal Revenue Code.
Under
Section 83, the excess of the fair market value of the shares of our common
stock acquired pursuant to the grant of a stock award or the exercise of
any
option over the amount paid for such stock, which is referred to as excess
value, must be included in the gross income of the holder in the first taxable
year in which the common stock acquired by the holder is not subject to a
substantial risk of forfeiture. In calculating excess value, fair market
value
will be determined on the date that the substantial risk of forfeiture expires,
unless a Section 83(b) election is made to include the excess value in income
immediately after the acquisition, in which case fair market value will be
determined on the date of the acquisition. Generally, we will be entitled
to a
federal income tax deduction in the same taxable year that holders, including
highly compensated officers, recognize income. We will be required to withhold
income taxes with respect to income reportable pursuant to Section 83 by
a
holder. The basis of the shares acquired by an optionholder will be equal
to the
exercise price of those shares plus any income recognized pursuant to Section
83. The basis of shares received as a stock award will equal the amount paid
for
the shares, if any, plus the income recognized pursuant to Section 83 with
respect to the shares. Subsequent sales of the acquired shares will produce
capital gain or loss. Such capital gain or loss will be long term if the
stock
has been held for more than one year from the date the substantial risk of
forfeiture lapsed or, if a Section 83(b) election is made, more than one
year
from the date the shares were acquired.
Generally,
all cash awards granted to employees are treated as compensation income to
the
employees when the cash payment is made pursuant to the award. Such cash
payment
also results in a federal income tax deduction for our Company.
PROPOSAL
3: AUTHORIZATION OF
SERIAL
PREFERRED STOCK
The
Board
of Directors has approved a proposal to authorize 50,000,000 shares of Serial
Preferred Stock, par value $.001 per share, which may be issued in one or
more
series from time to time as determined by the Board of Directors with such
designations, preferences, privileges, conversions, and other rights, voting
powers, restrictions, limitations, qualifications, and other terms and
conditions as the Board of Directors may determine. The full text of the
proposal is set forth in Article IV of our Articles of Incorporation as proposed
to be amended and restated as included as "Appendix C" to this proxy
statement.
Under
Florida law, assuming a quorum is present the approval of the proposal requires
the affirmative vote of a majority of the shares of our common stock present
in
person or represented by proxy at the meeting and entitled to vote on this
proposal. The proposed amendment will become effective upon filing of Articles
of Amendment with the Florida Secretary of State, which will occur as soon
as
practicable following the meeting.
The
Board of Directors recommends a vote "for" the proposal to authorize Serial
Preferred Stock.
Reasons
for and Effect of the Proposal
The
Board
of Directors believes that authorizing the Board of Directors to issue shares
of
Serial Preferred Stock will provide additional flexibility and enable us
to
raise capital, refinance indebtedness, make acquisitions, and accomplish
other
corporate objectives in response to market conditions or growth opportunities
as
and when they become available.
Authorization
of Serial Preferred Stock
Our
Articles of Incorporation currently do not authorize the issuance of any
shares
of Serial Preferred Stock. The Board of Directors believes that, in certain
instances, it would be advantageous to our Company and our stockholders to
have
the flexibility to issue shares of Serial Preferred Stock instead of common
stock or debt securities. We may not be able to, and do not desire to, raise
the
entire amount of funds needed to operate and expand our Company from additional
borrowings. In particular, our current indebtedness places significant
limitations on our ability to incur additional indebtedness and restricts
the
use of our cash. In addition, we recognize that we may not be able to issue
additional shares of common stock at certain times as a result of market
conditions or lack of market demand. We believe that the ability to issue
one or
more series or classes of preferred stock would provide a new source of capital
and enhance our ability to make acquisitions.
The
proposed amendment would authorize the Board of Directors to approve the
issuance of one or more classes or series of Serial Preferred Stock and to
establish the terms of such Serial Preferred Stock as the Board of Directors
may
deem appropriate. No further stockholder approval would be required for the
authorization and issuance of such Serial Preferred Stock unless otherwise
required by applicable laws or by the rules of the National Association of
Securities Dealers. As described below, those terms may include preferential
dividend rights, voting rights, and liquidation rights. The Board of Directors
also believes that, as a practical matter in today's financial markets, it
seldom is practicable to delay potential issuances of Serial Preferred Stock
for
the period that would be necessary to obtain stockholder approval of any
particular series of serial preferred stock.
The
Board
of Directors will have broad discretion with respect to designating and
establishing the terms of each series or class of Serial Preferred Stock
prior
to its issuance. Under the proposed amendment, the Board of Directors will
have
authority to set or change the dividend rate, if any, time of payment, and
whether dividends are cumulative on any shares of Serial Preferred Stock.
As a
result, the holders of Serial Preferred Stock may receive payment of dividends
from our Company at times when no dividends are paid on our common stock
or the
amount of any dividends paid on our common stock is less than the amount
paid to
such Serial Preferred Stock. The Board of Directors also will have authority
to
determine whether any shares of Serial Preferred Stock will have voting rights
in addition to the voting rights provided by law and, if so, the extent of
such
rights, including the right to elect one or more members of our Board of
Directors at all times or upon non-payment of dividends for a specified period
of time. Under the proposed amendment, the Board of Directors also will have
authority to determine (1) whether shares of a series or class will be
redeemable and, if so, the redemption price, sinking fund provisions, and
other
terms and conditions for redemption; (2) whether shares of a series will
be
convertible into or exchangeable for shares of common stock or any other
preferred stock and, if so, the terms and conditions for such conversion
or
exchange; and (3) the liquidation rights of such shares in the event of a
liquidation, dissolution, or winding up of our Company, which may be prior
in
right of payment to the rights of holders of common stock.
We
currently do not have any plans to issue shares of Serial Preferred Stock.
The
Board of Directors believes, however, that the ability to issue Serial Preferred
Stock may be helpful in structuring financings or acquisitions in the future
for
the reasons described above.
Potential
Effects of the Proposal
In
deciding whether to issue additional shares of common stock or shares of
Serial
Preferred Stock, the Board of Directors will carefully consider the terms
of
such preferred stock and the effect of the issuance on the operating results
of
our Company and its existing stockholders. With the exception of stock
dividends, issuances of common stock or one or more series or classes of
Serial
Preferred Stock may result in dilution to the investments of existing
stockholders. In addition, issuances of common stock or Serial Preferred
Stock
could be used to discourage or make more difficult a business combination
or an
attempt to obtain control of our Company that is not approved by our Board
of
Directors, even when those attempts may be in the best interests of some
or all
of our stockholders. The Board of Directors did not propose this amendment
for
the purpose of discouraging mergers, tender offers, proxy contests, or other
changes in control of our Company, and we are not aware of any specific effort
to accumulate our common stock or to obtain control of our Company by means
of a
merger, tender offer, solicitation, or otherwise.
No
rights
of appraisal or similar rights of dissenters exist with respect to this
matter.
PROPOSAL
4: AUTHORIZATION OF
ADDITIONAL
COMMON STOCK
[The
Board of Directors has approved a proposal to authorize 300,000,000 additional
shares of Common Stock, par value $.001 per share, which may be issued from
time
to time as determined by the Board of Directors with rights and voting powers.
Our Articles of Incorporation is proposed to be amended to increase the number
of authorized shares of Common Stock by 300,000,000.
Under
Florida law, assuming a quorum is present the approval of the proposal requires
the affirmative vote of a majority of the shares of our common stock present
in
person or represented by proxy at the meeting and entitled to vote on this
proposal. The proposed amendment will become effective upon filing of Articles
of Amendment with the Florida Secretary of State, which will occur as soon
as
practicable following the meeting.
The
Board of Directors recommends a vote "for" the proposal to authorize Serial
Preferred Stock.
Reasons
for and Effect of the Proposal
The
Board
of Directors believes that authorizing the Board of Directors to issue
additional shares of Common Stock will provide additional flexibility and
enable
us to raise capital, refinance indebtedness, make acquisitions, and accomplish
other corporate objectives in response to market conditions or growth
opportunities as and when they become available.
Potential
Effects of the Proposal
In
deciding whether to issue additional shares of Common Stock, the Board of
Directors will carefully consider the effect of the issuance on the operating
results of our Company and its existing stockholders. Issuances of Common
Stock
could be used to discourage or make more difficult a business combination
or an
attempt to obtain control of our Company that is not approved by our Board
of
Directors, even when those attempts may be in the best interests of some
or all
of our stockholders. The Board of Directors did not propose this amendment
for
the purpose of discouraging mergers, tender offers, proxy contests, or other
changes in control of our Company, and we are not aware of any specific effort
to accumulate our common stock or to obtain control of our Company by means
of a
merger, tender offer, solicitation, or otherwise.
No
rights
of appraisal or similar rights of dissenters exist with respect to this
matter.
PROPOSAL
5: RATIFICATION OF AUDITORS
Our
Audit
Committee has appointed Jewett Schwartz & Associates, or Jewett Schwartz, an
independent registered public accounting firm, to audit the consolidated
financial statements of our Company for the fiscal year ending December 31,
2004
and recommends that stockholders vote in favor of the ratification of such
appointment. In the event of a negative vote on such ratification, the Audit
Committee will reconsider its selection. We anticipate that representatives
of
Jewett Schwartz will be present at the meeting, will have the opportunity
to
make a statement if they desire, and will be available to respond to appropriate
questions.
The
Audit
Committee has considered whether the provision of non-audit services by Jewett
Schwartz is compatible with maintaining Jewett Schwartz's
independence.
Fees
The
aggregate fees billed to our Company by Jewett Schwartz, for the fiscal years
ended December 31, 2003 and December 31, 2004, are as follows:
|
|
|
2003
|
|
2004
|
|
|
Audit
fees
|
|
$
|
56,000
|
|
$
|
28,500
|
|
|
Audit-related
fees
|
|
|
0
|
|
|
0
|
|
|
Tax
fees
|
|
|
0
|
|
|
0
|
|
|
All
other fees
|
|
|
1,400
|
|
|
―
|
|
Audit
Committee Pre-Approval Policies
The
charter of our Audit Committee provides that the duties and responsibilities
of
our Audit Committee include the pre-approval of all audit, audit-related,
tax,
and other services permitted by law or applicable SEC regulations (including
fee
and cost ranges) to be performed by our independent auditor. Any pre-approved
services that will involve fees or costs exceeding pre-approved levels will
also
require specific pre-approval by the Audit Committee. Unless otherwise specified
by the Audit Committee in pre-approving a service, the pre-approval will
be
effective for the 12-month period following pre-approval. The Audit Committee
will not approve any non-audit services prohibited by applicable SEC regulations
or any services in connection with a transaction initially recommended by
the
independent auditor, the purpose of which may be tax avoidance and the tax
treatment of which may not be supported by the Internal Revenue Code and
related
regulations. All of the services for which fees are disclosed under the heading
"All other fees" in the table above were pre-approved by the Audit
Committee.
To
the
extent deemed appropriate, the Audit Committee may delegate pre-approval
authority to the Chairman of the Audit Committee or any one or more other
members of the Audit Committee provided that any member of the Audit Committee
who has exercised any such delegation must report any such pre-approval decision
to the Audit Committee at its next scheduled meeting. The Audit Committee
will
not delegate to management the pre-approval of services to be performed by
the
independent auditor.
Our
Audit
Committee requires that our independent auditor, in conjunction with our
Chief
Financial Officer, be responsible for seeking pre-approval for providing
services to us and that any request for pre-approval must inform the Audit
Committee about each service to be provided and must provide detail as to
the
particular service to be provided.
DEADLINE
FOR RECEIPT OF SHAREHOLDER PROPOSALS
Shareholder
proposals that are intended to be presented by shareholders at the annual
meeting of shareholders for the fiscal year ending December 31, 2005 must
be
received by us no later than _________, 2006, in order to be included
in
the proxy statement and form of proxy relating to such meeting.
Pursuant
to Rule 14a-4 under the Exchange Act, we intend to retain discretionary
authority to vote proxies with respect to shareholder proposals for which
the
proponent does not seek to have us include the proposed matter in the proxy
statement for the annual meeting to be held during calendar 2006, except
in
circumstances where (1) we receive notice of the proposed matter no later
than
______________, 2006 and (2) the proponent complies with the other requirements
set forth in Rule 14a-4.
OTHER
MATTERS
We
know
of no other matters to be submitted to the meeting. If any other matters
properly come before the meeting, it is the intention of the persons named
in
the enclosed proxy card to vote the shares they represent as our Board of
Directors may recommend.
Dated:
_______________
GOLDSPRING,
INC.
[LOCATION]
ANNUAL
MEETING OF SHAREHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned shareholder of GOLDSPRING, INC., a Florida corporation (the
“Company”), hereby acknowledges
receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement
of
the Company,
each dated ______________, ____, and hereby appoints John Cook and Robert
T.
Faber, and each
of
them, proxies and attorneys-in-fact, with full power to each of substitution,
on
behalf and in the name
of
the undersigned, to represent the undersigned at the Annual Meeting of
Shareholders of the Company,
to be held on _________, ___________, 2005, at 1:30 p.m., local time, at
________________________,
and at any adjournment or adjournments thereof, and to vote all shares
of the
Company’s
Common Stock that the undersigned would be entitled to vote if then and
there
personally present,
on the matters set forth on the reverse side.
A
majority of such proxies or substitutes as shall be present and shall act
at the
meeting or any adjournment
or adjournments thereof (or if only one shall be present and act, then
that one)
shall have and may
exercise all of the powers of said proxies hereunder.
(Continued
and to be signed on the other side.)
COMMENTS:
________________________________________________________________________________________
SEE
REVERSE SIDE
Please
mark your votes
as in this
example X
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS, “FOR”
PROPOSALS 2, 3, 4 AND 5.
1.
To
elect five directors. FOR
ALL NOMINEES - WITHHOLD AUTHORITY FOR ALL NOMINEES
Christopher
L. Aguilar
Todd
S.
Brown
Stanley
A. Hirschman
Bill
Nance
Phil
E.
Pearce
(INSTRUCTIONS:
To withhold authority to vote for any individual
nominee, mark the “Exceptions” box
and
write that nominee’s
name in the space provided below.)
*Exceptions_______________________________________________
2.
To
vote on the approval of our 2005 Stock Option and Incentive Plan. FOR
- AGAINST - ABSTAIN
3.
To
vote on a proposal to authorize Serial Preferred Stock. FOR-
AGAINST - ABSTAIN
4.
Authorization of additional common stock. FOR
- AGAINST - ABSTAIN
5.
To
ratify the Company's selection of Jewett Schwartz & Associates to be the
Company's
independent Auditor. FOR
- AGAINST - ABSTAIN
6.
To
transact such other business as may properly come before the
meeting
or any adjournment or adjournments thereof. FOR
- AGAINST - ABSTAIN
To
include any comments, use the comments box on the reverse side of this
card.
Date
,
_____________________________2005
______________________________________
Signature
of Stockholder
______________________________________
Signature
of Stockholder
Note
Please
sign exactly as your name or names appear on this Proxy. When shares are
held
jointly, each
holder should sign. When signing as executor, administrator, attorney,
trustee
or guardian, please give
full
title as such. If the signer is a corporation, please sign full corporate
name
by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.