SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A-3
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS UNDER THE 1934 ACT
Liberty Mint, Ltd.
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(Name of Small Business Issuer in Its Charter)
Nevada 84-14092 19
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
975 North 1430 West, Orem, Utah 84059
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(Address of Principal Executive Offices) (Zip Code)
801-426-5155
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act: None
Securities to be registered under Section 12(g) of the
Exchange Act:
Title of Each Class to be so registered:
Common Stock (No Par Value)
Name of Each Exchange on Which Each Class is to be Registered: N/A
This form is being filed with the Securities & Exchange Commission in order to
become a reporting company under the Exchange Act of 1934 and to maintain the
Company's quotation on the OTC Bulletin Board in compliance with the National
Association of Securities Dealers, Inc. Rules 6530 and 6540 to limit quotations
on the OTC Bulletin Board to securities of
companies that report their current financial information to the SEC,
banking, or insurance regulators.
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TABLE OF CONTENTS
Page No.
PART I
Item 1. Description of Business.....................................1
Item 2. Management's Discussion and
Analysis or Plan of Operation..........................8
Item 3. Description of Property.....................................16
Item 4. Security Ownership of Certain Beneficial
Owners and Management.................................16
Item 5. Directors, Executive Officers,
Promoters and Control Persons.........................18
Item 6. Executive Compensation......................................20
Item 7. Certain Relationships and Related Transactions..............21
Item 8. Description of Securities...................................22
PART II
Item 1. Market for Common Equity and
Related Stockholder Matters...........................23
Item 2. Legal Proceedings...........................................24
Item 3. Changes in and Disagreements with Accountants...............24
Item 4. Recent Sales of Unregistered Securities.....................24
Item 5. Indemnification of Directors and Officers...................26
PART F/S
Financial Statements..........................................................27
PART III
Item 1. Index to Exhibits...........................................28
Signatures....................................................................29
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Corporate Organization
As used herein the term "Company" refers to Liberty Mint, Ltd., its
subsidiaries and predecessors, unless indicated otherwise. Liberty Mint, Ltd.
was originally incorporated in the State of Colorado on March 15, 1990 as St.
Joseph Corp. VI. The Company changed its name to Petrosavers International, Inc.
on July 26, 1993, and again changed its name to Hana Acquisitions, Inc. on
September 12, 1996. On June 9, 1997, the Company changed its name to Liberty
Mint, Ltd. On October 8, 1999, Articles of Merger were filed with the Secretary
of State's office in the states of Colorado and Nevada, documenting a merger
between Liberty Mint, LTD., a Colorado Corporation and Liberty Mint, LTD., a
Nevada Corporation. The purpose of the merger was to effect a change of domicile
of the Company from Colorado to Nevada.
In June of 1997, the Company issued 3,725,436 pre-split shares of the
company's common stock (a 6-1 reverse split occurred in May 1999 reducing these
shares to 620,906 shares) to Shareholders of Liberty Mint, Inc., a Utah
Corporation, in exchange for 7,450,864 shares (approximately 90%) of the
outstanding shares of Liberty Mint, Inc. The shares of the company were issued
to Liberty Mint, Inc., shareholders in an isolated transaction pursuant to
Section 4(2) of the Securities Act of 1933. Prior to the Company's acquisition
of control of Liberty Mint, Inc., Liberty Mint, Inc. had issued, in early 1997,
1,919,341 of its shares to 15 of its creditors in return for cancellation of
$676,111 in silver debts of Liberty Mint, Inc., by the creditors, in isolated
transactions pursuant to Section 4(2) of the Securities Act of 1933. Since these
transactions occurred prior to the purchase of Liberty Mint, Inc. by the
Company, they had no effect on the Company's balance sheet.
Before the acquisition of Liberty Mint, Inc., the Company had not
engaged in any material operations. The Company is a holding company that
presently owns interest in two subsidiaries, Liberty Mint Marketing, Inc., a
wholly owned subsidiary and The Great Western Mint, Inc., a wholly owned
subsidiary. On September 23, 1999 the Company sold its total interest in Liberty
Mint, Inc., a Utah corporation to Calbear Gas, LLC for twenty five dollars
($25.00). At the time of the sale of Liberty Mint, Inc., it was behind in its
payments of employee withholding taxes and owed substantial sums to customers
for undelivered silver bullion orders and for bullion on deposit (see Part II,
B., Liquidity and Capital Resourses.). The Company is carrying on its books, a
contingent liability in the amount of $374,406 ,which represents undelivered
silver and gold and past due payroll taxes of Liberty Mint, Inc. which accrued
while the Company owned Liberty Mint, Inc. In the event Liberty Mint, Inc. is
unable to pay these amounts, the Company may be liable.(see footnote 1 at page
12, infra.) Prior to this transaction the Company had owned 90% of the issued
and outstanding stock of Liberty Mint., Inc. The Company's operations currently
consist of developing, manufacturing, and marketing custom-minted commemoratives
and collectibles in both precious and non- precious metals. The Company's
primary products are custom coins and silver sculptures.
B. Description of Business
Since 1984, the Company has provided custom minting services for
foreign countries, domestic states, municipalities, Fortune 500 companies,
educational institutions, and nonprofit organizations. The Company's business is
primarily comprised of manufacturing and designing custom coins, and silver
Collectibles and sculptures (The Great Western Mint) and distribution of sports
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and entertainment related Collectibles and premium incentive products (Liberty
Mint Marketing). Under prior management, the Company generated revenues
primarily as a manufacturer through its subsidiary, Liberty Mint, Inc., which
did not generate adequate sales growth or profit. Consequently, the Company
under new management has decided to expand its source of revenues by not only
manufacturing products, but also by designing and creating new products that the
Company can sell as a wholesale and retail distributor. As a result of this
decision, the Company divested itself of its interest in Liberty Mint, Inc., on
September 23, 1999. The Company has identified three areas that its wholesale
and retail marketing efforts will be based upon: freedom/patriotic themes under
the name of Liberty Mint, entertainment collectibles under the trade name of
Superstar Commemorative Collector Series ("SCCS"), and western art and
collectibles with a tentative trade name of Jackson Hole Collectibles.
In addition, the Company's present efforts are being focused upon
increasing sales through improving and expanding its marketing and distribution
methods. As a result of the Company's new direction, it has successfully
marketed products on a limited basis to the public. The Company's product lines
are currently derived from the use of licenses and rights to produce various
collectibles which include public personalities and popular events. The Company
intends to continue the use of its existing licenses and plans to make a
concerted effort to obtain additional licenses and marketing rights to use
images of public personalities, sports heros and popular events. As it obtains
additional licences, the Company will seek to develop niche products designed to
appeal to the public. Upon the development of various products, the Company will
then focus on developing wholesale, retail, and direct marketing strategies to
create ongoing demand for its products.
C. Description of Products and Services
Bullion Silver Rounds. Prior to the sale of Liberty Mint, Inc., on
September 23, 1999, the Company's primary product was bullion silver rounds. The
Company produced these bullion silver rounds on a limited basis (one troy once,
.999 pure medallions) for investors (this was the mainstay of business from 1984
to 1987). Since the sale of Liberty Mint, Inc., the Company has begun to
significantly refocus its efforts and products away from bullion silver rounds.
The company decided to shift its efforts away from bullion because the Company's
losses are directly attributed to the production of bullion silver rounds.
Although the bullion sales accounted for a significant part of the Company's
revenues, the Company has been unable to create a profit from these sales. Often
the silver was sold at or slightly above costs to the customer and therefore
these sales did not represent much of the net income of the Company. Therefore,
the Company did not consider this a viable or profitable area of business and
finally resolved to divest the Company of its interest in Liberty Mint, Inc. in
an effort to stop the continuing losses attributable to this aspect of the
Company's business. The sale of Liberty Mint, Inc. will allow the Company to
concentrate its efforts on the higher margin areas mentioned below.
Custom Minting. These products and services include minting custom
premium and promotional items for companies and other organizations. The
purchasers of these items generally include: businesses, sports organizations,
collectors' organizations or retail companies, and art enthusiasts. The
customers have largely been corporations and organizations that want to
commemorate various events or milestones, or to promote a product or idea. The
customers generally use these products for the following reasons: to commemorate
an event; as a prestigious award; as fund-raisers for schools, sports teams and
nonprofit organizations; as sales incentives and recognition awards; and as an
enduring form of advertising.
Examples of some of the coin projects that the Company has created and
manufactured range from gold retirement coins for retiring Dow Chemical
employees, to silver coin premiums given to prospective Chrysler customers who
take a test drive. These projects have usually originated from the efforts of
the Company's representatives who introduce the idea to prospective corporate
clients.
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Superstar Commemorative Collector Series. The Superstar Commemorative
Collector Series ("SCCS") trade name has been in use by the Company for
approximately two years. Under this label the Company produces commemorative
collector coins of the world's superstars. The Company is continuing to operate
this business pursuant to a licencing agreement and joint distribution contract
with Signatures Network ("Signatures"), formerly Sony Signatures, which was
signed in 1996. The Company and Signatures are continuing to carry on business
while currently in final negotiations to extend the contracts until the year
2001. Coins have already been created for, Elvis, Celine Dion, Alan Jackson,
Kiss, Michael Jackson, and others. The Company will continue to negotiate with
other companies in the entertainment industry to continue to gain the rights to
more superstars. Through SCCS, the Company will attempt to expand and further
develop this market because of its significant potential to generate revenues.
In addition, the Company currently supplies 1400 stores nation wide with the
SCCS series. Marketing and distribution of SCCS will be done through local
collectibles retailers, music and musical equipment stores. The Company hopes to
achieve mass market distribution through retail chain stores.
Western Art and Collectibles. The Company believes that western art and
collectibles products have significant potential to generate sales. The Company
intends to pursue western art sales through its subsidiary, Great Western Mint,
Inc. and under the trade name Jackson Hole Collectibles.
In the past the Company has cast three of Remington's sculptures: The
Broncho Buster, The Mountain Man, and The Rattlesnake. Each edition consists of
100 sculptures cast from 1,000 ounces of pure silver and each edition is sold
out. The Company plans to develop additional sculptures authorized by various
museums including a series of smaller Remington sculptures.
<TABLE>
D. Revenue of Products and services.
<CAPTION>
December 31, 1997 December 31, 1998 September 30, 1999
<S> <C> <C> <C> <C> <C> <C>
Bullion * $ 120,350 4% $ 924,493 21% $ 1,726,216 24%
Sculptures 643,000 21% 785,553 18% 439,339 16%
Disney 604,000 20% 603,153 14% 247,907 13%
Signatures 166,624 6% 416,991 9% 274,072 7%
Total Revenue 3,022,721 4,430,950 4,111,691
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</TABLE>
* Bullion accounted for a significant percentage of the Company's
revenues through the third quarter of 1999. However, the sale of Liberty Mint,
Inc. in September of 1999 will cause the sales of bullion in the future, if any,
to be insignificant.
E. Marketing and Distribution.
Print Advertising. The marketing strategy for the next twelve months
will be for the Company to increase its exposure to potential business and
wholesale clientele by advertising in multiple monthly trade and industry
publications, as well as business magazines. This exposure will familiarize and
supply business groups with information about the Company and the premium
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incentives and promotions available for their company or group. This has
historically been the most successful advertising method for the Company and has
consistently produced the best sales results.
Direct Marketing. The Company will market Jackson Hole Collectibles
directly to the customer through direct mail and other traditional marketing
techniques, including the Internet. The Company currently owns and operates a
website, that will continue to be used in the future.
The marketing plan for the SCCS is composed of multiple direct
marketing strategies devised by the Company and Signatures. The plan outlines
aggressive niche marketing programs designed to maximize product exposure and
recognition which, in turn, should spawn sales. The Company will also
continually engage in test marketing to assess the future possibility of
expanded mass marketing and retail sales options.
The Company will attempt to develop direct marketing programs which
target fans and the general public to generate "non-concert" retail sales. The
SCCS agreement allows the Company and Signatures to jointly develop and offer
commemorative coins through CD and catalog inserts as well as other various
direct marketing opportunities. To this end, SCCS will seek out associations
with existing companies which have proven track records in mass marketing
collectibles.
In conjunction with the foregoing, the Company will attempt to take
full advantage of the ongoing publicity which surrounds high-profile SCCS
clients. In so doing, it may be possible to reduce advertising and promotional
costs while still creating new opportunities to increase awareness in target
markets. The Company also foresees the necessity of press releases, promotions
with local media and interviews with media personalities. In addition,
cross-marketing promotions with national sponsors will be attempted. The Company
will continue its efforts to procure additional rights for popular persons or
events.
Internet Marketing. The Company has developed an Internet website that
it believes will become a significant part of its future marketing program. The
Company will attempt to establish channels over the Internet to market and
distribute its custom collectibles. The major emphasis will be placed on the
SCCS and Jackson Hole Collectibles product lines.
F. Business Relationships, Custom Projects, and Licenses
Disney Custom Minting Projects. The Company currently supplies
collectible coins to Disneyland and Disney World which are sold in their
exclusive gallery stores. In addition, Disneyland and Disney World have decided
to produce a yearly issue, similar to a U.S. Proof set and non-precious
medallions. The Company has received orders from the Disney Store organization,
Disney Catalog, Disney Hotel, and Disney Cruise Lines. In 1998 orders from
Disney and its affiliates accounted for approximately 14% of the total revenues
of the Company.
The Signatures Network (formerly Sony Signatures) Joint Venture.
Liberty Mint, Inc. entered into a joint venture manufacturing and distribution
agreement with Signatures in 1996. The rights of Liberty Mint, Inc. to this
contract were sold to the Company prior to the sale by the Company of its
interest in Liberty Mint, Inc. The Company is currently doing business with
Signatures under the terms of the 1996 agreement pending the execution of a new
agreement which is intended to give manufacturing and distribution rights to the
Company through the year 2001. Under the new contract, the Company will continue
to merchandise collectible coins of legendary bands and entertainers. The
original joint venture resulted in launching the "Superstar Commemorative
Collector Series(TM)" which develops collectible products with fan appeal.
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Signatures creates innovative merchandising, licensing and marketing programs
based on film, television, music, sports and lifestyles artists. Signatures
represents an elite group of over 80 musical artists and groups, including
superstars such as Michael Jackson, The Beatles, Celine Dion, Kiss, Elvis, John
Lennon and Leann Rimes. Signatures will also work with the Company to provide
access to other top entertainment talents not presently in the Signatures
portfolio.
The terms of the original agreement, effective September 1, 1996,
provide the Company with exclusive United States and non-exclusive International
rights to manufacture and sell articles embodying the name and/or image of
Signatures musical artists. The term of the original agreement was extended
until August 31, 1999. The Company is currently in final negotiations with
Signatures to extend the agreement until the year 2001. The Company continues to
do business with Signatures pending the finalization of a new agreement. Under
the terms of the new agreement the Company will pay Signatures a fee of 20% of
all gross sales revenues from the Signatures articles, whether sold by
Signatures or its representatives or sold directly by the Company. All articles
and all artwork is subject to Signatures' discretionary approval. The Company
will be responsible to pay royalties to Signatures applicable to each licensor
(artist). These royalties will vary depending upon the artist and the articles
manufactured and sold. The parties have come to an agreement in principal, but
have not yet finalized an extension.
G. Competitive Business Conditions
Collectible Industry. Collectibles consumers are using a much broader
range of sources to buy collectibles than they did in the past. "Collectible
industry sales grew 6.2% in 1998, reaching $10.65 billion at retail, up from
$10.05 billion in 1997," according to the "Collectibles Business" Newsletter in
April 1999. Of this total, the Internet generated $280 million in sales and
captured 3% share of the total market in 1998.
The collectibles industry is highly segmented into niche markets, with
relatively large numbers of companies supplying very highly specialized
products. Among a total of 800 companies about 80% of the companies have annual
sales of five million or less. The largest competitors in the retail sector hold
less than 20% of the total share of the retail market. The leading competitors
tend to manufacture a wide range of products, thus accounting for their dominant
position in the market, while smaller competitors tend to limit production to
one or two product forms only.
Several of the Company's competitors are significantly larger than the
Company and possess greater resources and market share. These competitors
include, but are not limited to, The Franklin Mint and The Washington Mint.
These companies produce commemorative coins, scale model automobiles and
collectible dolls, statues and plates. When compared to the size of these
companies, the market share of the Company is not significant. The Company's
niche market involves the Signatures SuperStar Commemorative Collector Series,
Western Art and Collectibles and sales to the Disney Organization. The Company
does not presently have significant competition in this small niche market.
There is no assurance that these larger companies will not attempt to target the
niche market being developed by the Company by obtaining exclusive rights to
produce similar collectibles. The Company will attempt to gain an advantage over
these companies through its specialization on quality custom minting for
businesses, entertainment collectibles and western art. The Company will attempt
to utilize existing business contracts and alliances with Signatures, an ongoing
relationship with Disney and increased use of print advertisement in order to
provide increased name recognition and market awareness for its products.
Current Industry Position. The market for selling commemorative coins
and collectibles products is intensely competitive with many providers who
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have greater production expertise, financial resources and marketing
capabilities than the Company. The Company produces and markets unique silver
collectable items in the areas of music and entertainment Collectibles and
western art Collectibles. These products have appeal to a group of silver
afficionados who have interest in silver Collectibles. The Company's marketing
concept is to target silver collectors with these unique products. The Company
faces competitive obstacles consisting of (1) a limited market consisting of
collectors of silver art and Collectibles, (2) the ability to continue to create
products which will be appealing to this limited market, and (3) the existence
of at least one other manufacturer of which the Company is aware who directly
competes with the Company. This competitor is of approximately the same size as
the Company. The Company differs from its competitors in that it is attempting
to fill a niche which consists of providing products to collectors of silver art
and entertainment Collectibles. There are a number of additional competitors who
could, should they choose to do so, compete directly with the Company's products
and marketing efforts. These companies enjoy more extensive advertising budgets
and widespread brand recognition. There is no assurance that the Company will be
able to overcome these competitive obstacles with the limited capital available.
If the Company cannot compete effectively, it will not succeed.
Method of Competition. The Company is in direct competition with other
merchants of entertainment related memorabilia, western art, and commemorative
products. For instance, at a typical concert there are about 30 different types
of merchandise, most of which have a long track record of market appeal. Such
items may include the typical T-shirts, hats, mugs and other commonplace
souvenir style products. The Company will need to expose the existence of SCCS
products and cause its products to appeal to fans. The Company will continue to
seek methods for creating consumer awareness of the SCCS series.
Although the Company must compete with well-established merchants for
the consumer's memorabilia dollar, it also enjoys the potential advantage of
having created a niche market which does not now have substantial direct
competition. The Company is not currently aware of other competitive efforts to
license legendary artists for precious metal medallions and related products.
The Company feels that the establishment of SCCS as a premier collection, as
well as the preliminary effort of licensing key artists and personalities will
enhance its efforts to stay ahead of any competition, should one or more decide
to compete directly.
The Company's market for SCCS products consists primarily of fans and
secondarily of collectors. Both markets are robust and show signs of increasing
growth and consumer demand. Much of the Company's market will be derived from
targeting specialty areas such as CD purchases and fan club members. As SCCS
continues to grow in scope the Company believes that a secondary market will
develop (this is common with virtually all manner of collectibles such as
trading cards, figurines, plates, etc.) among entertainment enthusiasts which
will create greater demand and liquidity for Company's products.
The Company believes it has an additional competitive advantage which
enhances its products. Over the years the Company has developed technical
processes that distinguishes the Company from other mints, in that the Company
is able to create unique coin designs incorporating multiple textures which
supplies the standard frosted image and mirrored background giving its products
recognizable appeal
H. Sources and Availability of Raw Materials.
Source of Materials. Materials and supplies (except one) including
printing, collateral materials, and packaging are being purchased from at least
two or more suppliers. The custom boxes are currently being purchased from a
single supplier, due to the high cost of tooling and setup. However, there are
other suppliers who have been used in the past, and could be used again if the
need arises.
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The Company currently uses four major local suppliers of silver. These
are : (1) The Sunshine Mint, (2) Regency Mint, (3) Monarch Coin, and (4) Pioneer
Refining, The Company also uses one other major United States supplier, Dillon
Gage, which ships through a local supplier. Additionally there are other minor
sources the Company uses occasionally. The Company has no reason to believe that
the availability of silver will change in the near future. If one supplier
should have difficultly delivering the needed silver supply the Company would be
able to switch to one of its other suppliers. The Company maintains a
fluctuating inventory of silver, which is replaceable from time to time as
needed from the suppliers mentioned above.
The Company obtains certain raw materials and components for its
products from single suppliers. In most cases, the Company's sources of supply
could be replaced if necessary without undue disruption, but it is possible that
the process of qualifying new materials and/or vendors for certain raw materials
and components could cause a material interruption in manufacture or sales. No
material interruptions have occurred over the last two years.
Although the Company has had no material interruptions in its supply of
raw materials, there can be no assurances that the Company's suppliers will be
able to supply the Company in quantities needed. Future government regulation of
the industry or delays in the process of qualifying new materials and/or vendors
to supply the raw materials may also cause a decrease in sales of affected
products by disrupting the manufacturing process. The Company believes that its
supply of raw materials is adequate for the current fiscal year.
I. Customers - Dependence on One or Few
The Company currently relies on Disney for 14% of its total revenues.
Although the Company has no written contract with Disney, the Company believes
that this is a stable customer that will continue to bring business to the
Company. However, if the client should discontinue to bring business to the
Company management believes the effect of this would be absorbed by the
introduction of additional business and would not have a long term adverse
effect on the Company.
J. Requirement of Government Approval
The U.S. Department of the Treasury has developed a policy regarding
the use of metal tokens. The currently established parameters restrict the
minting of commemorative coins or medallions which approximate the size, weight
and appearance of coins produced by the United States government. The Company
has no control over future regulatory changes. Any future regulatory changes may
impact the Company and its ability to produce its products.
K. Employees
The Company currently has 16 full time employees. No employees are
currently covered by a collective bargaining contract.
L. Reports to Security Holders
The Company is not required to deliver an annual report to security
holders and will not voluntarily deliver a copy of the annual report to the
security holders. If the Company should choose to create an annual report, it
will contain audited financial statements. The Company intends to, from this
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date forward, file all of its required information with the Securities and
Exchange Commission ("SEC"). Prior to this form being filed there were not any
other forms filed. The Company plans to file its 10KSB, 10QSB, and all other
forms that may be or become applicable to the Company with the SEC.
The public may read and copy any materials that are filed by the
Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Public may obtain information on the operation
of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
statements and forms filed by the Company with the SEC have also been filed
electronically and are available for viewing or copy on the SEC maintained
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC. The
Internet address for this site can be found at http://www.sec.gov. Additional
information can be found concerning the company on the Internet at
http://www.libertymint.com.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. General
In April of 1999, the Company reorganized its management by replacing
its President and releasing its Chief Financial Officer. As of September 30,
1999, the Company had not found a replacement for its Chief Financial Officer.
The reorganization was carried out to bring about a change in the company's
focus and business plan. Prior management had been committed to an attempt to
build the Company through an increase in the Bullion business and its emphasis
on the minting and sales of silver rounds. This business was being carried out
by Liberty Mint, Inc. The expansion of the Bullion business in 1998 and early
1999 had resulted in increased losses for the Company.
In an effort to stem the Company's rising losses, the Board of
Directors, in April, 1999, reorganized the Company's management team. The new
management team began focusing its efforts on producing products that would
bring a higher profit return to the Company. Management determined that the
Bullion business, with its emphasis on production and sales of silver rounds,
was not a profitable venture. A decision was made to cease involvement in the
Bullion business and to sell Liberty Mint, Inc. On September 23, 1999, the
Company sold its interest in Liberty Mint, Inc., which subsidiary had been
primarily engaged in the silver bullion business and the production of bullion
silver rounds.
The effect of this transition has been a shift from sales of the
Company's heretofore primary product, bullion silver rounds, to products which
the Company believes will allow higher profit margins, such as custom minting,
commemorative coin series, and other products noted in Item 1. Description of
Business. Each of these businesses has a higher profit margin than the Bullion
business. The Company believes that the downsizing of the Company which was
accomplished with the elimination of the Bullion business and the sale of
Liberty Mint, Inc. coupled with a renewed emphasis on growing the remaining
businesses of the Company will allow management to reverse the Company's history
of loss and allow the Company to become profitable. However, no assurance can be
given that in fact the Company will be able to earn a profit in the future.
The following discussion and analysis provides information that the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition. The discussion
should be read in conjunction with the financial statements and footnotes that
appear elsewhere in this report.
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Nine Months ended September 30, 1999 and September 30, 1998 and Years ended
December 31, 1998 and December 31, 1997.
Sales. Sales for the nine months ended September 30, 1999 increased to
$4,174,437 from $3,031,607 for the comparable period in 1998, an increase of
37%. The increase in revenues was primarily attributable to an increase in
wholesale bullion sales.
Sales for the year ended December 31, 1998 increased to $4,430,950 from
$3,022,721 for the year ended December 31, 1997, an increase of 46.5%. The
increase in revenues were primarily attributable to an increase in wholesale
bullion sales. Also contributing to the increase in sales were custom and SCCS
sales.
Losses. Net losses for the nine months ended September 30, 1999,
increased to $1,017,159 from $556,629 for the comparable period in 1998, an
increase of 82%. The increase in losses was primarily attributable to low
margins on the revenues generated by the increased bullion sales of Liberty
Mint, Inc.
Net losses for the year ended December 31, 1998 decreased to $1,720,525
from $2,053,512 for the year ended December 31, 1997, a decrease of 16.2%. The
substantial decrease in losses was primarily from a decrease in administrative
and sales commission costs.
The Company expects to break even or to operate at a slight profit
during the last quarter of 1999 as a result of the divestiture of Liberty Mint,
Inc. and its production of bullion rounds on September 23, 1999. Nonetheless,
the Company expects to show a loss for fiscal 1999 because of losses generated
by the Liberty Mint, Inc. bullion business. There can be no assurance that the
Company will achieve or maintain profitability or that its revenue growth can be
sustained in the future.
Expenses. Selling, and General and Administrative expenses for the nine
months ended September 30, 1999, decreased to $1,427,046 from $1,593,520 in the
comparable period in 1998, a decrease of 11 %. The decrease in selling, general
and administrative expenses was the result of a decrease in executive salaries
and a reclassification of certain general and administrative expenses as cost of
sales. Certain expenses were reclassified in the 1998 audit. The basis for the
reclassification of expenses was that certain expenses consisting of rent on
buildings, utilities and expenses of depreciation on equipment had been
incorrectly classified in the past as selling, general and administrative
expenses and should have been classified as manufacturing overhead. Beginning in
1998, the Company began to correctly account for these expenses.
Selling, general and administrative expenses for the year ended
December 31, 1998, decreased to $2,278,061 from $2,475,925 for the year ended
December 31, 1997, a decrease of 7.9%. The decrease in selling general and
administrative expenses was the result of a cost reduction program begun by the
Company in 1998. Many expense areas were decreased including: postage, general
supplies and materials, interest expense, communications expense, legal expense,
travel and auto.
Depreciation and amortization expenses for the nine months ended
September 30, 1999 and September 30, 1998 were $34,232 and $35,902 respectively.
The decrease was due to the full depreciation of certain minting equipment in
1998. During the annual audit, a group of inventory items were identified as
potentially obsolete, and the write-off was accrued for as a 1998 expense.
During the second quarter of 1999, these items were reviewed item by item, and
the obsolete items were physically removed from inventory, written off, and
disposed of. The reserve was used to cover most of this write-off.
9
<PAGE>
Depreciation and amortization expenses for the years ended December 31,
1998 and December 31, 1997 were $250,461 and $242,853., respectively. The
increase was due primarily to two new capital leases for computer and office
equipment. These leases are detailed in Note 10 of the audited financial
statements.
Cost of Sales. The largest factors in the variation from year to year
in the cost of sales as a percentage of net sales are the cost of raw materials
and the yield of finished goods from the Company's manufacturing facilities.
The cost of goods sold for the nine months ended September 30, 1999 was
$3,658,509 compared to $1,821,195 for the comparable period in 1998. Cost of
goods sold as a percentage of gross sales for nine months ended September 30,
1999 and 1998 respectively, were 88% and 59%. The higher cost of goods sold by
percentage of total revenues increased because of the increased sales of
wholesale bullion, which has a low margin of return.
The cost of goods sold for the year ended December 31, 1998 was
$3,750,357 compared to $2,279,066 for the year ended December 31, 1997. The
increase in the cost of goods sold was primarily attributable to an increase in
wholesale bullion sales as a percent of total revenues, which has a
substantially lower margin (3-5%) than custom minting. Cost of goods sold as a
percentage for December 31, 1998 and 1997 respectively, were 84.6% and 75.3%.
Impact of Inflation. The Company believes that inflation has had a
negligible effect on operations over the past three years. The Company believes
that it can offset inflationary increases in the cost of materials and labor by
increasing sales and improving operating efficiencies.
B. Liquidity and Capital Resources.
As of December 31, 1998 and 1997, the Company held customer deposits in
the amount of $407,206 and $442,566, respectively, and has taken silver and gold
for various commitments to produce product. As of December 31, 1998 and 1997,
the Company had silver and gold commitments in excess of the amount of silver
and gold on hand in the amount of $247,893 and $16,463. The commitment in excess
of the amount of gold and silver on hand as of September 30, 1999 was $141,306,
down $70,094 from the 1998 year end figure
The following table shows the history of the company's silver and gold
commitments
30 Sep 99 30 Jun 99 31 Dec 98 31 Dec 97
Customer Deposits $163,027 $589,524 $407,206 $442,566
Silver Inventory $ 17,967 $27,439 $62,475 $308,886
Silver on Lease 0 0 0 ($22,269)
10
<PAGE>
Silver held on
Account 0 ($310,528) ($304,027) ($287,341)
Net Silver Liability $17,967 ($283,089 ($241,552) ($724)
30 Sep 99 30 Jun 99 31 Dec 98 31 Dec 97
Gold Inventory $2,802 $9,284 $20,749 $3,519
Gold Held on Account 0 ($3,414) ($27,090) ($19,258)
Net Gold Liability $2802 ($5,870) ($6,341) ($15,739)
Combined Liability $20,769 (277,219) ($247,893) ($16,463)
The Company funds its inventories through the following methods:
1. Silver lease- Owners of silver can send their silver to the company
for "storage" in the Company's vault. The Company is allowed to melt and finish
it into product, and replace the silver upon shipment of product. (This was a
method used by Liberty Mint, Inc. Since the sale of Liberty Mint, Inc. on
September 23, 1999, This practice has ceased.)
2. Metal held on account-Some customers send the company their own
silver to be used in completing their order for coins.
3. Deposits-The customer is required to pay for the precious metal in
advance; thus creating a contra- asset account called "prepayments."
The preceding table shows the relationship of these accounts, revealing
the Company's inventory is not adequate to meet the current committed
liabilities created by these three transaction types. In early 1999, management
recognized that its ability to produce prepaid product and deliver committed
product and return gold and silver held on account was becoming worse. In
addressing the problem, management determined that this was a historical problem
with the bullion business of Liberty Mint, Inc. which had not been able to be
corrected. Management determined that it was in the best interest of the Company
to get out of the bullion business in order to prevent this problem from
continuing to grow. This was the key reason the Company had for divesting itself
of its subsidiary "Liberty Mint, Inc." during the third quarter of this year and
concentrating its efforts on its two remaining subsidiaries The monies owed for
return of silver and gold, and for prepaid and committed product are liabilities
of the company which are shown as a part of "contingency on sale of subsidiary"
on the balance sheet. In the event the Company is unable to pay these amounts
11
<PAGE>
when due, or to make arrangements for their payment which is satisfactory to the
creditors, the ability of the Company to continue to do business could be
adversely affected. If the Company is unable to arrange for repayment of these
amounts, and other amounts owed by the Company, the Company could face
bankruptcy.
At present, most orders of materials and supplies are sent to the
Company COD. The impact of this policy has been one of inconvenience, but
overall it has not adversely affected product production because the two largest
production costs are the metal itself and the dies used to stamp the metal. In
most cases, the company is now requiring prepayment of these costs. Statements
regarding the adequacy of raw materials refer to "availability." The Company has
no reason to believe that any of the materials used by the Company will be in
short supply in the current fiscal year.
The Company frequently has been unable in the past to make timely
payments to its trade and other creditors. As of year-end , the Company had past
due payables in the amount of $337,331. However, only $154,873 was more than 90
days past due. As of September 30, 1999, because of the sale of Liberty Mint,
Inc., the Company's past due payables for gold and silver owed to customers of
Liberty Mint, Inc. were eliminated.(1) The Company's total debt as of September
30, 1999 is $1,117,263. See the following table for year-to-year and year to
date comparisons.
September 30, 1999 December 31, 1998 December 31, 1997
Trade A/P $ 2,498 $ 406,763 $ 306,552
Total Past Due $ 0 $ 337,331 N/A
90 Days + $ 0 $ 154,873 N/A
% over 90 Days 0% 38% N/A
At present, the Company substantially relies on revenue from sales of
its products and services to maintain operations. The Company estimates that
subsequent to the sale of Liberty Mint, Inc. it will need to generate minimum
monthly sales levels of $225,000 in order to operate at a profit. The Company
may not be able to maintain this level of sales. If the Company's sales revenues
fall short of this minimum level on average, the Company may fall short of the
minimum capital required to maintain operations. If revenues of the Company fall
short of the minimum levels required to continue operations, the Company would
not be able to sustain its capital needs without cash from borrowing or from
sale of equity in the Company. The current sources of cash available to the
Company consist of (1) revenues from sales, (2) debt financing through
Performance Funding Co. of Phoenix, Arizona (a factoring line of credit in the
amount of $250,000 and a purchase order line of credit of $100,000), and (3)
Equity financing (notes receivable in the sum of $298,604).
- ---------------
(1) The Company is carrying a liability on its balance sheet titled
"Contingency on Sale of Subsidiary" in the sum of $374,406 which represents
undelivered silver and gold and past due payroll taxes of Liberty Mint, Inc.
which accrued while the Company owned Liberty Mint, Inc. In the event Liberty
Mint, Inc. is unable to pay these amounts, the Company may be liable. However,
due to the contingency of the liability, the Company is not treating the
contingent amount as past due because no demand for payment has been made upon
the Company for payment of these amounts.
12
<PAGE>
On a long term basis, liquidity is dependent on continuation and
expansion of operations, receipt of revenues, additional infusions of capital
and debt financing. Since 1996 the Company has been engaged in efforts to
restructure the Company's debt. These efforts have been primarily focused on
equity financing. These efforts are chronicled in Part II, Item 4, "recent sales
of unregistered securities."
The Company's liquidity problems and the attendant cash shortfall
problems were addressed by the Board of Directors and resulted in the sale of
Liberty Mint, Inc. The sale of Liberty Mint, Inc. left the Company with
contingent liabilities of $374,406. The Company does not think it is realistic
to believe these contingent liabilities can be paid solely from revenues
generated by sales. The Company believes it will need to raise capital in an
amount between $600,000 and $1,000,000 in order to allow the Company to retire
this debt and have sufficient operating capital to grow the business through the
expansion of the Company's sales and marketing efforts.
Management believes the Company's ability to raise additional capital
to meet its needs depends on its ability to demonstrate that the Company can
generate profits from sales of its products and services. The Company has no
present plan to raise additional capital in an equity offering because it is
still too early to assess the long term effect of the sale of Liberty Mint, Inc.
on the Company's ability to generate profits.
The Company is considering launching a wide scale marketing and
advertising campaign. The Company's current capital and revenues are not
sufficient to fund such a campaign. If the Company chooses to launch such a
campaign it is estimated the Company will require capital in excess of current
operating costs of between $250,000 and $500,000. The Company may choose to
raise this capital through an additional stock offering. The funds raised from
this offering will be used to develop and execute the marketing and advertising
strategy which may include the use of television, radio, print, direct marketing
and Internet advertising. However, there can be no assurance that the Company
will be able to obtain additional equity or debt financing in the future, if at
all. If the Company is unable to raise additional funds the growth potential
will be adversely effected.
Capital Commitments. The Company has no current commitments for capital
expenditures. But, management will be looking at upgrading manufacturing
equipment and putting some redundancy in the manufacturing capabilities to
reduce the risk of production shut down. This will be done with an integrated
plan which keeps abreast of the capacity expansion needed to support the planned
growth.
Going concern. The Company has incurred significant losses during 1997,
1998, and 1999 (3 quarters). As of September 30, 1999, the Company has current
liabilities in excess of current assets of $754,381 and has a stockholder's
deficit of $85,431. As of September 30, 1999, the Company held customer deposits
in the amount of $163,027. As of September 30, 1999, the Company did not have
the ability to produce the prepaid product without additional funds provided
through loans and/or through additional sales of stock or through the collection
of notes receivable from shareholders. These items raise a substantial concern
and doubt about the ability of the Company to continue as a going concern. In an
effort to overcome the financial difficulties surrounding the continued
operation of Liberty Mint, Inc., Management, on September 23, 1999, divested the
Company of its interest in Liberty Mint, Inc., the source of the Company's
ongoing problem with delivery of silver products. The divestiture has allowed
the Company to reduce its overhead by moving to a smaller facility and reducing
the number of employees from 25 to 16. The Company's emphasis is now moving from
manufacturing to marketing with products as described at pages 2-3 above. These
13
<PAGE>
products have a higher profit margin than bullion sales. Management proposes to
raise additional funds through collection of notes receivable from shareholders,
loans, and/or additional sales of its common stock. Management believes that
with the divestiture of the Company's interest in Liberty Mint, Inc., with the
resultant improvement of operations, it can reduce expenses, refinance debt, and
convert debt to equity, and that through a combination of these efforts,
continue as a going concern.
C. Trends, Events, Uncertainties that may have a Material Effect on Liquidity
Lack of Profitability/Limited Operating History. The Company has
limited assets and has experienced financial difficulties in the past. The
Company's subsidiary, Liberty Mint, Inc., has a ten year operating history and
has operated at a significant loss since 1990. In 1996 and early 1997, prior to
its acquisition by the Company, Liberty Mint, Inc., began restructuring its debt
in an attempt to overcome its financial problems. The main focus of this effort
was the obtaining of equity financing. Because of ongoing losses attributable to
the operations of Liberty Mint, Inc., the Company divested itself of its
interest in Liberty Mint, Inc. on September 23, 1999. The sale of Liberty Mint,
Inc. will eliminate a source of continuing loss to the Company, which management
believes will have a positive effect on the Company's operations.
In June of 1997, Liberty Mint, Inc. was acquired as a subsidiary of
the Company. Since that time the Company has attempted to operate Liberty Mint,
Inc. The Company attempted to resolve the financial problems of Liberty Mint,
Inc.'s bullion business for about two years through infusions of capital into
the subsidiary. Despite the efforts of the Company's management, the Bullion
sales business continued to lose money. In April, 1999, new management was
installed in the Company. New management met to assess the problems caused by
the continuing losses attributable to the bullion business. The Board determined
it was not in the best interest of the Company to preserve the Bullion business
since the business was historically unprofitable and the Company was continuing
to lose money as a result of bullion operations. The Board decided the Company
would be best served if the Bullion business was abandoned. The Board decided to
abandon the bullion business by divesting the Company of its interest in Liberty
Mint, Inc. This would allow the Company to concentrate its efforts on its
remaining businesses, Custom Minting, the SuperStar Commemorative Collector
Series and Western Art and Collectibles. In September of 1999, the Company sold
its interest in Liberty Mint, Inc. to Calbear Gas, L.L.C., a Texas Limited
Liability Company.
Since April, 1999, the Company has attempted to refocus its business
efforts towards development of its businesses other than the bullion business.
Since divestiture of Liberty Mint, Inc., in September of 1999, the Company has
turned its whole effort to developing and expanding the Custom Minting,
SuperStar Commemorative Collector Series, and Western Art and Collectibles
businesses. By eliminating the bullion business, the Company believes it has
eliminated a problem which has historically had a negative effect on the
Company's capital resources and liquidity. The Company's remaining businesses
appear to be able to generate a profit. The Company believes that in its next
fiscal year (2000) the revenues from its remaining businesses will allow it to
reduce its debt significantly. The Company believes its remaining businesses can
be operated profitably. The negative effects to the Company's operations,
liquidity and the continuing drain on capital resources attributable to
continuing operation of the bullion business have been eliminated. Revenues
since September, 1999 have been greater than expenses for the same period. The
Company believes that if this trend continues, the Company can be profitable.
There is no assurance the Company will be able to successfully implement its
business objectives or that it will be able to operate profitably.
14
<PAGE>
Working Capital Deficit / Need for Additional Capital. As of September
30, 1999, when compared to September 30, 1998, the Company was operating with a
working capital deficit of $851,432 and is heavily dependent upon receiving an
increase in capital. The Company is currently weighing its options and will need
to raise funds from debt financing or sale of its securities. Even upon the
completion of the raising of additional capital the amount of capital available
to the Company may be extremely limited, and may not be sufficient to enable the
Company to fully recover from its working capital deficit and/or fully implement
its proposed business expansion operations. The is no assurance that such
financing will be available to the Company on attractive terms or at all. Except
for the notes receivable from shareholders in the amount of $298,604, the
Company currently has no commitments for additional cash funding.
D. Trends, Events, Uncertainties that may have a Material Effect on Net Revenue
or Income
Uncertain Market Acceptance. The Company's current and intended
business is to produce custom commemorative coins for various corporations and
organizations. Additionally, the Company developed a series of silver
sculptures. Along with custom minting, the Company is attempting to enter the
retail collectibles market through direct marketing and wholesale distribution.
The retail collectibles market is based on the marketing concept of selling
commemorative and collectible products related to superstars of entertainment,
sports fans, as well as products for popular events. The Company has experienced
some degree of success in direct marketing projects in the past. However, there
is no assurance of market acceptance for the Company's retail collectibles, and
the Company will be subject to all the risks associated with introducing a new
marketing concept. The Company has not undertaken any independent market studies
to determine the feasibility of the concept. If the market does not accept the
products as the Company believes it will, then projected revenues could be
adversely effected.
Licensing. The Company's continued ability to develop product will be
contingent on its ability to generate new licenses and rights for trademark and
symbol use at a cost and in a manner which are financially feasible for the
Company. There is no assurance that the Company's efforts to obtain suitable
rights and licenses will be successful. Without new licenses the Company's
product line will be significantly limited in the future which may influence the
revenues and profit of the Company.
E. Year 2000
Description and Impact. Many current installed computer systems and
software may be coded to accept only two-digit entries in the date code field
and cannot distinguish 21st century dates from 20th century dates. As a result,
many software and computer systems may need to be upgraded or replaced, there is
uncertainty about the overall effect of the Year 2000 on the Internet and
therefore the Company's Internet operations. If other third parties that the
Company uses or the overall Internet should experience significant problems from
Year 2000 related issues, it could significantly affect the operation and
ability of the Company to perform business over the Internet.
Inventory, Assessment and Status of Progress. The Company has taken
steps to insure that all of the internal computer systems are compliant. The
Company has replaced its computers and software with new Year 2000 compliant
machines. The Company has not incurred material costs in the process and does
not believe that the cost of additional actions will have a material effect on
its operating results or financial condition. The current systems and products
may contain undetected errors or defects with Year 2000 date functions that may
result in material costs. In addition, the Company utilizes third-party
equipment, software, and content - including non-information technology systems,
such as security systems, building equipment, and systems with embedded
micro-controllers that may not be Year 2000 compliant.
15
<PAGE>
Third Parties. The Company has taken steps to analyze its technical
relationships and ensure that its third party suppliers, distributors, advisors,
and other entities that the Company depends on for operations are also
compliant. Not all of the Company's third party distributors have given adequate
assurances that they are or are not compliant and therefore may or may not
experience problems relating to the Year 2000 issues and potentially create
delays in distributing necessary inventory or create other unforseen problems.
Risks. Management of the Company believes it has an effective program
in place to resolve the Year 2000 issue. The Company has completed all necessary
phases of the Year 2000 program. Disruptions in the economy generally resulting
from Year 2000 issues could materially adversely affect the Company.
Failure of third-party equipment, software or content to operate
properly with regard to the Year 2000 issue could require the Company to incur
unanticipated expenses to remedy problems, which could have a material adverse
effect on its business, operating results and financial condition. If any
problems arise from third parties or from the Internet in general related to the
Year 2000 issues, the ability of the Company to respond is limited.
Additionally, the computer systems necessary to maintain the viability
of the Internet or any of the Web sites that direct consumers to the Company's
website may not be Year 2000 compliant. Computers used by customers to access
the Company's website may not be Year 2000 compliant, delaying customers'
product purchases. The Company cannot guarantee that its systems will be Year
2000 compliant or that the Year 2000 problem will not adversely affect its
business, which includes limiting or precluding customer purchases.
Contingency Plans. If a Year 2000 situation should occur in the Company
or with the Company's third party equipment, suppliers or distributors, the
Company will process the existing orders using non- Internet and computer based
methods, such as telephone confirmation, standard ground shipping done through
local offices, and manual processing of credit cards. Manufacturing would not be
effected do to the lack of microprocessors in the Company's manufacturing
equipment. The use of non-computer based systems would continue until all third
parties or the Internet solve the problems and normal business operations can
continue.
ITEM 3. PROPERTY
The Company is currently leasing a 6,000 square foot facility located
at 975 North 1430 West, Orem, Utah, pursuant to a lease expiring in 2002. The
Company believes that its manufacturing facilities are adequate for its proposed
needs through the year 2002. If additional space is needed before then, some
office functions could be moved to nearby office buildings, which are readily
available. The Company believes that its current facilities are generally
suitable and adequate to accommodate its current operations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the
ownership of the Company's Common Stock as of September 30, 1999, with respect
to: (i) each person known to the Company to be the beneficial owner of more than
five percent of the Company's Common Stock, (ii) all directors; and (iii)
directors and executive officers of the Company as a group. The notes
accompanying the information in the table below are necessary for a complete
understanding of the figures provided below. As of September 30, 1999 there were
3,778,481 post 6 to 1 reverse split shares of common stock outstanding.
16
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Ownership Beneficial Ownership of Class
- ------------------- ------------------------------------- ------------------- ---------------
<S> <C> <C> <C>
Common Daniel R. Southwick, Director(2) 820,556(3) 17%(4)
Stock 364 West 4620 North
No Par Value Provo, Utah 84604
Common Robert Joyce, Director 825,000(3) 18%(4)
Stock 4483 Hazetine Ave.
No Par Value Sherman Oaks, California 91423
Common John Pennington, Director 600,000(3) 13%(4)
Stock 1539 SE 11th St.
No Par Value Deerfield Beach Florida 33441
Common William Schmidt, Director(5) 1,316,667 31%(4)
Stock 88 N.E. 5th Avenue
No Par Value Del Ray, Florida 33483
</TABLE>
- --------
(2) Dan Southwick is a managing member of SF Investments, LLC which owns
20,556 shares of common stock of Liberty Mint, Ltd. These shares have been
attributed to Dan Southwick as part of his total shares.
(3) In 1997 Mr. Southwick (through SF Investments) was granted options to
purchase 200,000 shares at $6.00, Mr. Joyce was granted options to purchase
200,000 shares at $6.00, and Mr. Ruff was granted options to purchase 266,667
shares at $6.00. American Investment Properties was granted an option in July,
1998, to purchase 400,000 shares at $6.00. Subsequently in 1999, Mr. Southwick,
(SF Investments), Mr. Pennington, and Mr. Joyce were each granted options to
purchase 600,000 shares at $0.40.
(4) ) The Percent of Class owned by each individual reflects the percent if
all options owned by the individual listed in footnote 3 are exercised.
(5) William Schmidt is a managing member of American Investment Properties
which owns and has options to purchase 1,316,667 shares of common stock of
Liberty Mint, Ltd. These shares have been attributed to William Schmidt and also
to Ralph Muller.
17
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
<S> <C> <C> <C>
Common Larry H. Ruff 500,054 12%(4)
Stock 320 Kolob Circle
No Par Value Springville, Utah 84663
Common American Investment Properties 1,316,667 31%
Stock 88 N. E. 5th Avenue
No Par Value Del Ray Florida 33483
Common All Executive Officers and 3,167,223 52%(6)
Stock Directors as a Group
No Par Value (Five persons)
Common Ralph P. Muller 1,351,389 31%(7)
Stock 6400 North Andrews Street
Suite 200
No Par Value Fort Lauderdale, Florida 33309
</TABLE>
Changes in Control. There are currently no arrangements in place that will
result in a change in control of the Company.
ITEM 5. DIRECTORS, OFFICERS, PROMOTERS, AND CONTROL PERSONS
The directors, executive officers, control persons, and significant
employees of the Company, their respective ages, and positions with the Company
are as follows:
- ----------------
(6) The percent of class owned by all Executive Officers and Directors as a
Group reflects the percent if all options owned by the group as listed in
footnote 3 are exercised.
(7)Ralph P. Muller is the owner of American Investment Properties. He is
not involved in the management or day-to-day operations of American Investment
Properties. American Investment Properties is managed by William Schmidt to whom
the shares owned by the Company have been attributed. Because of his sole
ownership of the Company, the AIP shares have also been attributed to Mr.
Muller.
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<PAGE>
NAME AGE POSITION
- ---- --- --------
Daniel R. Southwick 47 Director & President
Robert Joyce 47 Director & Secretary
Eugene Pankratz 56 Treasurer
John Pennington 49 Director
William C. Schmidt 54 Director
Ralph P. Muller 59 Control Person
Ron Lewis 46 Significant Employee
Daniel R. Southwick, 47, has served as president and a director of the Company
since April 1999. Mr. Southwick was elected a Director in April 1999 to serve
for one year, or until his successor is elected and qualified. From September
1996 until April 1999 he served as vice-president of corporate development and a
Director for the Company. From September 1996 until June 1997, he served as
Vice-President of Corporate Development for Liberty Mint, Inc. He has been a
small business entrepreneur since 1977. Past experience includes President of
International Trade & Investments, Ltd., a placer mining company, and President
of Parkside Industries, Inc., a telecom reseller company located in Sarasota,
Florida. From 1992 to 1996, Mr. Southwick served as president of Parkside
Industries, Inc. Mr. Southwick has 8 years experience with public company
development.
Robert Joyce, 47, serves as Secretary and a Director of the Company.
Mr. Joyce was elected a Director and Secretary of the Company in April of 1999.
His current term as a Director is to serve for one year, or until his successor
is elected and qualified. Mr. Joyce was first elected a director in June of 1997
and has served as a Director continuously since that time. From June 1997 until
April 1999 he served as the senior vice-president for the Company. A 25-year
veteran of the entertainment industry, Joyce worked in the production business
with such artists as Sly & The Family Stone, David Bowie, and James Taylor among
others. Mr. Joyce wrote and implemented the SuperStar Commemorative Collector
Series marketing plan, a major product of the Company. From 1994 until 1997, Mr.
Joyce served as General Manager of Studio Instrument Rentals of Hollywood
California ("SIR"). SIR is the number one provider of rented musical equipment
in the world. From 1992 to 1994, Joyce was president and CEO of Green Suites
International, a company specializing in environmental services for the hotel
industry.
Eugene Pankratz, 56, has three and one half years public accounting
experience with We. Soria & Company in San Jose, California, including
management services for small businesses, tax return preparation, consulting and
tax planning for individuals, partnerships and corporations. He has ten years
experience in the private sector including Controller for North American
Manufacturing, a division of the Tally Corporation, Controller for Impulse
Designs, and Controller for the Priddis Group of Lindon, Utah (formerly Priddis
Music Corp.) This experience also included a period of time from May 1994 to May
1995 when he served as President and Chief Operations Officer of the Priddis
Group. From December 1995 until May of 1998, Mr. Pankratz was self employed as
an independent accountant and consultant. Mr. Pankratz has served as Controller
of Liberty Mint, Inc., a subsidiary of the Company, from June 1998 until
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<PAGE>
September of 1999 when Liberty Mint, Inc., was sold by the Company. Since April
1999 he has served as Treasurer of the Company, and since September 1999 he has
served as President of The Great Western Mint, Inc., a Subsidiary of the
Company. He attended Brigham Young University and is currently enrolled at
Thomas Edison State College where he is working on a Bachelor of Arts degree in
Business Management with an Accounting emphasis. He passed the Internal Revenue
Service Enrolled Agent's examination and is eligible to practice before the IRS.
He has served as a Director of the Lindon/Pleasant Grove Chamber of Commerce.
John Pennington, 49, has served as a Director of the Company since July
of 1998. In April, 1999 Mr. Pennington was re-elected to the Board of Directors
of the Company for a one year term, or until his successor is elected and
qualified. He also serves as President of Liberty Mint Marketing, Inc., a
subsidiary of the Company. Mr. Pennington is a graduate of the University of
Miami and has over 20 years of sales and marketing experience. Mr. Pennington
held the position of Vice President of Telesales and Services with Vacation
Break U.S.A. of Ft. Lauderdale, Florida from May 1994 until July 1998. Prior to
May of 1994 he had served as a Vice President of Sales and Marketing with
Cooperative Retirement Services and Vice President of National Accounts with
Ryder P.I.E. Nationwide. In these roles he had Senior Executive responsibilities
for sales and operations, domestically and internationally. Since January 1,
1999, Pennington has served on the board of Imperial Majesty Cruise Line and
International Water Makers. Pennington presently oversees Liberty Mint's direct
marketing efforts.
William C. Schmidt, 54, has been serving as a Director of the Company
since July of 1998. In April, 1999, he was reelected to the Board of Directors
of the Company for a one year term, or until his successor is elected and
qualified. He is a graduate of Susquehanna University with a Bachelor of Science
degree in accounting. Schmidt is a Certified Public Accountant and a member of
the American Institute of Certified Public Accountants since 1971. Schmidt then
partnered with a regional CPA firm and specialized in corporate taxes and
acquisition financing. He was vice president of special projects and chief
financial officer of Vacation Break USA, Inc. from October of 1991 until
December of 1997. From January of 1998 until the present, Schmidt has been
serving as the executive vice president of American Investment Properties
("AIP"), an investment advisory company. Mr. Schmidt is an employee of AIP, but
has no ownership interest in AIP.
Ralph P. Muller, 59, is a graduate of Widner University. Mr. Muller
retired as CEO of Vacation Break USA, Inc. in 1997. He served as CEO of Vacation
Break USA, Inc. from 1988 through 1997.
Ron Lewis, 46, is 13 credits from receiving a B.S. degree in Public
Relations. Lewis worked as an account executive (salesman) for Liberty Mint,
Inc. from June of 1988 until it was acquired by the Company in June of 1997.
Since June 1997, Lewis has worked as an account executive for the Company. He
currently works for The Great Western Mint, a subsidiary of the Company. Mr.
Lewis does not own stock of the Company.
ITEM 6. EXECUTIVE COMPENSATION
Compensation of Executives
The following table provides summary information for the years 1998,
1997 and 1996 concerning cash and non-cash compensation paid or accrued by the
Company to or on behalf of the president and the only other employees to receive
compensation in excess of $100,000.
20
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payout
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payout Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
- --------------- -------- ------------ --------- ---------------- ------------ --------------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Daniel R.(8) 1998 71,325 - - - - - -
Southwick, 1997 69,130 - - - 200,000 - -
CEO, 1996 19,000
Director
Larry Ruff 1998 83,640 - - - - - -
CEO, 1997 77,330 - - - 266,667 - -
Director 1996 72,000
Ron Lewis 1998 142.189 - - - - - -
Salesperson 1997 162,369 - - - - - -
1996 104,139
- --------------- -------- ------------ --------- ---------------- ------------ --------------- ----------- -----------------
</TABLE>
In 1997 Mr. Southwick was granted options to purchase 200,000 shares at
$6.00, Mr. Ruff was granted options to purchase 266,667 shares at $6.00. All are
vesting at the rate of one-third per year. Subsequently in 1999, Mr. Southwick
was granted options to purchase 600,000 shares at $0.40.
Compensation of Directors
Currently there is no plan to compensate Directors of the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1997, Larry Ruff , former CEO of the
Company from 1992 until April of 1999, paid expenses and purchased silver on the
Company's behalf totaling $5,846. The note bears interest at a rate of 12% per
annum. During the year ended December 31, 1998, an additional $47,000 was loaned
to the Company for expenses. Also, during the year ended December 31, 1998, the
Company paid Larry Ruff $31,182 towards the note. Accrued interest of $2,497 has
been included in the outstanding total of $24,802 as of December 31, 1998.
During the year ended December 31, 1998, three related shareholders and
former Directors of the Company, Reed, Carolyn and Christopher Call, paid
expenses on behalf of the Company and loaned the Company silver and cash for a
total loan of $212,261. Subsequent to the year ended December 31, 1998, the
Company is negotiating to repay this amount with interest at 12% over a
three-year period.
On April 1, 1997, prior to its acquisition by the Company,
Liberty Mint, Inc., secured an SBA loan through First National Bank of Layton in
the amount of $210,000. Personal guarantees were required from Larry Ruff, a
beneficial owner and former officer and Director of the Company, Howard Ruff, a
former beneficial owner, and Creed and Clarene Law. Larry and Howard Ruff
- --------
(8) Dan Southwick became CEO on April 23rd 1999, prior to this
appointment Mr. Southwick served as Senior Vice President for corporate
development.
21
<PAGE>
received no additional consideration for this guarantee. Creed and Clarene Law,
who were already shareholders of Liberty Mint, Inc., received 50,000 shares of
Liberty Mint, Inc., class A common stock for their guaranty which was only to
continue until 1998 when the loan was due to be paid. When the loan was not paid
in 1998, Creed and Clarene Law negotiated with the Company for, and were
granted, options for 200,000 shares of Liberty Mint, Ltd. at $0.40 per share
(market value at the time) for their continued guarantee of the SBA loan.
Because the options were issued at cost, they had no value and were not treated
as an expense by the Company.
During January 1999, the Company authorized the issuance of 750,000
common shares to American Investment Properties at $0.16 per share pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering in exchange for $125,000 in
debt owed to American Investment Properties by the Company. At the time of this
transaction AIP was the owner of in excess of 5% of the shares of the Company
and was an accredited investor. AIP was infusing cash into the Company in early
1999 to keep the Company from having to shut down operations. AIP agreed to take
shares of the Company's stock in exchange for the monies given to the Company to
keep it in operation.
Other than as described herein the Company is not expected to have
significant further dealing with affiliates. However, if there are such dealings
the parties will attempt to deal on terms competitive in the market and on the
same terms that either party would deal with a third person. Presently, none of
the officers and directors have any transactions which they contemplate entering
into with the Company, aside from matters described herein.
ITEM 8. DESCRIPTION OF SECURITIES
Common Stock. The Company is presently authorized to issue 25,000,000
shares of no par value Common Stock. The Company presently has 3,778,481 shares
issued and outstanding.
The holders of common stock, and of shares issuable upon exercise of
any Warrants or Options, are entitled to equal dividends and distributions, per
share, with respect to the common stock when, as and if declared by the Board of
Directors from funds legally available therefor. No holder of any shares of
common stock has a pre-emptive right to subscribe for any securities of the
Company nor are any common shares subject to redemption or convertible into
other securities of the Company. Upon liquidation, dissolution or winding up of
the Company, and after payment of creditors and preferred stockholders, if any,
the assets will be divided pro-rata on a share-for-share basis among the holders
of the shares of common stock. All shares of common stock now outstanding are
fully paid, validly issued and non-assessable. Each share of common stock is
entitled to one vote with respect to the election of any director or any other
matter upon which shareholders are required or permitted to vote. Holders of the
Company's common stock do not have cumulative voting rights, so that the holders
of more than 50% of the combined shares voting for the election of directors may
elect all of the directors, if they choose to do so and, in that event, the
holders of the remaining shares will not be able to elect any members to the
Board of Directors.
Preferred Stock. The Company is presently authorized to issue
10,000,000 shares of no par value Preferred Stock. No shares of Preferred Stock
22
<PAGE>
are currently issued and outstanding. Under the Company's Articles of
Incorporation, the Board of Directors has the power, without further action by
the holders of the Common Stock, to designate the relative rights and
preferences of the preferred stock, and issue the preferred stock in such one or
more series as designated by the Board of Directors. The designation of rights
and preferences could include preferences as to liquidation, redemption and
conversion rights, voting rights, dividends or other preferences, any of which
may be dilutive of the interest of the holders of the Common Stock or the
Preferred Stock of any other series. The issuance of Preferred Stock may have
the effect of delaying or preventing a change in control of the Company without
further shareholder action and may adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, the issuance of preferred stock could depress the market price of
the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS
In April 1997, the Company's Common Stock was approved for listing on
the OTCBB. On June 9, 1997, the Company changed it's name to Liberty Mint, Ltd.
During the third quarter of 1999 the trading symbol was changed from LIBY to
LBMN. On May 12, 1999, the Company effected a 6 to 1 reverse stock split.
Fractional shares were rounded to the nearest whole share.
The table below sets forth the high and low sales prices for the
Company's Common Stock for each quarter of 1997, 1998 and the first three
quarters of 1999. All quotes given reflect a 1 for 6 reverse split which the
Company effected on May 12, 1999. The quotations below reflect inter-dealer
prices, without retail mark- up, mark-down or commission and may not represent
actual transactions:
Quarter High Low
------- ---- ---
1997 First $0.00 $0.00
Second $0.00 $0.00
Third $17.22 $12.00
Fourth $16.68 $11.82
Quarter High Low
------- ---- ---
1998 First $15.00 $11.22
Second $14.04 $3.36
Third $6.18 $1.50
Fourth $4.86 $0.36
Quarter High Low
------- ---- ---
1999 First $2.46 $0.54
Second $12.00 $1.50
Third $5.38 $1.38
23
<PAGE>
Record Holders. As of November 1, 1999 there were approximately 250
shareholders of record holding a total of 3,778,481 shares of Common Stock. The
holders of the Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of the Common
Stock have no preemptive rights and no right to convert their Common Stock into
any other securities. There are no redemption or sinking fund provisions
applicable to the Common Stock.
Dividends. The Company has not declared any cash dividends since
inception and does not anticipate paying any dividends in the foreseeable
future. The payment of dividends is within the discretion of the Board of
Directors and will depend on the Company's earnings, capital requirements,
financial condition, and other relevant factors. There are no restrictions that
currently limit the Company's ability to pay dividends on its Common Stock other
than those generally imposed by applicable state law.
ITEM 2. LEGAL PROCEEDINGS
The Company is currently not a party to any pending material legal
proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has had no changes in or disagreements with its accountants
in its two most recent fiscal or any later interim period.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
The following is a list of all securities sold by the Company within
the last three years including, where applicable, the identity of the person who
purchased the securities, title of the securities, and the date sold are
outlined below. All shares are adjusted to reflect a 6 to 1 reverse split
effected on May 12, 1999
In March 1997, the Company issued 25,000 shares of common stock at
$0.84 per share to Gary McAdam for cash pursuant to section 4(2) of the
Securities Act of 1933 in an isolated private transaction by the Company which
did not involve a public offering. The Company made this offering based on the
following factors: (1) The issuance was an isolated private transaction by the
Company which did not involve a public offering; (2) there was only one offeree
who was issued stock for cash; (3) the offeree did not resell the stock but
continued to hold it for at least two years; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
On June 26, 1997, the Company acquired approximately 90% of Liberty
Mint, Inc.'s common stock by issuing 620,906 shares of the Company's common
stock for 7,450,864 shares of Liberty Mint, Inc.'s common stock in an isolated
transaction to a total of 21 investors pursuant to section 4(2) of the
Securities Act of 1933. The Company made this offering based on the following
factors: (1) The issuance was an isolated private transaction by the Company
which did not involve a public offering; (2) there were only twenty-one offerees
who was issued stock for stock; (3) the offerees did not resell the stock but
continued to hold it for at least two years; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.
24
<PAGE>
From July through December of 1997, the Company issued a total of 99,050 shares
of its common stock at $7.20 per share pursuant to a Private Placement
memorandum dated June 30, 1997. The Company issued the 99,050 shares of its
common stock pursuant to Rule 504 under Regulation D of the Securities Act of
1933. The Company issued the 99,050 shares to approximately 40 investors who
were given a Private Placement Memorandum and offered the opportunity to inspect
the books and records of the Company. Subsequently, from February to April of
1998, the Company issued an addition 7,750 shares of its common stock at $7.20
per share pursuant to the Private Placement memorandum dated June 30, 1997 for
the exercise of 7,750 warrants. The Company issued the 7,750 shares of its
common stock pursuant to Rule 504 under Regulation D of the Securities Act of
1933. The Company issued the 7,750 shares to 3 investors who were given a
Private Placement Memorandum and offered the opportunity to inspect the books
and records of the Company. The Company relied on the following facts in
determining that Rule 504 Regulation D was available: (a) the Company was not
subject to the reporting requirements of Section 13 or 15(d) of the Exchange
Act; (b) the Company was engaged in the manufacture and sale of minting products
and therefore was neither a development stage Company with no specific business
plan or purpose nor a Company whose plan was to merge with an unidentified
Company; (c) the aggregate offering price did not exceed $1,000,000 and (d) the
Company filed a Form D within 15 days of the first sale of the shares subject to
the offering.
In November of 1997, the Company issued 25,000 shares of common stock
at $9.00 per share to Bill Wittman, an accredited investor, for cash pursuant to
section 4(6) of the Securities Act of 1933 in a private transaction by the
Company which did not involve a public offering.
In February 1998, the Company issued 1,667 shares of common stock to
William H. Beatty and 833 shares of common stock, at $12.42 per share, to
Nicholas Butsicaris, as compensations for services rendered, pursuant to section
4(2) of the Securities Act of 1933 in an isolated private transaction by the
Company which did not involve a public offering. Mr. Beaty and Mr. Butsicaris
provided consulting services to the Company which assisted the Company in
securing the Signatures Contract with Sony. These services were valued by the
Company at $31,050, which value was agreed to by Mr. Beatty and Mr. Butsicaris.
The Company made this offering based on the following factors: (1) The issuance
was an isolated private transaction by the Company which did not involve a
public offering; (2) there were only two offerrees who were issued stock for
services rendered to the Company; (3) the offerees did not resell the stock but
have continued to hold it for twenty two months; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offerees and the Company.
On September 11, 1998, the Company issued 396 of Common Shares to
purchase 4,752 common shares of its subsidiary Liberty Mint, Inc., pursuant to
section 4(6) of the Securities Act of 1933 in a private transaction by the
Company which did not involve a public offering.
In December of 1998, the Company issued 135,834 shares of common stock
at $3.60 per share for cash to American Investment Properties ("AIP") for cash,
pursuant to section 4(6) of the Securities Act of 1933 in an isolated private
transaction by the Company which did not involve a public offering. At the time
of this transaction AIP was an accredited investor, as defined in Rule 215,
whose employee, William Schmidt, served on the Board of Directors of the
Company. The shares were sold to AIP to provide working capital for the Company
for the purpose of allowing operations of the Company to continue.
25
<PAGE>
In December 1998, the Company issued the 10,000 shares of common stock
to Donna O'Dell in exchange for 60,000 ITEX barter credits pursuant to section
4(2) of the Securities Act of 1933 in a private transaction by the Company which
did not involve a public offering. The Company guaranteed the value
of those shares to be $6.00 per share after one year. If the shares are not
valued at $6.00 per share after one year the Company committed to issuing
additional shares to Donna O'Dell to bring the total value of all shares issued
to Donna O'Dell in this transaction to $60,000.
On January 18, 1999, the Company issued 6,667 shares of common stock to
Donna O'Dell in exchange for 40,000 ITEX barter credits pursuant to section 4(2)
of the Securities Act of 1933 in a private transaction by the Company which did
not involve a public offering. The Company guaranteed the value of those shares
to be $6.00 per share after one year. If the shares are not valued at $6.00 per
share after one year the Company committed to issuing additional shares to Donna
O'Dell to bring the total value of all shares issued to Donna O'Dell in this
transaction to $40,000.
During January 1999, the Company authorized the issuance of 750,000
common shares to American Investment Properties at $0.16 per share pursuant to
section 4(2) of the Securities Act of 1933 in an isolated private transaction by
the Company which did not involve a public offering in exchange for $125,000 in
debt owed to American Investment Properties by the Company. At the time of this
transaction, AIP was the owner of in excess of 5% or the shares of the Company
and was an accredited investor. AIP was infusing cash into the Company in early
1999 to keep the Company from having to shut down operations. AIP agreed to take
shares of the Company's stock in exchange for the monies given to the Company to
keep it in operation.
On April 6, 1999, the Company issued a total of 2,000,000 shares of its
common stock at $0.40 per share pursuant to a Private Placement memorandum and
offered to allow the investors to inspect the books and records of the Company.
The Company issued the 2,000,000 shares of its common stock pursuant to Rule 504
under Regulation D of the Securities Act of 1933. The Company issued the
2,000,000 shares to 12 accredited investors who were given a Private Placement
Memorandum. The Company relied on the following facts in determining that Rule
504 Regulation D was available: (a) the Company was not subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act; (b) the Company was
engaged in the manufacture and sale of minting products and therefore was
neither a development stage Company with no specific business plan or purpose
nor a Company whose plan was to merge with an unidentified Company; (c) the
aggregate offering price did not exceed $1,000,000 and (d) the Company filed a
Form D within 15 days of the first sale of the shares subject to the offering.
During May 1999, John Pennington, a Director of the Company exercised
options to purchase 5,000 shares of the Company's common stock at $.40 per share
for total proceeds of $2,000 pursuant to section 4(2) of the Securities Act of
1933 in an isolated private transaction by the Company which did not involve a
public offering.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
An officer or director of the Corporation shall not be personally
liable to the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as an officer or director, except for liability to the
Corporation or to its shareholders for monetary damages for (i) acts of
omissions which involve intentional misconduct, fraud or knowing violation of
law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes.
26
<PAGE>
ny repeal or modification of the indemnification rights granted to
officers and directors of the corporation shall be prospective only, and shall
not adversely affect any limitation of the personal liability of an officer or
director of the Company for acts or omissions prior to the repeal or
modification of the right of indemnification.
PART F/S
The Company's financial statements for the fiscal year ended December 31, 1998
and the interim reports for June 30, 1999 are attached hereto as F-1 through
F-35.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
27
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Unaudited Interim Financial Reports for the period ending September 30, 1999
Balance Sheet................................................................F-2
Statements of Operations............................................. .......F-3
Statements of Cash Flows................................................F-4, F-5
Notes to Interim Financial Statements...................................F-6, F-7
Audited Financial Reports for Year ending December 31, 1998
Cover Page...................................................................
Table of Contents............................................................F-8
Letter From Auditor..........................................................F-9
Balance Sheet.........................................................F-10, F-11
Statements of Operations....................................................F-12
Statement of Stockholder's Equity....................................F-13 - F-15
Statements of Cash Flows..............................................F-16, F-17
Notes to Financial Statements........................................F-18 - F-35
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
F-1
<PAGE>
Liberty Mint Ltd. and Subsidiaries
Consolidated Unaudited Condensed Detailed Balance Sheets
For Nine Months Ending September 30, 1999
ASSETS
Cash 10,459
A/R 304,334
Allow for Doubtful (156,372)
-----------
Net Accounts Receivable $ 147,962
Inventories 68,663
Other Current Assets -
------------
Total Current Assets 227,084
Net Fixed Assets 23,147
Other Assets 15,600
------------
TOTAL ASSETS $ 265,831
============
LIABILITIES
Accounts Payable 2,498
Factoring Advance 106,493
Contingency on Sale of Subsidiary 374,406
Wittman Note for Inventory 246,478
Short Term Notes Payable 11,160
Contingency on Stock Guarantee 42,500
Customer Deposits/Prepayments 163,027
Other Current Liabilities 34,903
------------
Total Current Liabilities 981,465
------------
SBA Loan - Layton Bank 135,798
------------
Total Long-Term Liabilities 135,798
------------
TOTAL LIABILITIES 1,117,263
------------
SHAREHOLDERS EQUITY
Preferred stock no par value:
10,000,000 shares authorized;
no shares issued -
Common stock no par value;
50,000,000 shares authorized;
3,721,981 shares issued 2,710,126
Paid in Capital - Beneficial Conversion of NP 133,333
Accumulated deficit (3,396,287)
Notes Receivable-Stockholders (298,604)
-------------
TOTAL STOCKHOLDER'S EQUITY (851,433)
-------------
TOTAL LIABILITIES AND EQUITY $ 265,831
=============
Note #1 During the Annual Audit, a group of inventory items were identified as
potentially obsolete, and $150,000 was accrued for in 1998. During the Second
quarter of 1999, these items were then reviewed item by item, and the obsolete
items were physically removed from inventory, written off and disposed of. The
reserve was used to cover most of this write off.
F-2
<PAGE>
Liberty Mint Ltd. and Subsidiaries
Consolidated Unaudited Condensed Statements of Operations
For Nine Months Ending September 30, 1999 and 1998
Nine Months Nine Months
Ended Ended
September 30, September 30,
1999 1998
REVENUE
Total Sales $ 153,262 $ 90,977
Less: Cost of Goods Sold 69,160 63,719
------------- ------------
GROSS PROFIT 84,102 27,258
OPERATING EXPENSES
Selling Expense 289,163 211,543
Bad dept expense 2,331,112 -
General and Administrative 81,965 -
------------- ------------
TOTAL OPERATING EXPENSE 2,702,240 211,543
------------- ------------
NET OPERATING INCOME (LOSS) (2,618,138) (184,285)
TOTAL OTHER INCOME AND EXPENSE 134,991 -
------------- ------------
NET INCOME (LOSS) BEFORE TAXES $ (2,753,130) $ (184,285)
DISCONTINUED OPERATIONS
(Loss) From operation of discontinued
minting & Foundry Subsidiary $ (643,088) (372,344)
------------- ------------
TOTAL LOSS (3,396,217) (556,629)
============= ============
LOSS PER COMMON SHARE
Continuing operations (1.21) (0.23)
Discontinued Operations (0.28) (0.47)
------------- ------------
Loss per Common Share (1.49) (0.70)
F-3
<PAGE>
<TABLE>
Liberty Mint Ltd. and Subsidiaries
Consolidated Unaudited Condensed Statements of Cash Flows (continued)
For Nine Months Ending September 30, 1999 and 1998
<CAPTION>
------------------ ---------------
1999 Q3 1998 Q3
Y-T-D Y-T-D
------------------ ---------------
<S> <C> <C>
Cash Flows Provided by Operating Activities
Net Loss $ (3,396,217) $ (556,629)
------------- -------------
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and Amortization 34,232 35,902
Beneficial Conversion of Note Payable 133,333 -
Loss from Sale of Subsidiary (105,333) -
Non-cash expenses - 41,403
Bad debt expense - 22,554
Reserve for obsolete inventory (150,000) -
Changes in assets and liabilities:
(Increase) in accounts receivable 23,780 (90,214)
(Increase) decrease in inventory 331,461 107,401
(Increase) decrease in prepaid in
prepaid expenses 41,694 (50,204)
Decrease in receivable from subsidary 2,331,112 -
Increase (decrease) in accounts payable (2,498) (25,974)
Increase (decrease) in inventory liabilities - (46,295)
Increase (decrease) in factoring advances 101,763 99,934
Increase (decrease) for sculpture
repurchase - -
Increase (decrease) in accrued expenses - 364,959
Increase (decrease) in customer deposits (244,069) (243,205)
------------- ------------
Total Adjustments 2,495,475 216,261
------------- ------------
Net Cash Provided (Used) by Operating
Activities (900,742) (340,368)
------------- ------------
Cash Flows Provided by Investing Activities:
(Purchases)/ Sale of property and equipment - 8,170
Purchases of Licenses (15,600) -
Payment of refundable deposits - -
(Purchase) sale of US treasury bonds, net 4,857 41,654
Issuance (receipt) from notes receivable - (74,398)
------------- ------------
Net Cash (Used) by Investing Activities (10,743) (24,574)
------------- ------------
</TABLE>
F-4
<PAGE>
<TABLE>
Liberty Mint Ltd. and Subsidiaries
Consolidated Unaudited Condensed Statements of Cash Flows (continued)
For Nine Months Ending September 30, 1999 and 1998
<CAPTION>
1999 Q3 1998 Q3
Y-T-D Y-T-D
--------------- --------------
<S> <C> <C>
Cash Flows Provided by Financing Activities:
Payments on line of credit - -
Proceeds from notes payable - related party (190,585) 305,859
Payments on note payable (25,396) 16,568
(Decrease) in capital lease obligations - (8,250)
Proceeds from common stock Issuance 937,400 31,764
Contingency on Stock Guarantee 42,500 -
Purchase of subsidiary stock - (8,078)
Contingency on Sale of Subsidiary 374,406 -
Notes Receivable Stockholders (298,604) -
Stock Offering Cost - -
--------------- -------------
Net Cash Provided by Financing Activities 839,721 304,727
--------------- -------------
Net Increase (Decrease) in Cash and Cash
Equivalents (71,764) (60,214)
Cash and Cash Equivalents at Beginning
of Period 82,223 82,815
--------------- -------------
Cash and Cash Equivalents at End of Period 10,459 22,601
--------------- -------------
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
Notes to consolidated financial statements (Continued)
Liberty Mint, Ltd. and subsidiaries
unaudited
September 30, 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at
September 30, 1999, the results of operations for the nine month periods ended
September 30,1999 and 1998, and cash flows for the nine months ended September
30, 1999 and 1998. The results for the period ended September 30, 1999, are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 1999.
NOTE B - EARNINGS (LOSS) PER SHARE
The Following represents the calculation of earnings (loss) per share:
For the nine months ended
September 30, 1999 September 30, 1998
Net income from Continuing Operations $ (2,753,130.00) $ (184,285.00)
(Loss) From operation of discontinued
minting & foundry subsidiary $ (643,088.00) $ (372,344.00)
---------------------------------------
Total Net Income (Loss) $ (3,396,217.00) $ (556,629.00)
=======================================
Weighted average number of
Common Shares 2,278,974 792,225
Loss per common share
Continuing Operations $ (1.21) $ (0.23)
Discontinued Operations $ (0.28) $ (0.47)
---------------------------------------
Loss per Common Share $ (1.49) $ (0.70)
=======================================
NOTE C
During September 1999, the Company discontinued Liberty Mint, Inc., its Minting
& Foundry operation, by selling the subsidiary to an unrelated party for the
amount of $25. All revenues and expenses associated with this business have been
netted and reclassified as discontinued operations on the income statement for
all periods presented. Revenue for the years ended Sept 30, 1999 and Sept 30,
1998 relating to these operations were $4,021,175 and $2,940,630, respectively.
F-6
<PAGE>
Notes to consolidated financial statements (Continued)
Liberty Mint, Ltd. and subsidiaries
unaudited
September 30, 1999
NOTE D
The Terms of the Sale of Liberty Mint, Inc. to Calbear Gas are as follows: The
Price was $25.00 paid in cash. Liberty Mint, LTD has accepted certain fiduciary
responsibilities, including 1) Unpaid federal and state payroll taxes, and 2)
The refund of monies paid to Liberty Mint, Inc. for silver bullion which had not
been delivered, as of the date of sale. These responsibilities are estimated at
$374,406 which were set up as a Contingency on the Sale of Subsidiary. The
Interim financial statements have been prepared in accordance with APB 30,
paragraphs 8 and 9.
NOTE E
The terms of the Wittmann Note for Inventory of $246,478 are as follows:
The Note is for the principle amount of $200,000, bearing interest at the rate
of 12% per annum. It was entered into on November 21, 1997 and is payable in
full on November 18, 2000. At the option of the note holder, principle and
accrued interest are convertible to restricted common stock of Liberty Mint,
LTD., at the rate of 60% of the closing bid on the day prior to conversion.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
F-7
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
PRITCHETT, SILER & HARDY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
PAGE
-- Independent Auditor's Report F-91
-- Consolidated Balance Sheets, December 31,
1998 and 1997 F-10, F-11
-- Consolidated Statements of Operations,
for the years ended December 31, 1998
and 1997 F-12
-- Consolidated Statement of Stockholders'
(Deficit) for the years ended
December 31, 1998 and 1997 F-13 - F-15
-- Consolidated Statements of Cash Flows,
for the years ended December 31, 1998
and 1997 F-16, F-17
-- Notes to Consolidated Financial Statements F-18 - F-35
F-8
<PAGE>
[Letterhead of PRITCHETT, SILER & HARDY, P.C.]
INDEPENDENT AUDITOR'S REPORT
Board of Directors
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
Provo, Utah
We have audited the accompanying consolidated balance sheets of Liberty Mint,
Ltd. (formerly Hana Acquisitions, Inc.) and Subsidiary as of December 31, 1998
and 1997, and the related consolidated statements of operations, stockholders'
(deficit) and cash flows for the years ended December 31, 1998 and 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Liberty Mint Ltd.
(formerly Hana Acquisitions, Inc.) and Subsidiary as of December 31, 1998 and
1997 and the consolidated results of their operations and their cash flows for
the years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has current liabilities in excess of current assets and
has a stockholders' (deficit), raising substantial doubt about its ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
PRITCHETT, SILER & HARDY, P.C.
/s/ Pritchett, Siler & Hardy
April 26, 1999
Salt Lake City, Utah
F-9
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
December 31,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 82,223 $ 82,815
U.S. Treasury bonds, trading 4,857 11,067
Accounts receivable, less allowance for doubtful
accounts of $168,609 and $49,022 171,743 270,146
Inventory 250,124 417,083
Prepaid expenses 34,198 110,812
Current portion of notes receivable - 13,939
---------- -----------
Total Current Assets 543,145 905,862
---------- -----------
PROPERTY AND EQUIPMENT, net 94,804 135,569
---------- -----------
OTHER ASSETS:
Goodwill, net- 176,763
Other assets 22,581 22,714
---------- -----------
Total Other Assets 22,581 199,477
---------- -----------
$ 660,530 $ 1,240,908
---------- -----------
</TABLE>
[Continued]
F-10
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED BALANCE SHEETS
[Continued]
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
<CAPTION>
December 31,
1998 1997
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Inventory liabilities $ - $ 51,917
Accounts payable 406,763 306,522
Factoring advances 4,730 85,095
Accrued expenses 440,290 177,858
Allowance for sculpture repurchases 100,000 100,000
Customer deposits 407,206 442,566
Notes payable - related party 437,063 226,032
Current portion of notes payable 27,932 28,543
Current portion of capital lease obligation 21,641 9,206
---------- -----------
Total Current Liabilities 1,845,625 1,427,739
LONG-TERM OBLIGATIONS:
Notes payable, less current portion 155,824 183,756
Capital lease obligation, less current portion 40,294 36,826
---------- -----------
Total Long-Term Obligations 196,118 220,582
---------- -----------
Total Liabilities 2,041,743 1,648,321
-------- ---------
COMMITMENTS AND CONTINGENCIES
[See Note 17] - -
CLASS A PREFERRED STOCK OF SUBSIDIARY:
No par value, 2,000,000 shares authorized,
469,978 and 469,978 shares issued
and outstanding 159,792 159,792
---------- -----------
STOCKHOLDERS' (DEFICIT):
Preferred Stock, no par value, 10,000 shares
authorized, no shares issued and outstanding - -
Common stock, no par value, 25,000,000
shares authorized, 943,103 and 786,623
shares issued and outstanding 3,798,277 3,051,552
Retained (deficit) (5,339,282) (3,618,757)
---------- -----------
Total Stockholders' (Deficit) (1,541,005) (567,205)
---------- -----------
$ 660,530 $ 1,240,908
---------- -----------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-11
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the Years Ended
December 31,
--------------------------
1998 1997
------------- ------------
<S> <C> <C>
SALES, net of returns and discounts $ 4,430,950 $ 3,022,721
COST OF GOODS SOLD 3,750,357 2,279,066
------------- ------------
GROSS PROFIT 680,593 743,655
------------- ------------
OPERATING EXPENSES:
Selling expense 990,296 1,092,066
General and administrative 1,287,765 1,383,919
Other operating expense 66,698 132,594
Write-off of notes receivable - related party - 229,228
--------------- -------------
Total Operating Expenses 2,344,759 2,837,807
--------------- -------------
LOSS FROM OPERATIONS (1,664,166) (2,094,152)
--------------- -------------
OTHER INCOME (EXPENSE):
Interest expense (89,312) (55,424)
Interest and other income 33,080 95,979
Unrealized gain (loss) on
trading securities (127) 85
--------------- -------------
Total Other Income (Expense) (56,359) 40,640
--------------- -------------
LOSS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (1,720,525) (2,053,512)
CURRENT TAX EXPENSE -
DEFERRED TAX EXPENSE -
--------------- -------------
NET LOSS $ (1,720,525) $ (2,053,512)
--------------- -------------
LOSS PER COMMOM SHARE $ (2.15) $ (4.75)
---------------- --------------
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-12
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, and 1997
<CAPTION>
Class A
Preferred Stock of Subsidiary Preferred Stock Common Stock
Accumulated
Shares Amount Shares Amount Shares Amount (Deficit)
---------- ---------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 469,978 $ 159,792 - $ - 16,667 200 $ (200)
$
Issuance of 25,000 shares common stock
for cash at $0.84 per share, March 1997 - - - - 25,000 21,000 -
Issuance of 620,906 shares common stock
to purchase a 90% interest in Liberty
Mint, Inc., June 1997 - - - - 620,906 2,056,596 (1,565,045)
Issuance of 99,050 shares common stock
in a 504D offering for cash at $7.20
per share, June 1997 - - - - 99,050 713,162 -
Issuance of 25,000 shares common stock
for cash at $9.00 per share, November 1997 - - - - 25,000 225,000 -
</TABLE>
[Continued]
F-13
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, and 1997
[Continued]
<CAPTION>
Class A
Preferred Stock of Subsidiary Preferred Stock Common Stock
Accumulated
Shares Amount Shares Amount Shares Amount (Deficit)
---------- ---------- ---------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Repurchase of 13,725 shares of Liberty
Mint, Inc. at $2.04 per share, December
1997 - - - - - (28,000) -
Compensation for stock options granted - - - - - 63,594 -
Net loss for the year ended December 31,
1997 - - - - - - (2,053,512)
---------- ---------- ---------- ----------- --------- ---------- -----------
BALANCE, December 31, 1997 - $ - 469,978 $ 159,792 786,623 3,051,552 $(3,618,757)
---------- ---------- ---------- ----------- --------- ---------- -----------
Issuance of 2,500 shares common stock
for services at $12.42 per share,
February 1998 - - - - 2,500 31,050 -
Issuance of 7,750 shares common stock
in a 504D offering for cash at $7.20
per share, April 1998 - - - - 7,750 55,800 -
Issuance of 396 shares common stock
to purchase 4,752 shares of Liberty
Mint, Inc. at $.51 per share,
November 1998 - - - - 396 203 -
[Continued]
</TABLE>
F-14
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, and 1997
[Continued]
<CAPTION>
Class A
Preferred Stock of Subsidiary Preferred Stock Common Stock
Accumulated
Shares Amount Shares Amount Shares Amount (Deficit)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of 135,834 shares common stock
for cash at $3.60 per share, December
1998 - - - - 135,834 489,000 -
Issuance of 10,000 shares common stock
for services at $6.00 per share, December
1998 - - - - 10,000 60,000 -
Repurchase of 3,960 shares of Liberty
Mint, Inc. at $2.04 per share, December
1998 - - - - - (8,078) -
Compensation for stock options granted - - - - - 182,344 -
Net loss for the year ended December 31,
1998 - - - - - - (1,720,525)
----------- ----------- ----------- ----------- -------- ---------- ----------
BALANCE, December 31, 1998 - - 469,978 $ 159,792 943,103 3,798,277 $(5,339,282)
----------- ----------- ----------- ----------- -------- ---------- ----------
</TABLE>
The accompanying notes are an
integral part of this financial statement.
F-15
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
For the Years Ended
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows Provided by Operating Activities:
Net loss (1,720,525) $ (2,053,512)
----------- -----------
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 250,461 242,853
Non-cash expenses 121,386 361,279
Additional compensation expense recorded
in accordance with APB Opinion No. 25 118,750 63,594
Bad debt expense 118,075 109,880
Reserve for obsolete inventory - 150,000
Changes in assets and liabilities:
(Increase) in accounts receivable (19,672) (213,048)
(Increase) decrease in inventory 136,959 (395,349)
(Increase) decrease in prepaid expenses 76,614 (22,067)
Increase in accounts payable 100,241 60,078
(Decrease) in inventory liabilities (51,917) (20,852)
Increase (decrease) in factoring advances (80,365) 85,095
Increase in allowance for sculpture repurchases - 100,000
Increase in accrued expenses 262,432 59,374
Increase (decrease) in customer deposits (35,360) 212,098
----------- -----------
Total Adjustments 997,604 792,935
----------- -----------
Net Cash (Used) by Operating Activities (722,921) (1,260,577)
----------- -----------
Cash Flows Provided by Investing Activities:
Purchases of property and equipment (63,063) (66,493)
Payment of refundable deposits - (1,285)
(Purchase) sale of US treasury bonds, net 6,210 (11,067)
Issuance (receipt) from notes receivable 13,939 (13,939)
----------- -----------
Net Cash (Used) by Investing Activities (42,914) (92,784)
----------- -----------
Cash Flows Provided by Financing Activities:
Payments on line of credit - (260,000)
Proceeds from notes payable - related party 437,063 440,513
Payments on note payable (219,542) -
Payments on capital lease obligations (11,000) (16,344)
Proceeds from common stock Issuances 544,800 1,234,162
Purchase of subsidiary stock (8,078) (28,000)
Stock Offering Cost - (58,182)
----------- -----------
Net Cash Provided by Financing Activities 743,243 1,312,149
----------- -----------
</TABLE>
[Continued]
F-16
<PAGE>
<TABLE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
[Continued]
<CAPTION>
For the Years Ended
December 31,
------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net Increase (Decrease) in Cash and Cash Equivalents $ (592) $ (41,212)
Cash and Cash Equivalents at Beginning of Period 82,815 124,027
----------- -----------
Cash and Cash Equivalents at End of Period $ 82,223 $ 82,815
============ ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 16,160 $ 16,920
Income taxes $ - $ -
</TABLE>
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
For the year ended December 31, 1998:
The Company entered into a capital lease for equipment valued at
$26,903.
The Company issued a total of 12,500 shares of common stock in exchange
for services rendered, valued at $91,050.
For the year ended December 31, 1997:
The Company entered into a capital lease for equipment valued at
$46,032.
The Company wrote-off notes receivable and corresponding accrued
interest, for service agreements valued at $229,228, as bad debt; due
to the value of services being valued at $0 as of December 31, 1997.
The Company set up a $100,000 reserve for sculpture repurchases.
The accompanying notes are an integral part of
these financial statements.
F-17
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business and Basis of Presentation - The consolidated financial statements
include the accounts of Liberty Mint, LTD. (a Colorado corporation
incorporated March 13, 1990, formerly Hana Acquisitions, Inc., a shell
entity with no operations) [Parent], which is engaged in the manufacturing
and marketing of precious metal coins, medallions, and other collectibles
through its 90% owned subsidiary Liberty Mint, Inc. (a Utah Corporation
Incorporated March 1, 1989) [Subsidiary]. The Company's principal markets
are geographically disbursed throughout the United States. The Subsidiary
also had foreign sales of approximately $58,436 and $6,476 for the years
ended December 31, 1998 and 1997, respectively.
Consolidation - On June 23, 1997, the Subsidiary acquired all of the
outstanding stock of Liberty Mint Marketing, Inc. (A Nevada Corporation
incorporated February 13, 1997) by issuing two shares of the Subsidiary's
common stock for one share of Liberty Mint Marketing, Inc.'s common stock
and Liberty Mint Marketing. Inc. (A Nevada Corporation) was effectively
dissolved. On June 24, 1997, the Parent acquired a majority interest
(approximately 90%) of the Subsidiary's common stock by issuing 620,906
shares of the Parent's common stock for 7,450,864 shares of the
Subsidiary's common stock. The aquisition was accounted for as a
recapitalization of the Subsidiary as the sharholders of the Subsidiary
controlled the combined Company after the acquisition. There was no
adjustment to the carrying values of the assets or liabilities of the
Parent or Subsidiary as a result of the recapitalization. The merger has
been accounted for as a reverse merger; accordingly, the Subsidiary is
treated as the purchaser in the transaction. During 1997, the Parent
purchased an additional 82,353 shares of the Subsidiary's common stock for
$28,000. Also, during 1998, the Parent purchased an additional 28,510
shares of the Subsidiary's common stock for $8,078 in cash and by issuing
396 shares of its common stock at $.34 per share. During 1998, the Company
incorporated the wholly owned subsidiary Liberty Mint Marketing, Inc. (a
Utah corporation). The consolidated financial statements include the
accounts of the Parent and the Subsidiary. All significant intercompany
transactions between Parent and Subsidiary have been eliminated in
consolidation.
Minority Interest - The Parent owns a 90% interest in the Subsidiary
Liberty Mint, Inc. No minority interest has been recorded as the losses
applicable to minority interest on the Subsidiary exceed the minority
interest in the equity capital of the Subsidiary, in accordance with
Accounting Research Bulletin 51 paragraph 15, and as the Subsidiary's
liabilities exceed assets and the Company has experienced losses from the
date of the merger.
U.S. Treasury Bonds - The Company accounts for investments in debt and
equity securities in accordance with Statement of Financial Accounting
Standard (SFAS) 115, "Accounting for Certain Investments in Debt and Equity
Securities". Under SFAS 115 the Company's treasury bonds (debt securities)
have been classified as trading securities and are recorded at fair market
value (See Note 4).
Accounts Receivable - The Company factors their accounts receivable with a
financial institution at 85% with full recourse. During the years ended
December 31, 1998 and 1997, the Company received $704,623 and $123,803,
respectively, from factoring accounts receivable. At December 31, 1998 and
1997, $4,730 and $85,095, respectively, have been received from factoring
accounts receivable and are presented as a liability as the underlying
accounts receivable have not been collected.
F-18
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Inventories - Inventories at December 31, 1998 and 1997, consist of silver,
gold, other metals, and supplies. Silver and gold inventories are stated at
market value. Other metals, and supplies are stated at the lower of cost or
market using the first-in, first-out method (See Note 6).
Income Taxes - The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes." This statement requires an asset and liability approach for
accounting for income taxes (See Note 12).
Advertising Expense - Advertising costs are expensed as incurred.
Advertising expense amounted to $159,096 and $142,334 for the years ended
December 31, 1998 and 1997, respectively.
Property and Equipment - Property and equipment are stated at cost.
Expenditures for repairs and maintenance are charged to operating expense
as incurred. Expenditures for additions and betterments that extend the
useful lives of property and equipment are capitalized, upon being placed
in service. When assets are sold or otherwise disposed of, the cost and
related accumulated depreciation or amortization are removed from the
accounts and any resulting gain or loss is included in operations.
Depreciation - Depreciation of equipment is computed using the
straight-line method over the estimated useful lives of the assets ranging
from three to ten years. Leasehold improvements are amortized over the
lease period or the estimated useful life of the improvements, whichever is
less.
Customer Silver Held on Account - Inventories held for customers on account
are recorded as liabilities at market value (See Note 2, 6 and 17).
Allowance for Sculpture Repurchases - The Company provides an allowance for
sculptures purchased by customers, which may be repurchased from the
customer under certain circumstances where the Company has an unconditional
repurchase agreement with the Customer. The amount of the allowance is
based upon probable future returns that can be reasonably estimated (See
Note 17).
Loss Per Share - Effective for the year ended December 31, 1997, the
Company adopted Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share," which requires the Company to present basic earnings
(loss) per share and dilutive earnings per share when the effect is
dilutive, instead of simple and fully diluted earnings per share. The
computation of loss per share is based on the weighted average number of
shares outstanding during the period presented. There was no effect on the
financial statements for the change in accounting principle (See Note 11).
Cash and Cash Equivalents - For purposes of the statement of cash flows,
the Company considers all highly liquid debt investments purchased with a
maturity of three months or less to be cash equivalents.
F-19
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Stock Based Compensation - The Company accounts for its stock based
compensation in accordance with Statement of Financial Accounting Standard
123 "Accounting for Stock-Based Compensation". This statement establishes
an accounting method based on the fair value of equity instruments awarded
to employees as compensation. However, companies are permitted to continue
applying previous accounting standards in the determination of net income
with disclosure in the notes to the financial statements of the differences
between previous accounting measurements and those formulated by the new
accounting standard. The Company has adopted the disclosure only provisions
of SFAS No. 123, accordingly, the Company has elected to determine net
income using previous accounting standards.
Reclassifications - The financial statements for all years prior to
December 31, 1998 have been reclassified to conform to the headings and
classifications used in the December 31, 1998 financial statements.
Restatement - The financial statements for all periods presented have been
restated to reflect the 6 to 1 reverse stock split subsequent to the year
ended December 31, 1998 (See Note 20).
Revenue Recognition - Revenue is recognized when the product is shipped.
Preferred Stock of Subsidiary - Class A preferred stock has preference over
all shares of common stock of the Subsidiary in the event of liquidation,
such that the holders of preferred stock receive by way of liquidating
distributions the value of their initial investment, plus accumulated
dividends with the balance of any Subsidiary assets to be divided pro rata
among the holders of common stock. Preferred stock also has voting rights
on par with common stock.
Cumulative preferred dividends began to accrue on October 10, 1996 at the
rate of 10 percent annual interest, based on the total purchase price of
the preferred stock; such dividends were to be paid in monthly payments
beginning April 10, 1997, as follows: (a) dividend obligations accumulated
on the purchase price from the period October 10, 1996 to April 10,1997
shall be payable in equal monthly installments over an 18 month period
beginning April 10, 1997 and ending October 10, 1998 (said accumulated
dividends shall not be subject to further interest charges after April 10,
1997) and (b) dividends accruing and owed on the purchase price after April
10, 1997 will be paid monthly beginning April 10, 1997. At December 31,
1998 and 1997 the Company had $19,974 and $3,994 in accrued dividends
payable. During 1998 and 1997, the Company paid $0 and $15,979 in dividends
and $0 and $0 in accrued interest, respectively.
Recently Enacted Accounting Standards - Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income", SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information", SFAS
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits", SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", and SFAS No. 134, "Accounting for Mortgage-Backed
Securities..." were recently issued. These accounting standards have no
current applicability to the Company or their effect on the financial
statements would not have been significant.
F-20
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [Continued]
Accounting Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimated by management.
Goodwill - Goodwill represents the excess cost of the purchasing Liberty
Mint Marketng, Inc. (A Nevada Corporation) over the fair market value of
the assets at the date of acquisition, and is being amortized on the
straight-line method of 1 year. Amortization expenses charged to operations
for 1998 and 1997 was $176,763 and $132,573 [See Note 14].
NOTE 2 - GOING CONCERN
The Company has incurred significant losses during 1998 and 1997, has
current liabilities in excess of current assets of $1,302,480 at December
31, 1998, and has a stockholders' (deficit) of $1,541,005. As of December
31, 1998 and 1997, the Company held customer deposits in the amount of
$407,206 and $442,566, respectively, and has taken silver and gold for
various commitments to produce product. As of December 31, 1998 and 1997,
the Company had silver commitments in excess of the amount of silver on
hand in the amount of $247,893 and $16,463. As of December 31, 1998, the
company does not have the ability to produce the prepaid product, committed
product, or return the silver or gold without additional funds provided
through loans and/or through additional sales of its common stock (See Note
17). These items raise substantial doubt about the ability of the Company
to continue as a going concern.
Management's plans in regards to these matters are as follows:
Management is proposing to raise necessary additional funds not
provided by operations through loans and/or through additional sales of
its common stock. Management believes that it can improve operations,
refinance debt, convert debt to equity, and reduce expenses. Management
believes that a combination of these efforts will be necessary to
continue as a going concern.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The financial statements do not
include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities
that might be necessary should the Company be unable to obtain additional
financing, establish profitable operations or realize its plans.
NOTE 3 - OTHER ASSETS
Other assets consist of loan guarantee fees and refundable deposits on
capital leases. The loan guarantee fees at December 31, 1997 have a cost
basis of $24,000 and are being amortized over the term of the loan expiring
in 1998. During the year ended December 31, 1998, the loan guarantee fees
were fully expensed and both the asset and accumulated amortization were
removed from the books. Amortization expense for the years ended December
31, 1998 and 1997 amounted to $22,714 and $2,571, respectively. The
refundable deposits are being carried at cost of $7,499 and $1,285 for the
years ended December 31, 1998 and 1997, respectively.
F-21
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - OTHER ASSETS [Continued]
The Company has entered into agreements to produce silver products for the
contracted spot price of silver at the date of the agreement. The Company
is exposed to the risk of fluctuation in the market price of silver at the
date production begins versus the contracted spot price. At December 31,
1998, the market price of silver was less than the contract price, leaving
the Company a $15,082 positive fluctuation that has been included in other
assets.
NOTE 4 - U.S. TREASURY BONDS
The following is a summary of the Company's investment in 22 US treasury
bonds as trading securities at December 31, 1998:
Date Maturity Market
Acquired Date Cost Value
---------- ---------- ---------- ----------
12/31/98 8/15/2027 $ 4,984 $ 4,857
---------- ----------
$ 4,984 $ 4,857
----------- -----------
The Company has purchased these U.S. Treasury bonds with the intention to
be sold with the sculptures at cost. During December 31, 1998 and 1997, the
Company recognized an unrealized gain (loss) of $(127) and $85,
respectively, and included these amounts in continuing operations.
NOTE 5 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment - at cost, less
accumulated depreciation and amortization as of December 31, 1998 and 1997:
1998 1997
----------- ----------
Production and refining equipment $ 348,619 $ 346,126
Office equipment 176,747 146,307
Leasehold improvements 30,885 30,885
Coin dies 47,768 47,768
------------- -----------
604,019 571,086
Less: accumulated depreciation
and amortization (509,215) (435,517)
------------- ----------
94,804 $ 135,569
-------------- ----------
Of the office equipment, $72,935 in 1998 and $46,032 in 1997 is financed
with capital leases (See Note 10) with related accumulated depreciation of
$4,097 and $0, respectively. Depreciation and amortization expense for the
years ended December 31, 1998 and 1997, amounted to $73,698 and $107,709,
respectively.
F-22
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - INVENTORIES
<TABLE>
Inventories consist of the following at December 31:
<CAPTION>
1998 1997
------------------- -------------------
Troy Troy
Ounces Value Ounces Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Total silver inventory 12,396 62,475 49,186 308,886
Silver on lease - - (3,546) (22,269)
Silver held on account (60,323) (304,027) (45,755) (287,341)
---------- ---------- ---------- ----------
Net silver liability (47,927) (241,552) (115) (724)
---------- ---------- ---------- ----------
Total gold inventory 72 20,749 12 3,519
Gold held on account (94) (27,090) (66) (19,258)
---------- ---------- ---------- ----------
Net gold liability (22) (6,341) (54) (15,739)
---------- ---------- ---------- ----------
Combined net silver and
gold liability (47,949) (247,893) (169) (16,463)
---------- ---------- ---------- ----------
Other inventories:
Consignment inventory - 7,307
Other metals inventory 178,641 60,546
Accessories inventory 100,828 163,425
Sculptures finished goods 37,431 23,400
Reserve for obsolescence (150,000) (150,000)
---------- ----------
Total other inventories 166,900 104,678
---------- ----------
Total inventories 250,124 417,083
----------- -----------
</TABLE>
At December 31, 1998 and 1997, the Company is exposed to the risk of
fluctuation in the market price of silver and gold on its uncovered
liability of 47,927 and 115 troy ounces of silver and 22 and 54 troy ounces
of gold, respectively. Gains and losses from the fluctuation in the market
price of precious metals are recognized in the cost of goods sold account
as they occur.
The Company has applied silver and gold inventories toward silver and gold
liabilities in the following order of preference:
Silver Inventory Gold Inventory
------------- -------------
Silver on lease Gold held on account
Silver held on account Customer deposits
Customer deposits
At December 31, 1998 and 1997, the Company's gold and silver inventories
are not adequate to meet silver on lease, inventories held on account, and
customer deposits.
F-23
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - NOTES RECEIVABLE - RELATED PARTY
On March 1, 1989, the Subsidiary assumed all the assets and liabilities of
Liberty Mint (a general partnership); liabilities exceeded the fair market
value of assets by $848,810 at that date. In consideration, the Subsidiary
accepted notes receivable from the former partners (now stockholders) for
the amount of the excess. The notes were receivable in total annual
installments of $114,680, which were paid through service agreements with
the former partners. The notes were unsecured, accrued interest at 9.14%
through December 31, 1996. During the year ended December 31, 1997, the
Company determined that the future benefits from the service agreements
were of no value and the notes receivable with the corresponding interest
on the notes were fully expensed.
NOTE 8 - ACCRUED LIABILITIES
The following is a summary of accrued liabilities as of December 31, 1998
and 1997:
1998 1997
------------- -------------
Payroll costs $ 106,756 $ 101,252
Accrued interest 27,251 6,210
Preferred dividend payable 19,974 3,994
Bonds payable 81,551 66,402
Sculpture payable 94,320 -
Royalties payable 35,241 -
Advances payable 75,197 -
------------ ------------
$ 440,290 $ 177,858
------------ ------------
Royalties Payable -The Company was also committed to pay $30,000 in
royalties by January 1998 for a specific project. As of December 31, 1998,
the Company has paid the obligation in full.
F-24
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - LONG-TERM OBLIGATIONS
<TABLE>
The following is a summary of long-term debt, which includes notes payable
to related parties, as of December 31, 1998 and 1997:
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
Loan payable to a bank with monthly payments of
$3,596, interest at prime plus 2.75%, due April 1,
2004, secured by all equipment inventory and
accounts receivables $ 178,386 $ 201,275
12% unsecured note payable to a shareholder,
due November 18, 2000 (See Note 16) 200,000 200,000
10% unsecured note payable to an individual due
in monthly payments of principle and interest 5,370 11,024
12% unsecured demand note payable to a
shareholder (See Note 16) 24,802 5,846
12% unsecured notes payable to three shareholders
(See Note 16) 212,261 20,186
---------- -----------
$ 620,819 $ 438,331
Less: current portion (464,995) (254,575)
---------- -----------
$ 155,824 $ 183,756
---------- -----------
</TABLE>
Future maturities of long-term debt and notes payable are summarized as
follows:
Year
----------
1999 $ 464,996
2000 27,737
2001 30,947
2002 34,528
2003 38,523
Thereafter 24,088
-----------
$ 620,819
-----------
NOTE 10 - LEASE OBLIGATIONS
Capital Lease - During the year ended December 31, 1997, the Company
entered into a capital lease wherein the Company is the lessee of office
equipment under a capital lease expiring in July 2002. The asset and
liability under the capital lease was recorded at $46,032. During the year
ended December 31, 1998, the Company entered into an additional capital
lease wherein the Company is the lessee of office equipment under the
capital lease expiring in May of 2001. The asset and liability under the
capital lease was recorded at $26,903. Amortization expense for the years
ended December 31, 1998 and 1997 amounted to $11,837 and $6,022,
respectively.
F-25
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - LEASE OBLIGATIONS [Continued]
Total future minimum lease payments, executory costs and current portion of
capital lease obligations are as follows:
Future minimum lease payments for the years ended December 31,
Year ending December 31, Lease Payments
--------------------- ---------
1999 $ 27,356
2000 27,356
2001 18,219
2002 9,100
----------
Total future minimum lease payments $ 82,031
Less: amounts representing interest and executory costs 20,096
----------
Present value of the future minimum lease payments 61,935
Less: current portion 21,641
----------
Capital lease obligations - long-term $ 40,294
----------
Operating Lease - The Company has entered into a building lease for the
office and production facility. The lease period on the facility extends to
March 30, 2005, and may be extended by mutual agreement on a year-to-year
basis. The lease can be canceled if either side provides written notice one
year in advance. Lease expense for the years ended December 31, 1998 and
1997 amounted to $49,312 and $48,918, respectively. Following is a schedule
of minimum annual rental payments for the next five years.
Year Ending Minimum Annual
December 31, Rental Payments
---------- -------------
1999 $ 48,783
2000 48,783
2001 48,783
2002 48,783
2003 48,783
-------------
$ 243,915
--------------
Effective July 1, 1998 and effective each July 1 thereafter, the rental
amount will be increased by the annual inflation rate for the previous
year.
F-26
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - LOSS PER SHARE
The following data show the amounts used in computing loss per share and
the effect on income and the weighted average number of shares of potential
dilutive common stock for the years ended December 31, 1998 and 1997:
For the Years Ended
December 31,
----------------------
1998 1997
---------- ----------
Loss from continuing operations available
to common stockholders $ (1,720,525) $ (2,053,512)
Weighted average number of common shares
outstanding used in basic earnings per share 800,771 432,273
---------- ----------
Weighted number of common shares and potential
dilutive common shares outstanding used in
dilutive earnings per share N/A N/A
----------- -----------
The Company had at December 31, 1998 and 1997, options and warrants to
purchase 541,344 and 381,302 shares of common stock, respectively, at
prices ranging from $4.26 to $12.96 per share, that were not included in
the computation of diluted earnings per share because their effect was
anti-dilutive (the options exercise price was greater than the average
market price of the common shares).
NOTE 12 - INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes [FASB
109]. FASB 109 requires the Company to provide a net deferred tax asset or
liability equal to the expected future tax benefit or expenses of temporary
reporting differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At December 31, 1998 and 1997,
the total of all deferred tax assets was $2,186,056 and $1,602,601 and the
total of the deferred tax liabilities was $0 and $8,796. The amount of and
ultimate realization of the benefits from the deferred tax assets for
income tax purposes is dependent, in part, upon the tax laws in effect, the
Company's future earnings, and other future events, the effects of which
cannot be determined.
F-27
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - INCOME TAXES [Continued]
The components of income tax expense from continuing operations for the
years ended December 31, 1998 and 1997 consist of the following:
1998 1997
--------- ---------
Current income tax expense:
Federal $ - $ -
State - -
-------- ---------
Net tax expense - -
-------- ---------
Deferred tax expense (benefit) arising from:
Excess of tax over financial
accounting depreciation $ (12,826) $ (10,725)
Reserve for doubtful accounts (49,763) (16,832)
Reserve for sculpture repurchase - (37,000)
Allowance for inventory valuation - (55,500)
Accrued expenses 3,228 (3,434)
Reserve for NFL License (3,700) -
Net operating less carryover (529,190) (876,539)
Valuation allowance 592,251 1,000,030
-------- ---------
Net deferred tax expense $ - $ -
-------- ---------
Because of the uncertainty surrounding the realization of the deferred tax
assets, the Company has established a valuation allowance of $2,186,056 and
$1,593,805 as of December 31, 1998 and 1997, which has been offset against
the deferred tax assets. The net change in the valuation allowance during
the year ended December 31, 1998, was $592,251.
Deferred income tax expense results primarily from the reversal of
temporary timing differences between tax and financial statement income.
A reconciliation of income tax expenses at the federal statutory rate to
income tax expense at the company's effective rate is as follows:
1998 1997
--------- ---------
Computed tax at the expected statutory rate $(584,955) $ (698,194)
-------- ---------
State and local income taxes, net of federal
benefit (51,614) (61,605)
Non-deductible expenses 1,581 338
Compensation expense 43,938 (259,947)
Valuation Allowance 592,251 1,000,030
Other items (1,201) 19,378
-------- ---------
Income tax expense $ - $ -
-------- ----------
F-28
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12 - INCOME TAXES [Continued]
As of December 31, 1998 the Company has net tax operating loss (NOL)
carryforwards available to offset its future income tax liability. The NOL
carryforwards have been used to offset deferred taxes for financial
reporting purposes. The Company has federal NOL carryforwards of $5,390,858
that expire in various years beginning in 2006 through 2018.
The temporary differences and carryforwards gave rise to the following
deferred tax assets (liability) at December 31, 1998 and 1997:
1998 1997
--------- ---------
Excess of tax over book accounting
depreciation $ 4,030 $ (8,796)
Reserve for doubtful accounts 67,901 18,138
Charitable contribution carryover 185 185
Reserve for sculpture repurchase 37,000 37,000
Allowance for inventory valuation 55,500 55,500
Accrued expenses 23,122 26,351
Reserve for NFL License 3,700 -
NOL Carryover 1,994,618 1,465,427
As of December 31, 1998 and 1997 the deferred tax asset (liability)
consisted of the following:
1998 1997
--------- ---------
Current deferred tax assets $ - $ -
Deferred tax assets (liabilities) - -
--------- ---------
$ - $ -
---------- ----------
NOTE 13 - LINE OF CREDIT
Effective through the year ended December 31, 1996, the Company had
established a revolving line of credit at a bank through a stockholder of
the Company. During the year ended December 31, 1997, the Company paid the
line of credit in full and the line of credit was cancelled.
NOTE 14 - CAPITAL STOCK
Common Stock - During March 1997, the Company issued 25,000 shares of its
previously authorized, but unissued common stock for cash. Total proceeds
from the sale of stock amounted to $21,000 (or $0.84 per share).
Services Rendered - During February 1998, the Company issued 2,500 shares
of common stock to non-employee's for services rendered which services were
valued at $31,050 (or $12.42 per share). During December 1998, the Company
issued 10,000 shares of common stock to non-employee's for services
rendered which services were valued at $60,000 (or $6.00 per share). The
Company guaranteed that one year from the date of issue the price of its
common stock would be valued at least $6.00 per share (See Note 17).
F-29
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - CAPITAL STOCK [Continued]
Warrants - During June 1997, the Company granted warrants to purchase a
total of 1,463,620 shares of the Company's common stock at prices ranging
from $7.20 to $90.00 per share. The warrants expire between April 20, 1999
through June 26, 2002. During the years ended December 31, 1998 and 1997,
7,750 and 54,674 warrants have been exercised for total proceeds of $55,800
and $393,653.
Public Offering - During the year ended December 31, 1996, the Parent sold
16,667 shares of common stock pursuant to a public offering. This offering
was registered by qualification in the State of Utah and was made in
reliance on Rule 504 of Regulation D under the Securities Act of 1933. The
Parent and the sales agent arbitrarily determined an offering price of
$7.20 per share. Total proceeds from the stock sold through December 31,
1998 amounted to approximately $120,000. As part of the offering the
Company granted 100,000 warrants to purchase the Company's common stock at
$7.20 per share to three entities and two individuals for services. As of
December 31, 1998 and 1997, 6,083 and 77,083 warrants have been exercised
for total proceeds of $43,800 and $555,000. As part of the offering the
Company also granted 13,120 warrants to purchase the Company's common stock
at $7.20 per share to former shareholders of the Subsidiary Liberty Mint,
Inc. in exchange for 157,437 previously issued Subsidiary warrants. As part
of the offering, the Company also granted 5,208 options to purchase the
Company's common stock at $7.20 per share to former shareholders of the
Subsidiary Liberty Mint, Inc. in exchange for 10,417 previously issued
Subsidiary options.
Stock Options - During November 1997, the Company issued 25,000 shares of
its common stock for options exercised at $9.00 per share. During December
1998, the Company issued 135,834 shares of its common stock for options
exercised at $3.60 per share. Subsequent to the year ended December 31,
1998, the Company issued 35,834 shares of its common stock for exercise of
options for options exercised at prices ranging from $0.40 to $3.60 per
share.
Purchase of Subsidiary Stock - During June 1997, the Parent issued 620,906
shares of the its common stock in conjunction with the reverse merger of
Parent with the Subsidiary Liberty Mint, Inc. During November 1998, the
Parent issued 396 shares of its common stock for 4,752 shares of the
Subsidiary's common stock in order to increase its interest in the
Subsidiary Liberty Mint, Inc. (See Note 1).
Acquisition - On June 23, 1997, Liberty Mint, Inc. acquired all of the
outstanding common stock of Liberty Mint Marketing, Inc. (A Nevada
Corporation) in a business combination accounted for as a purchase. Liberty
Mint Marketing, Inc. was incorporated on February 13, 1997 and had no
operations, and its only asset was a one year licensing agreement with a
major record label to distribute custom minted coins with the likeness of
certain recording celebrates. The total cost of the acquistion was $309,336
resulting from the issuance of 644,450 shares of Liberty Mint, Inc. valued
at $.48 per common share. The cost exceeds the value of the assets acquired
by $309,336 resulting in the recording of goodwill which is being amortized
over one year.
Preferred Stock - The Company is authorized to issue 10,000 shares of
preferred stock, no par value with such rights, preferences and
designations and to be issued in such series as determined by the Board of
Directors.
F-30
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 - CAPITAL STOCK [Continued]
Class A Preferred Stock of Subsidiary - The Class A Preferred Stock of the
Subsidiary pays dividends at the rate of 10% and is fully cumulative. The
Class A preferred stock are entitled to receive dividends, commencing
October 10, 1996, at an annual rate of 10% per share out of the funds
legally available and to the extent declared by the Board of Directors. The
dividends are payable in equal monthly installments on April 10, 1997 and
ending October 10, 1998. The dividends may be paid either in cash, in
common stock of the corporation or a combination thereof. The holders of
Class A Preferred Stock shall be entitled to one (1) vote of each share of
Class A Preferred Stock held.
Stock split - During May 1999, the Company effected a 6 to 1 reverse stock
split, which has been retroactively reflected in these financial statements
(See Note 20).
NOTE 15 - STOCK OPTIONS
The Company applies APB Opinion No. 25 in accounting for its options
granted under the employment agreements. Compensation of $118,750 and
$63,594 was recorded in 1998 and 1997, respectively. The Corporation has
adopted the disclosure-only provisions of Statements of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation".
The effect on net income from the adoption of Statement of Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
would be the same.
The fair value of each option granted is estimated on the date granted
using the Black-Scholes option pricing model, with the following
weighted-average assumptions used for grants during the period ended
December 31, 1998: risk-free interest rate of 5.5%, expected dividend yield
of zero, an expected life of 5 years and expected volatility of 459%.
A summary of the status of the options granted under agreements at December
31, 1998 and 1997, and changes during the periods then ended is presented
in the table below:
<TABLE>
<CAPTION>
1998 1997
--------------------- ----------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Outstanding at
beginning of period 1,192,500 $ 7.21 - $ -
Granted 573,334 5.30 1,197,708 7.21
Exercised 135,833 3.60 5,208 7.20
Forfeited 4,400 12.96 - -
Canceled 50,000 6.00 - -
-------- ------------ -------- ---------
Outstanding at end of Period 1,575,601 $ 7.08 1,192,500 $ 7.21
-------- ------------ -------- ---------
Exercisable at end of period 272,168 $ 5.17 12,500 $ 5.82
-------- ------------ -------- ---------
Weighted average fair value of
options granted 191,111 $ 0.44 79,847 $ 2.11
--------- ------------- -------- ----------
</TABLE>
F-31
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - STOCK OPTIONS [Continued]
<TABLE>
A summary of the status of the options outstanding under agreements at
December 31, 1998 is presented below:
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------ -------------------------
Weighted-Average Weighted Average Weighted-Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
------------- ------------ ---------------- ----------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 6.00 682,501 4.2 years $ 6.00 233,001 $ 6.00
$ 6.00 566,667 4.5 years $ 6.00 - $
$ 6.00 83,333 3.5 years $ 6.00 - $ -
$ 5.76 8,333 2.3 years $ 5.76 8,333 $ 5.76
$ 12.96 203,933 1.2 years $ 12.96 - $
$ 3.60 30,834 0.5 years $ 3.60 30,834 $ 3.60
</TABLE>
The Company accounts for options agreements under Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. Had compensation cost for these options been
determined, based on the fair value at the grant dates for awards under
these agreements, consistent with the method prescribed by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the Company's net loss would have been the proforma amounts
as indicated below:
For the Year Ended
December 31,
-------------------------
1998 1997
------------ ------------
Net Loss As reported $ (1,720,525) $ (2,053,512)
Proforma $ (1,720,525) $ (2,053,512)
Loss per Share As reported $ (2.15) $ (4.75)
Proforma $ (2.15) $ (4.75)
NOTE 16 - RELATED PARTY TRANSACTIONS
The Company entered into certain transactions with related individuals and
entities resulting in the following balances at December 31, 1998.
Notes Payable to stockholders - During December 1997, a shareholder of the
Company loaned the Company $200,000 at 12% interest compounding yearly. At
December 31, 1998 and 1997, accrued interest amounted to $27,167 and
$2,827.
During the year ended December 31, 1997, a shareholder and then officer and
president of the Company paid expenses and purchased silver on the
Company's behalf totaling $5,846. The note bears interest at a rate of 12%
per annum. During the year ended December 31, 1998, an additional $47,000
was loaned to the Company for expenses. Also, during the year ended
December 31, 1998, the Company paid the shareholder and former officer and
president $31,182. Accrued interest of $2,497 has been included in the
outstanding total of $24,802 as of December 31, 1998 (See Note 9).
F-32
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - RELATED PARTY TRANSACTIONS [Continued]
During the year ended December 31, 1998, three related shareholders paid
expenses on behalf of the Company and loaned the Company silver and cash
for a total loan of $212,261. Subsequent to the year ended December 31,
1998, the Company is negotiating to repay this amount with interest at 12%
over a three-year period.
Personal Service Agreement - On January 1, 1990, the Company entered into
ten-year personal service agreements with the former partners of Liberty
Mint. The terms of the agreements were that the Company would receive up to
80 hours of service from each individual per month. The agreements would
expire December 31, 1999 and were noncancelable for the first five years.
During the year ended December 31, 1997, the Company, however, cancelled
the personal service agreements and fully expensed the notes receivable
relating to those agreements (See Note 7).
Sales - During the years ended December 31, 1998 and 1997, the Company had
2.3% and 2.5% of total sales to related parties.
Accounts receivable - At December 31, 1998 and 1997, the Company had 11.2%
and 7.3%, respectively, of total receivables to related parties.
NOTE 17 - LITIGATION, CONTINGENCIES AND COMMITMENTS
Manufacturer Repurchase Agreements - Some sculptures that are shipped have
an unconditional return policy attached with them. The length of term that
an individual has to return the sculpture depends upon the brochure that
was issued as an incitement to purchase the sculpture. The unconditional
guarantee ranges from 1 year to an unlimited amount of time. The Company
believes that the amount of returns are reasonably estimable and an
allowance of $100,000 has been established. The total potential liability
for returns is estimated at $1,500,000.
The Company is at risk to repurchase sculptures for the same price
originally purchased. From time to time the Company may be contacted by
customers requesting the Company to repurchase the sculpture or to assist
in re-selling the sculpture.
Stock guarantee - During December 1998, the Company issued 10,000 shares of
its common stock for advertising services performed valued at $60,000. The
Company guaranteed the advertising company that one year from the date of
issue they would be able to sell their 10,000 shares of common stock for a
minimum price of $6.00 per share (or for a total of $60,000). The Company
further agreed to issue a sufficient amount of shares to the advertising
Company in order to sell and receive total proceeds of $60,000 if the
trading price is less than $6.00 per share.
Customer Deposits - The Company has accepted silver and gold to be stamped
into coins and customer deposits for the purchase of gold or silver coins.
As of December 31, 1998 and 1997 the amount of customer deposits was
$407,206 and $442,556, respectively [See Note 2]. As noted in Note 6, the
Company's silver and gold inventory at December 31, 1998 and 1997 was not
adequate to meet the silver and gold held on account and customer deposits.
F-33
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - CREDIT RISK AND CONCENTRATIONS
Currently, one customer accounts for approximately 14 percent of revenue.
As of December 31, 1998 there were no indications that this relationship
would be negatively affected in the near future.
The Company has no policy of requiring collateral on any of its
receivables; hence, if economic conditions or other unforeseen events were
to negatively impact the economy, the risk of loss associated with the
Company's receivables could exceed the current allowance for doubtful
accounts.
NOTE 19 - PRIVATE PLACEMENT OFFERING
On December 9, 1996, the Company tendered a Private Placement Offering to
issue common stock to finance marketing, operations, and the purchase of
additional silver for working inventory, to repay short-term debt, and to
acquire equipment. The Company offered to issue 700,000 shares of common
stock at $2.88 per share to accredited investors. This offering expired
February 28, 1997. In connection with the offering, warrants were granted
with blocks of shares that exceed 16,667 shares; these warrants have an
exercise price of $5.76 per share and expire on December 31, 1999. A total
of 15,556 warrants were issued.
NOTE 20 - SUBSEQUENT EVENTS
Stock - During April 1999, the Company issued 2,000,000 shares of its
common stock for total proceeds of $800,000 (or $0.40 per share). The
issuance of these shares resulted in percent ownership of the new investors
and in a new shareholder control. As of the date of this audit $133,400 of
the total amount was collected.
During Janaury 1999, the Company issued 750,000 shares of its common stock
for total proceeds of $125,000 (or $0.17 per share).
During May 1999, a shareholder of the Company exercised options to purchase
5,000 post split shares of the Company's common stock at $.40 per share for
total proceeds of $2,000.
Reverse split - During May 1999, the Company had a 6 to 1 reverse stock
split. Fractional shares were rounded to the nearest whole share. The
financial statements for all periods presented have been retroactively
restated to reflect the reverse stock split.
Reorganization - During April 1999, the Company reorganized its management
by replacing its president. The chief financial officer was also released
and has not been replaced.
Lease obligation - During February 1999, the Company entered into an
additional capital lease. This lease requires monthly payments of $688 and
is for a 5 year term.
Contingency - During January 1999, the Company has become noncompliant with
its payroll tax responsibilities.
F-34
<PAGE>
LIBERTY MINT, LTD. AND SUBSIDIARY
(formerly Hana Acquisitions, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20 - SUBSEQUENT EVENTS [Continued]
Stock guarantee - During March 1999, the Company issued an additional 6,667
shares of its common stock for advertising services performed valued at
$40,000. The Company guaranteed the advertising company that one year from
the date of issue they would be able to sell their 6,667 shares of common
stock for a minimum price of $6.00 per share (or for a total of $40,000).
The Company further agreed to issue a sufficient amount of shares to the
advertising Company in order to sell and receive total proceeds of $40,000
if the trading price is less than $6.00 per share.
F-35
<PAGE>
PART III
ITEM 1. EXHIBITS
(a) Exhibits. Exhibits required to be attached are listed in the
Index to Exhibits beginning on page 30 of this Form 10-SB/A
under "Item 2. Description of Exhibits."
[THIS SPACE LEFT INTENTIONALLY BLANK]
28
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act
of 1934, the registrant caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, this 10th day of
April, 2000.
Liberty Mint, Ltd.
/s/ Daniel Southwick
---------------------
Daniel Southwick, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signatures Title Date
/s/ Daniel Southwick Chief Executive Officer, 10, April, 2000
-------------------------- Director ---
Daniel Southwick
/s/ Robert Joyce Secretary, Director 10, April, 2000
--------------------------
Robert Joyce
/s/ Eugene Pankratz Controller, Treasurer 10, April, 2000
-------------------------- ----
Eugene Pankratz
/s/ John Pennington Director 10, April, 2000
-------------------------- ----
John Pennington
/s/ William C. Schmidt Director 10, April, 2000
-------------------------- ----
William C. Schmidt
29
<PAGE>
ITEM 2. DESCRIPTION OF EXHIBITS
INDEX TO EXHIBITS
Exhibit
No. Page No. Description
2 31 Plan of Reorganization of Liberty Mint, Inc.
3(i) 45 Articles of Incorporation of the Company formerly known
as St. Joseph Corp. VI, a Colorado corporation, dated
March 15, 1990.
3(ii) 51 Articles of Amendment for St. Joseph Corp., dated July
26, 1993, changing the name of the Company to
Petrosavers International, Inc.
3(iii) 52 Articles of Amendment for Petrosavers International,
Inc., dated August 19, 1996, changing the name of the
Company to Hana Acquisitions, Inc.
3(iv) 53 Articles of Amendment for Hana Acquisitions, Inc.,
dated June 9, 1997, changing the name of the Company to
Liberty Mint, Ltd.
3(v) 54 Articles of Incorporation of Liberty Mint, Ltd., a
Nevada corporation, dated May 26, 1999
3(vi) 58 Articles of Merger of Liberty Mint, Ltd. changing
domicile to Nevada
3(ii) 62 By-laws of Liberty Mint, Ltd., a Nevada corp.
10(i) 89 Lease Agreement with Addendums A and B.
10(ii) 122 Manufacturing and Joint Distribution Merchandising
Agreement dated September 1, 1996.
10(iii) 143 Stock Purchase Agreement between Liberty Mint, Ltd. and
Calbear Gas, LLC dated September 23, 1999
10(iv) 147 Option Agreement between Dan Southwick and Calbear Gas,
LLC dated September 23, 1999.
21 148 Subsidiaries of Registrant
27 149 Financial Data Schedule "CE"
30
<PAGE>
PLAN
OF
REORGANIZATION
FOR
LIBERTY MINT, INC.
31
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT (the "Plan") is made this 24th day of June, 1997, between Liberty
Mint, Ltd., a COLORADO CORPORATION ("LIBERTY MINT - COLORADO"); Liberty Mint.,
Utah corporation ("Liberty"); and the persons listed in Exhibits A and A-1
hereof who are respectively the owners of record of all of the outstanding Class
A common stock and certain option and warrant holders who own rights to acquire
Class A common stock of Liberty and who execute and deliver a copy of this Plan
(respectively the "Liberty Stockholders" and the "Liberty Option and Warrant
Holders").
Liberty Mint - Colorado wishes to acquire all of the outstanding common
stock (Classes A and B) of Liberty in exchange for common stock of Liberty Mint
- - Colorado in a transaction qualifying as a tax-free exchange pursuant to
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended; and
LIBERTY MINT - COLORADO ALSO DESIRES TO EXCHANGE like options or
warrants to acquire shares of its common stock for the options or warrants to
acquire shares of Class A common stock- of Liberty, all as outlined in Exhibit
A- 1 hereof,
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section I
EXCHANGE OF STOCK
1.1 Number of Shares. The Liberty Stockholders agree to transfer to
Liberty Mint - Colorado at the closing (the "Closing") 100% of the outstanding
securities of Liberty, which are listed in Exhibit A hereof attached hereto and
incorporated herein by reference (the "Liberty Shares"), in exchange for the no
par value "unregistered" and "restricted" common voting stock of Liberty Mint -
Colorado set forth opposite the respective name each such Liberty Stockholder.
1.2 Delivery of Certificates by Liberty Stockholders. The transfer of
the Liberty Shares by the Liberty Stockholders shall be effected by the delivery
to Liberty Mint Colorado at -the Closing of stock certificate or certificates
representing the transferred shares duly endorsed in blank or accompanied by
stock powers executed in blank, with all signatures -witnessed or guaranteed to
the satisfaction of Liberty Mint - Colorado and with all necessary transfer
taxes and other revenue stamps affixed and acquired at the Liberty Stockholders'
expense.
32
<PAGE>
1.3 Further Assurances. At the Closing and from time to time
thereafter, the Liberty Stockholders shall execute such additional instruments
and take such other action as Liberty Mint - Colorado may request in order to
exchange and transfer clear title and ownership in the Liberty Shares to Liberty
Mint - Colorado.
1.4 Resignation of Present Sole Director and Executive Officer and
Designation of New Directors and Executive Officers. On Closing, the present
sole director and executive officer of Liberty Mint - Colorado shall resign and
designate the directors and executive officers nominated by Liberty to serve in
his place and stead, until the next respective annual meetings of the
stockholders and Board of Directors of Liberty Mint - Colorado, and until their
respective successors shall be elected and qualified or until their respective
prior resignations or terminations.
1.6 Assets and Liabilities of Liberty Mint - Colorado at Closing.
Liberty Mint - Colorado shall have no material assets and no liabilities at
Closing, and all costs incurred by Liberty Mint - Colorado incident to the Plan
shall have been paid or satisfied.
1.7 EXCHANGE OF LIKE OPTIONS OR WARRANTS. Liberty Mint - Colorado
adopts, ratifies and approves any written or other compensation plans of Liberty
and the outstanding options and warrants of Liberty to the extent outlined in
Exhibit A- 1 hereof and agrees to issue shares of its common stock in lieu of
shares of Class A common stock of Liberty required to be issued thereunder, on
exercise, in accordance with Exhibit A-1 and with the adjustments reflected
therein.
1.8 INITIAL CLOSING. The Plan may close on the execution and delivery
of Counterpart Signature Pages by persons who own not less than 50. 1% of the
outstanding Liberty Shares; and Liberty Mint - Colorado will use its best
efforts to acquire in exchange for "unregistered" and "restricted" shares of its
common stock or like options and warrants the remaining outstanding shares
(Classes A and B), options and warrants of Liberty to the extent that such
securities can be acquired pursuant to available exemptions from the
registration requirements of applicable securities laws, rules and regulations,
all on similar terms.
Section 2
CLOSING
The Closing contemplated by Section 1.1 shall be held at the offices of
Leonard W. Burningham, Esq., Suite 205 Hermes Building, 455 East 500 South Salt
Lake City, Utah 84111, unless another place or time is agreed upon in writing by
the parties. The Closing may be accomplished by wire, express mail or other
courier service, conference telephone communications or as otherwise agreed by
the respective parties or their duly authorized representatives.
33
<PAGE>
Section 3
REPRESENTATIONS AND WARRANTIES OF LIBERTY MING - COLORADO
LIBERTY MINT - COLORADO represent and warrant to, and covenant with,
the Liberty Stockholders, the Liberty Option and Warrant Holders and Liberty as
follows:
3.1 CORPORATE STATUS. Liberty Mint - Colorado is a corporation duly
organized, validly existing and in good standing under- the laws of the State of
Colorado and is licensed or qualified as a foreign corporation in all states in
which the nature of its business or the character or ownership of its properties
makes such licensing or qualification necessary (Colorado only.) Liberty i'vtnt
- - Colorado is a publicly held company, having previously and lawfully offered
and sold a portion of its securities in accordance with applicable federal and
state securities laws, rules and regulations. There is presently no public
market for these or any other securities of Liberty Mint - Colorado.
3.2 CAPITALIZATION. The authorized capital stock of Liberty Mint -
Colorado consists of 25,000,000 shares of no par value common voting stock, of
which 250,000 shares are issued and outstanding, all fully paid and
non-assessable, and 10,000,000 shares of no par value preferred stock, of which
no shares are outstanding. There are no outstanding options, warrants or calls
pursuant to which any person has the right to purchase any authorized and
unissued common stock of Liberty Mint - Colorado.
3.3 FINANCIAL STATEMENTS. The financial statements of Liberty Mint -
Colorado fumished to the Liberty Stockholders, the Liberty Option and Warrant
Holders and Liberty, consisting of audited financial statements for the periods
ended January 31, 1997 and February 28, 1996 and 1995, attached hereto as
Exhibit B, are correct and fairly present the financial condition of Liberty
Mint - Colorado at such dates and for the periods involved; such statements were
prepared in accordance with generally accepted accounting principles
consistently applied, and no material change has occurred in the matters
disclosed therein, except as indicated in Exhibit C, which is attached hereto
and incorporated herein by reference. Such financial statements do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading.
3.4 UNDISCLOSED LIABILITIES. Liberty Mint - Colorado has no liabilities
of any nature except to the extent reflected or reserved against in its balance
sheets, whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due or to become due, except as set
forth in Exhibit C.
3.5 INTERIM CHANGES. Since the date of its balance sheets, except as
set forth in Exlibit C, there have been no (1) changes in financial condition,
34
<PAGE>
assets, liabilities or business of Liberty Mint - Colorado which, in the
aggregate, have been materially adverse; (2) damages, destruction or losses of
or to property of Liberty Mint - Colorado, payments of any dividend or other
distribution in respect of any class of stock of Liberty Mint - Colorado, or any
direct or indirect redemption, purchase or other acquisition of any class of any
such stock; or (3) increases paid or agreed to in the compensation, retirement
benefits or other commitments to employees.
3.6 TITLE TO PROPERTY. Liberty Mint - Colorado has good and marketable
title to all properties and assets, real and personal, reflected in its balance
sheets, and the properties and assets of Liberty Mint - Colorado are subject to
no mortgage, pledge, lien or encumbrance, except for liens shown therein or in
Exhibit C, with respect to which no default exists.
3.7 LITIGATION. There is no litigation or proceeding pending, or to the
knowledge of Liberty Mint - Colorado, threatened, against or relating to Liberty
Mint - Colorado, its properties or business, except as set forth in Exhibit C.
Further, no officer, director or person who may be deemed to be an affiliate of
Liberty Mint - Colorado is party to any material legal proceeding which could
have an adverse effect on Liberty Mint - Colorado (financial or otherwise), and
none is party to any action or proceeding wherein any has an interest adverse to
Liberty Mint - Colorado.
3.8 BOOKS AND RECORDS. From the date of this Plan to the Closing,
Liberty Mint - Colorado will (1) give to the Liberty Stockholders, the Liberty
Option and Warrant Holders and Liberty or their respective representatives full
access during normal business hours to all of its offices, books, records,
contracts and other corporate documents and properties so that the Liberty
Stockholders, the Liberty Option and Warrant Holders and Liberty or their
respective representatives may inspect and audit them; and (2) furnish such
information concerning the properties and affairs of Liberty Mint - Colorado as
the Liberty Stockholders, the Liberty Option and Warrant Holders -and Liberty or
their respective representatives may reasonably request.
3.9 TAX RETURNS. Liberty Mint - Colorado has filed all federal and
state income or franchise tax returns required to be filed or has received
currently effective extensions of the required filing dates.
3.10 CONFIDENTIALITY. Until the Closing (and thereafter if there is no
Closing), Liberty Mint - Colorado and its representatives will keep confidential
any information which they obtain from the Liberty Stockholders, the Liberty
Option or Warrant Holders or from Liberty concerning the properties, assets and
business of Liberty. If the transactions contemplated by this Plan are not
consummated by June 30, 1997, Liberty Mint - Colorado will return to Liberty all
written matter with respect to Liberty obtained by Liberty Mint - Colorado in
connection with the negotiation or consummation of this Plan.
3.11 INVESTMENT INTENT. Liberty Mint - Colorado is acquiring the
Liberty Shares to be transferred to it under this Plan for investment and not
35
<PAGE>
with a view to the sale or distribution thereof, and Liberty Mint - Colorado has
no commitment or present intention to liquidate Liberty or to sell or otherwise
dispose of the Liberty Shares.
3.12 CORPORATE AUTHORITY. Liberty Mint - Colorado has full corporate
power and authority to enter into this Plan and to carry out its obligations
hereunder and will deliver to the Liberty Stockholders, the Liberty Option and
Warrant Holders and Liberty or their respective representatives at the Closing a
certified copy of resolutions of its Board of Directors authorizing execution of
this Plan by its officers and performance thereunder, and the sole director
adopting and delivering such resolutions is the duly elected and incumbent
director of Liberty Mint Colorado.
3.13 DUE AUTHORIZATION. Execution of this Plan and performance by
Liberty Mint - Colorado hereunder have been duly authorized by all requisite
corporate action on the part of Liberty Mint - Colorado, and this Plan
constitutes a valid and binding obligation of Liberty Mint - Colorado and
performance hereunder will not violate any provision of the Articles of
Incorporation, Bylaws, agreements, mortgages or other commitments of Liberty
Mint - Colorado.
3.14 ENVIRONMENTAL MATTERS. Liberty Mint - Colorado has no knowledge of
any assertion by any governmental agency or other regulatory authority of any
environmental lien, action or proceeding, or of any cause for any such lien,
action or proceeding related to the business operations of Liberty Mint -
Colorado. In addition, to the best knowledge of Liberty Mint - Colorado, there
are no substances or conditions which may support a claim or cause of action
against Liberty Mint - Colorado or any of its current or former officers,
directors, agents or employees, whether by a governmental agency or body,
private party or individual, under any Hazardous Materials Regulations.
"Hazardous Materials" means any oil or petrochemical products, PCB'S, asbestos,
utea formaldehyde, flammable explosives, radioactive materials, solid or
hazardous wastes, chemicals, toxic substances or related materials, including,
without limitation, any substances defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials," or "toxic
substances" under any applicable federal or state laws or regulations "Hazardous
Materials Regulations" means any regulations governing the use, generation,
handling, storage, treatment, disposal or release of hazardous materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act and
the Federal Water Pollution Control Act.
3.15 ACCESS TO INFORMATION REGARDING LIBERTY. Liberty Mint - Colorado
acknowledges that it has been delivered copies of what has been represented to
be documentation containing all material information respecting Liberty and its
present and contemplated business operations, potential acquisitions, including
its most recent merger with Liberty Mint Marketing, Inc., a Nevada corporation
("Liberty Mint - Nevada"), management and other factors; that it has had a
reasonable opportunity to review such documentation and discuss it, to the
extent desired, with its legal counsel, directors and executive officers; that
36
<PAGE>
it has had, to the extent desired, the opportunity to ask questions of and
receive responses from the directors and executive officers of Liberty, and with
the legal and accounting firms of Liberty, with respect to such documentation;
and that to the extent requested,- all questions raised have been answered to
its complete satisfaction.
Section 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF LIBEA
THE LIBERTV STOCKHOLDERS AND THE LIBERTY OPTION AND WARRANT HOLDERS
Liberty, the Liberty Stockholders and the Liberty Option and Warrant
Holders (with respect to the Liberty Stockholders and the Liberty Option and
Warrant Holders who are not directors or executive officers of Liberty, such
representations and warranties shall be made only be to the extent of their
respective personal knowledge, information and belief) represent and warrant to,
and covenant with, Liberty Mint - Colorado as follows:
4.1 LIBERTY SHARES. The Liberty Stockholders and the Liberty Option and
Warrant Holders are the record and beneficial owners of all of the Liberty
Shares and the options or warrants listed in Exhbits A and A-1, free and clear
of adverse claims of third parties; and Exhibits A and A- I correctly set forth
the names, addresses and the number of Liberty Shares and options or warrants
respectively owned by the Liberty Stockholders and the Liberty Option and
Warrant Holders.
4.2 CORPORATE STATUS. Liberty is a corporation duly organized, validly
existing and in good standing under the laws of the State of Utah and is
licensed or qualified as a foreign corporation in all states in which the nature
of its business or the character or ownership of its properties makes such
licensing or qualification necessary.
4.3 CAPITALIZATION. The authorized capital stock of Liberty consists of
13,000,000 shares of Class A common voting stock, having no par value, of which
8,252,387 shares are issued and outstanding, all fully paid and lawfully issued
in accordance with applicable securities laws, rules and regulations and
non-assessable; 1,000,000 shares of Class B common nonvoting stock, having no
par value per share, of which 121,000 shares are issued and outstanding, and all
of which are fully paid and lawfully issued in accordance with applicable
securities laws, rules and regulations and non-assessable; and 2,000,000 Class A
preferred stock, having no par value per share, of which 469,978 shares are
issued and outstanding, and all of which are fully paid and lawfully issued in
accordance with applicable securities laws, rules and regulations and
non-assessable. Except as set forth in Exhibit A-1, there are no outstanding
options, warrants or calls pursuant to which any person has the right to
purchase any authorized and unissued capital stock of Liberty.
37
<PAGE>
4.4 FINANCIAL STATEMENTS. The financial statements of Liberty furnished
to Liberty Mint - Colorado, consisting of an unaudited balance sheet and income
statement for the period ended December 31, 1996, and an unaudited balance sheet
and income statement for the period ended April 30, 1997, attached hereto as
Exhibit D, together with an unaudited balance sheet and profit and loss
statement of Liberty Mint - Nevada for the period ended April 30, 1997, attached
hereto as Exhibit D-1 and incorporated herein by reference, are correct and
fairly present the financial condition of Liberty as of that date and for the
periods involved, and such statements were prepared in accordance with Generally
accepted accounting principles consistently applied. These financial statements
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.5 UNDISCLOSED LIABILITIES. Liberty has no material liabilities of any
nature except to the extent reflected or reserved against in the balance sheets,
whether accrued, absolute, contingent or otherwise, including, without
limitation, tax liabilities and interest due or to become due, except as set
forth in Exhibit E attached hereto and incorporated herein by reference.
4.6 INTERIM CHANGES. Since the date of these balance sheets, except as
set forth in Exhibit E, there have been no (1) changes in the financial
condition, assets, liabilities or business of Liberty, in the aggregate, have
been materially adverse; (2) damages, destruction or loss of or to the property
of Liberty, payment of any dividend or other distribution in respect of the
capital stock of Liberty, or any direct or indirect redemption, purchase or
other acquisition of any such stock; or (3) increases paid or agreed to in the
compensation, retirement benefits or other commitments to their employees.
4.7 TITLE TO PROPERTY_. Liberty has good and marketable title to all
properties and assets, real and personal, proprietary or otherwise, reflected in
these balance sheets, and the properties and assets of Liberty are subject to no
mortgage, pledge, lien or encumbrance, except as reflected in the balance sheet
or in Exhibit E, with respect to which no default exists.
4.8 LITIGATION. There is no litigation or proceeding pending, or to the
knowledge of Liberty, threatened, against or relating to Liberty or its
properties or business, except as set forth in Exhibit E. Further, no officer,
director or person who may be deemed to be an affiliate of Liberty is party to
any material legal proceeding which could have an adverse effect on Liberty
(financial or otherwise), and none is party to any action or proceeding wherein
any has an interest adverse to Liberty.
4.9 BOOKS AND RECORDS. From the date of this Plan to the Closing, the
Liberty Stockholders and the Liberty Option and Warrant Holders will cause
Liberty to (1) give to Liberty Mint - Colorado and its representatives full
access during normal business hours to all of its offices, books, records,
contracts and other corporate documents and properties so that Liberty Mint -
Colorado may inspect and audit them; and (2) furnish such information concerning
the properties and affairs of Liberty as Liberty Mint - Colorado may reasonably
request.
38
<PAGE>
4.10 TAX RETURNS. Liberty has filed all federal and state income or
franchise tax returns required to be filed or has received currently effective
extensions of the required filing dates.
4.11 CONFIDENTIALITY. Until the Closing (and continuously if there is
no Closing), Liberty, the Liberty Stockholders, the Liberty Option and Warrant
Holders and their representatives will keep confidential any information which
they obtain from Liberty Mint Colorado concerning its properties, assets and
business. If the transactions contemplated by this Plan are not consummated by
June 30, 1997, Liberty, the Liberty Stockholders and the Liberty Option and
Warrant Holders will return to Liberty Mint - Colorado all written matter with
respect to Liberty Mint - Colorado obtained by them in connection with the
negotiation or consummation of this Plan.
4.12 INVESTMENT INTENT. The Liberty Stockholders and the Liberty Option
and Warrant Holders are acquiring the shares, options or warrants to be
exchanged and delivered to them under this Plan for investment and not with a
view to the sale or distribution thereof, and the Liberty Stockholders and the
Liberty Option and Warrant Holders have no commitment or present intention to
liquidate the Company or to sell or otherwise dispose of the Liberty Mint
Colorado shares, options or warrants.. The Liberty Stockholders and the Liberty
Mint Option and Warrant Holders shall execute and deliver to Liberty Mint -
Colorado on the Closing an Investment Letter attached hereto as Exhibit F and
incorporated herein by reference, acknowledging the "unregistered" and
"restricted" nature of the shares, options or warrants of Liberty Mint -
Colorado being received under the Plan in exchange for the Liberty Shares,
options or warrants, and receipt of certain material information regarding
Liberty Mint - Colorado.
4.13 CORPORATE AUTHORITY. Liberty has full corporate power and
authority to enter into this Plan and to carry out its obligations hereunder and
will deliver to Liberty Mint Colorado or its representative at tile Closing a
certified copy of resolutions of its Board of Directors authorizing execution of
this Plan by its officers and performance thereunder.
4.14 DUE AUTHORIZATION. Execution of this Plan and performance by
Liberty hereunder have been duly authorized by all requisite corporate action on
the part of Liberty, and this Plan constitutes a valid and binding obligation of
Liberty and performance hereunder will not violate any provision of the Articles
of Incorporation, Bylaws, agreements, mortgages or other commitments of Liberty.
4.15 ENVIRONMENTAL MATTERS. Liberty, the Liberty Stockholders and the
Liberty Option and Warrant Holders have no knowledge of any assertion by any
governmental agency or other regulatory authority of any environmental lien,
action or proceeding, or of any cause for any such lien, action or proceeding
related to the business operations of Liberty or its predecessors. In addition,
to the best knowledge of Liberty, there are no substances or conditions which
may support a claim or cause of action against Liberty or any of its current or
former officers, directors, agents, employees or predecessors, whether by a
governmental agency or body, private party or individual under any Hazardous s
39
<PAGE>
Materials Regulations. "Hazardous Materials" means any oil or petrochemical
products, PCB s, asbestos, urea formaldehyde, flammable explosives, radioactive
materials, solid or hazardous wastes, chemicals, toxic substances or related
materials, including, without limitation, any substances defined as or included
in the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," or "toxic substances" under any applicable federal or state laws or
regulations. "Hazardous Materials Regulations" means any regulations governing
the use, generation, handling storage, treatment, disposal or release of
hazardous materials, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act and the Federal Water Pollution Control Act.
4.15 ACCESS TO INFORMATION REGARDING LIBERTY MINT - COLORADO. Liberty,
the Liberty Stockholders and the Liberty Option and Warrant Holders acknowledge
that they have been delivered copies of what has been represented to be
documentation containing all material information respecting Liberty Mint -
Colorado and its present and contemplated business operations, potential
acquisitions, management and other factors; that they have had a reasonable
opportunity to review such documentation and discuss it, to the extent desired,
with their legal counsel, directors and executive officers; that they have had,
to the extent desired, the opportunity to ask questions of and receive responses
from the directors and executive officers of Liberty Mint - Colorado, and with
the legal and accounting firms of Liberty Mint - Colorado, with respect to such
documentation; and that to the extent requested, all questions raised have been
answered to their complete satisfaction.
Section 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF LIBERTY, THE LIBERTY STOCKHOLDERS
AND THE LIBERTY OPTION AND WARRANT HOLDERS
All obligations of Liberty, the Liberty Stockholders and the Liberty
Option and Warrant Holders under this Plan are subject, at their option, to the
fulfillment, before or at the Closing, of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSING. The representations
and warranties of Liberty Mint - Colorado contained in this Plan shall be deemed
to have been made again at and as of the Closing and shall then be true in all
material respects and shall survive the Closing.
5.2 DUE PERFORMANCE. Liberty Mint - Colorado shall have performed and
complied with all of the terms and conditions required by this Plan to be
performed or complied with by it before the Closing.
5.3 OFFICERS' CERTIFICATE. Liberty, the Liberty Stockholders and
the Liberty Option and Warrant Holders shall have been fumished with a
40
<PAGE>
certificate signed by the President of Liberty Mint - Colorado, in such capacity
and personally, attached hereto as Exhibit G and incorporated herein by
reference, dated as of the Closing, certifying (1) that all representations and
warranties of Liberty Mint - Colorado contained herein are true and correct; and
(2) that since the date of the financial statements (Exhibit B hereto), there
has been no material adverse change in the financial condition, business or
properties of Liberty Mint - Colorado, taken as a whole.
5.4 OPINION OF COUNSEL OF LIBERTY MINT - COLORADO. Liberty, the Liberty
Stockholders and the Liberty Option and Warrant Holders shall have received an
opinion of counsel for Liberty Mint - Colorado, dated as of the Closing, to the
effect that (1) the representations of Sections 3.1, 3.2 and 3.12 are correct;
(2) except as specified in the opinion, counsel knows of no inaccuracy in the
representations in 3.5, 3.6 or 3.7; (3) the shares of Liberty Mint - Colorado to
be issued to the Liberty Stockholders under this Plan will, when so issued, be
validly issued, fully paid and non- assessable- and (4) the options or warrants
of Liberty Mnt Colorado to be exchanoedvnith the Liberty Mint Option and Warrant
Holders shall deemed to be validly issued.
5.5 ASSETS AND LIABILITIES OF LIBERTY MINT - COLORADO. Liberty Mint -
Colorado shall have no material assets and no liabilities at Closing, and all
costs, expenses and fees incident to the Plan shall have been paid.
5.6 RESIGNATION OF SOLE DIRECTOR AND EXECUTIVE OFFICER AND DESIGNATION
OF NEW DIRECTORS AND EXECUTIVE OFFICERS. The present sole director and executive
officer of Liberty Mint - Colorado shall resign, and shall have designated
nominees of Liberty as directors and executive officers of Liberty Mint -
Colorado to serve in their place and stead, until the next respective annual
meetings of the stockholders and Board of Directors of Liberty Mint Colorado,
and until their respective successors shall be elected and qualified or until
their respective prior resignations or terminations.
Section 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF LIBERTY MINT - COLORADO
All obligations of Liberty Mint - Colorado under this Plan are subject, at its
option, to the fulfillment, before or at the Closing, of each of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES TRUE AT CLOSINIG. The representations and
warranties of Liberty, the Liberty Stockholders and the Liberty Option and
Warrant Holders contained in this Plan shall be deemed to have been made again
at and as of the Closing and shall then be true in all material respects and
shall survive the Closing.
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6.2 DUE PERFORMANCE. Liberty, the Liberty Stockholders and the Liberty
Option and Warrant Holders shall have performed and complied with all of the
ten-ns and conditions required by this Plan to be performed or complied with by
them before the Closing.
6.3 OFFICERS AND STOCKHOLDERS' CERTIFICATE. Liberty Mint - Colorado
shall have been furnished with a certificate signed by the President of Liberty,
attached hereto as Exhibit H and incorporated herein by reference, dated as of
the Closing, certifying (1) that all representations and warranties of Liberty,
the Liberty Stockholders and the Liberty Option and Warrant Holders contained
herein are true and correct; and (2) that since the date of the financial
statements (Exhibit D), there has been no material adverse change in the
financial condition, business or properties of Liberty, taken as a whole.
6.4 OPINION OF COUNSEL OF LIBERTY. Liberty Mint - Colorado shall have
received an opinion of counsel for Liberty, dated as of the Closinc,, to the
effect that (1) the representations of Sections 4.2, 4.3 and 4.13 are correct;
(2) except as specified in the opinion, counsel knows of no inaccuracy in the
representations in 4.6, 4.7 or 4.8; (3) the Liberty Shares to be delivered to
Liberty NEnt - Colorado under this Plan will, when so delivered, have been
validly issued, fully paid and non-assessable; and the options and warrants of
Liberty are validly issued.
6.5 BOOKS AND RECORDS. The Liberty Stockholders, the Liberty Option and
Warrant Holders or the Board of Directors of Liberty shall have caused Liberty
to make available all books and records of Liberty, including minute books and
stock transfer records; provided, however, only to the extent requested in
writing by Libert Mint - Colorado at Closing.
6.6 ACCEPTANCE BY LIBERTY STOCKHOLDERS. The terms of this Plan shall
have been accepted by the Liberty Stockholders who own not less than 50. 1 % of
the outstanding Class A Liberty Shares by their execution and delivery of a copy
of the Plan and related instruments.
Section 7
TERMINATION
Prior to Closing, this Plan may be terminated (1) by mutu al consent in
writing; (2) by either the sole director of Liberty Nfint - Colorado or Liberty,
the Liberty Stockholders and the Liberty Option and Warrant Holders if there has
been a material misrepresentation or material breach of any warranty or covenant
by the other party; or (3) by either the sole director of Liberty Mint -
Colorado or Liberty, the Liberty Stockholders and the Liberty Option and Warrant
Holders if the Closing shall not have taken place, unless adjourned to a later
date by mutual consent in writing, by the date fixed in Section 2.
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Section 8
GENERAL PROVISIONS
8.1 FURTHER ASSURANCES. At any time, and from time to time, after the
Closing, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party to confirm or perfect
title to any property transferred hereunder or otherwise to carry out the intent
and purposes of this Plan.
8.2 WAIVER. Any failure on the part of any party hereto to comply with
any of its obligations, agreements or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
8.3 BROKERS. Each party represents to the other parties hereunder that
no broker or finder has acted for it in connection with this Plan, and agrees to
indemnify and hold harmless the other parties acainst any fee, loss or expense
arising out of claims by brokers or finders employed or alleced to have been
employed by he/she/it.
8.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered in person or sent by
prepaid first-class registered or certified mail, return receipt requested, as
follows:
If to Liberty Mint - Colorado: 14 Red Tail Drive
Highlands Ranch, Colorado 80126
With a copy to: Leonard W. Burningham, Esq.
455 East 500 South, 9205
Salt Lake City, Utah 84111
If to Liberty: 651 Columbia Lane
Provo, Utah 84604
If to the Liberty
Stockholders, Option
or Warrant Holders: To the Addresses listed in Exhibits A
and A-1
8.5 ENTIRE AGREEMENT. This Plan constitutes the entire agreement
between the parties and supersedes and cancels any other agreement,
representation, or communication, whether oral or written, between the parties
hereto relating to the transactions contemplated herein or the subject matter
hereof
43
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8.6 HEADINGS. The section and subsection headings in this Plan
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Plan.
8.7 GOVERNING LAW. This Plan shll be governed by and construed
and enforced in accordance with the laws of the State of Colorado, except to the
extent preempted by federal law, in which event (and to that extent only),
federal law shall govern.
8.8 ASSIGNMENT. This Plan shad inure to the benefit of, and be
binding upon, the parties hereto and their successors and assigns; provided
however, that any assignment by any party of its rights under this Plan without
the prior written consent of the other parties shall be void.
8.9 COUNTERPARTS. This Plan may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement and
Plan of Reorganization effective the day and year first above written.
LIBERTY MINT, LTD.
Date: ___6/24/97______ BY _______________________
Gary J. McAdam, President
LIBERTY MINT, INC.
Date: ________________ BY__________________________
Larry H. Ruff, President
44
ARTICLES OF INCORPORATION
OF
ST. JOSEPH CORP. VI
The undersigned incorporator, being a natural person over the age of
eighteen years, and desiring to form a body corporate under the laws of the
state of Colorado, does hereby sign, verify and deliver in duplicate to the
Secretary of State of the state of Colorado, these Articles of Incorporation:
ARTICLE I
NAME
The name of the Corporation shall be ST. JOSEPH CORP. VI.
ARTICLE II
PERIOD OF DURATION
The Corporation shall exist in perpetuity, from, and after the date of
filing these Articles of Incorporation with the Secretary of State of the
state of Colorado unless dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
1. Purposes. Except as restricted by these Articles of Incorporation,
the Corporation is organized for the purpose of transacting all lawful
business for which corporations may be incorporated pursuant to the Colorado
Corporation Code.
2 General Powers. Except as restricted by these Articles of
Incorporation, the Corporation shall have and may exercise all powers and
rights which a corporation may exercise legally pursuant to the Colorado
Corporation Code.
3 . Issuance of Shares. The Board of Directors of the Corporation may
divide and issue any class of stock of the Corporation in series pursuant to a
resolution properly filed with the Secretary of State of the state of
Colorado.
ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this Corporation shall have
authority to issue is Twenty-Five Million (25,000,000) shares of no par value
each, which shares shall be designated "Common Stock"- and Ten million
(10,000,000) shares of no par value each, which shares shall be designated
"Preferred Stock" and which may be issued in one or more series at the
discretion of the Board of Directors. In establishing a series, the Board of
Directors shall give to it a
45
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distinctive designation so as to distinguish it from the shares of all other
series and classes, shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares of any one series shall
be alike in every particular except as otherwise provided by these Articles of
Incorporation or the Colorado Corporation Code.
1. DIVIDENDS. Dividends in cash, property or shares shall be paid up on
the Preferred Stock for any year on a cumulative or noncumulative basis as
determined by a resolution of the Board of Directors prior to the issuance of
such Preferred Stock, to the extent earned surplus for each such year is
available, in an amount as determined by a resolution of the Board of Directors.
Such Preferred Stock dividends shall be paid pro rata to holders of Preferred
Stock as determined by a resolution of the Board of Directors prior to the
issuance of such Preferred Stock. No other dividend shall be paid on the
Preferred Stock.
Dividends in cash, property or shares of the Corporation may be paid
upon the Common Stock, as and when declared by the Board of Directors, out of
funds of the Corporation to the extent and in the manner permitted by law,
except that no Common Stock dividend shall be paid for any year unless the
holders of Preferred Stock, if any, shall receive the maximum allowable
Preferred Stock dividend for such year.
2. DISTRIBUTION IN LIQUIDATION. Upon any liquidation, dissolution or
winding up of the Corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the Corporation
shall be distributed, either in cash or in kind, first pro rata the holders of
the Preferred Stock until an amount to be determined by a resolution of the
Board of Directors prior to issuance of such Preferred Stock, has been
distributed per share, and, then, the remainder pro rata to the holders of the
Common Stock.
3. REDEMPTION. The Preferred Stock may be redeemed in whole or in part
as determined by a resolution of the Board of Directors prior to the issuance of
such Preferred Stock, upon prior notice to the holders of record of the
Preferred Stock, published, mailed and given in such manner and form and on such
other terms and conditions as may be prescribed by the Bylaws or by resolution
of the Board of Directors, by payment in cash or Common Stock for each share of
the Preferred Stock to be redeemed, as determined by a resolution of the Board
of Directors prior to the issuance of such Preferred Stock. Common stock used to
redeem Preferred Stock shall be valued as determined by a resolution of the
Board of Directors prior to the issuance of such Preferred Stock. Any rights to
or arising from fractional shares shall be treated as rights to or arising from
one share. No such purchase or retirement shall be made if the capital of the
Corporation would be impaired thereby.
If less than all the outstanding shares are to be redeemed, such
redemption may be made by lot or pro rata as may be prescribed by resolution of
the Board of Directors; provided, however, that the Board of Directors may
alternatively invite from shareholders offers to the Corporation of Preferred
Stock at less than an amount to be determined by a resolution of the Board of
Directors prior to issuance of such Preferred Stock, and when such offers are
invited, the Board
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of Directors shall then be required to buy at the lowest price or prices
offered, up to the amount to be purchased.
From and after the date fixed in any such notice as the date of
redemption (unless default shall be made by the Corporation in the payment of
the redemption price), all dividends on the Preferred Stock thereby called for
redemption shall cease to accrue and all rights of the holders thereof as
stockholders of the Corporation, except the fight to receive the redemption
price, shall cease and terminate.
Any purchase by the Corporation of the shares of its Preferred Stock
shall not be made at PRICES IN excess of said redemption price.
4. VOTING RIGHTS; CUMULATIVE VOTING. Each outstanding share of Common
Stock shall be entitled to one vote and each fractional share of Common Stock
shall be entitled to a corresponding fractional vote on each matter submitted to
a vote of shareholders. A majority of the shares of Common Stock entitled to
vote, represented in person or by proxy, shall constitute a quorum, at a meeting
of shareholders. Except as otherwise provided by these Articles of Incorporation
or the Colorado Corporation Code, if a quorum is present, the affirmative vote
of a majority of the shares represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders. When, with respect to
any action to be taken by shareholders of the Corporation, the laws of Colorado
require the vote or concurrence of the holders of two-thirds of the outstanding
shares, of the shares entitled to vote thereon, or of any class or series, such
action shall be taken by, the vote or concurrence of a majority of such shares
or class or series thereof. Cumulative voting shall not be allowed in the
election of directors of the Corporation.
Shares of Preferred Stock shall only be entitled to such vote as is
determined by the Board of Directors prior to the issuance of such stock, except
as required by law, in which case each share of Preferred Stock shall be
entitled to one vote.
5. DENIAL OF PREEMPTIVE RIGHTS. No holder of any shares of the
Corporation, whether now or hereafter authorized, shall have any preemptive or
preferential right to acquire any shares or securities of the Corporation,
including shares or securities held in the treasury of the Corporation.
6. CONVERSION RIGHTS. Holders of shares of Preferred Stock may be
granted the right to convert such Preferred Stock to Common Stock of the
Corporation on such terms as may be determined by the Board of Directors prior
to issuance of such Preferred Stock.
47
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ARTICLE V
TRANSACTION WITH INTERESTED DIRECTORS
No contract or other transaction between the Corporation and one or
more or its directors or any other corporation, firm, association or entity in
which one or more of its directors are directors or officers or are
financially interested shall be either void or voidable solely because of such
relationship or interest or solely because such directors are present at the
meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction or solely because their
votes are counted for such purpose if;
(a) The fact of such relationship or interest is disclosed or known
to the Board of Directors or committee which authorizes, approves, or ratifies
the contract or transaction by a vote or consent sufficient for the purpose
without counting the votes or consents of such interested directors; or
(b) The fact of such relationship or interest is disclosed or
known to the shareholders entitled to vote or they authorize, approve, or
ratify such contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to the
Corporation.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves, or ratifies such contract or transaction.
ARTICLE VI
CORPORATE OPPORTUNITY
The officers, directors and other members of management of the
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which the Corporation has
expressed an interest as determined from time to time by the Corporation's
Board of Directors as evidenced by resolutions appearing in the Corporation's
minutes. Once such areas of interest are delineated, all such business
opportunities within such areas of interest which come to the attention of the
officers, directors and other members of management of the Corporation shall
be disclosed promptly to the Corporation and made available to it. The Board
of Directors may reject any business opportunity presented to it and
thereafter any officer, director or other member of management may avail
himself of such opportunity. Until such time as the Corporation, through its
Board of Directors, has designated an area of interest, the officers,
directors and other members of management of the Corporation shall be free to
engage in such areas of interest on their own and this doctrine shall not
limit the rights of any officer, director or other member of management of the
Corporation to continue a business existing prior to the time that such area
of interest is designated by the Corporation. This provision shall not be
construed to release any employee of the Corporation (other than an officer,
director or member of management) from any duties which he may have to the
Corporation.
48
<PAGE>
ARTICLE VII
INDEMNIFICATION
A director of the Corporation shall not be personally liable to the
Corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability to the Corporation or to its
shareholders for monetary damages for (i) any breach of the directors' duty of
loyalty to the Corporation or to its shareholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation
of law; (iii) acts specified in Section 7-5-114 of the Colorado Corporation
Code; or (iv) any transaction from which the director derived an improper
personal benefit.
If the Colorado Corporation code is hereafter amended to authorize the
further elimination or limitation of the liability of a director, then the
liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the Colorado Corporation Code, as so amended.
Any repeal or modification of the foregoing provisions of this Article
by the shareholders of the Corporation shall not affect adversely any right or
protection of a director of the corporation in respect of any acts or
omissions of such director occurring prior to the time of such repeal or
modification,
ARTICLE VIII
AMENDMENT
The Corporation reserves the right to amend its Articles of
Incorporation from time to time in accordance with the Colorado Corporation
Code.
ARTICLE IX
ADOPTION AND AMENDMENT OF BYLAWS
The initial Bylaws of the Corporation shall be adopted by its Board of
Directors. Subject to repeal or change by action of the shareholders, the
power to alter, amend or repeal the Bylaws or adopt new Bylaws shall be vested
in the Board of Directors. The Bylaws may contain any provisions for the
regulation and management of the affairs of the Corporation not inconsistent
with law or these Articles of Incorporation.
ARTICLE X
REGISTERED OFFICE AND REGISTERED AGENT.
The address of the initial registered office of the Corporation is
6950 E. Belleview Avenue, Suite 201, Englewood, Colorado 80111, and the name
of the initial registered agent at such address is Gary A. Agron. Either the
registered office or the registered agent may be changed in the manner
permitted by law.
49
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ARTICLE XI
INITIAL BOARD OF DIRECTORS
The number of directors of the Corporation shall be fixed by the
Bylaws of the Corporation, with the provision that there need be only as many
directors as there are shareholders in the event that the outstanding shares
are held of record by fewer than three shareholders. The initial Board of
Directors of the Corporation shall consist of one (1) director. The name and
address of the person who shall serve as director until the first annual
meeting of shareholders and until his successor is elected and shall qualify
is as follows:
NAME ADDRESS
---- -------
Gary A. Agron 6950 E. Belleview Avenue
Englewood, Colorado
80111
ARTICLE XII
INCORPORATOR
The name and address of the incorporator is as follows:
NAME ADDRESS
Gary A. Agron 6950 E. Belleview Avenue
Englewood, Colorado
80111
IN WITNESS WHEREOF, the above-named incorporator has signed these Articles of
Incorporation on this 13th day of March, 1990.
By: /s/ Gary A, Argon
-----------------------------------------
Gary A. Argon
50
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provision. of the Colorado Corporation Act, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation.
FIRST: The name of the corporation is ST. JOSEPH CORP. VI.
SECOND: The following amendment to the Articles of Incorporation was
adopted on July 26, 1993, by a vote of the shareholders The number of shares
voted for the amendment was sufficient for approval:
RESOLVED, that Article I is amended to change the Company's name to
"PETROSAVFRS INTERNATIONAL, INC."
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: Not applicable.
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital and the amount of stated capital as changed by such amendment,
are as follows: Not applicable.
Dated: July 26, 1993
PETROSAVERS INTERNATIONAL, INC.
(formerly St. Joseph Corp. VI)
By: /s/ Ralph W. LeBlanc
-----------------------------
Ralph W. LeBlanc
President
and by: /s/ Robert M. Bingham
-----------------------------
Robert M Bingham
Secretary
51
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the undersigned
corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
FIRST: The name of the corporation is Petrosavers International, Inc.
SECOND: The following amendment to the Articles of Incorporation was
adopted on August 19, 1996, by a vote of the shareholders. The number of shares
voted for the amendment was sufficient for approval:
RESOLVED, that Article I is amended to change the Company's name to "HANA
Acquisitions, Inc."
THIRD-. The manner, if not set forth in such amendment, in which any
exchange, reclassification or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: Not applicable.
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital and the amount of stated capital as changed by such amendment,
are as follows: Not applicable.
Dated: August 19, 1996
HANA ACQUISITIONS, INC.
(formerly Petrosavers International, Inc.)
By: /s/ James A. Eller
------------------------------
James A. Eller
President
52
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
HANA ACQUISITIONS, INC.
Pursuant to the provisions of Sections 7-2-107 and 7-2-109 of the Colorado
Revised Statutes, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation.
FIRST: The name of the corporation is Hana Acquisitions, Inc.
SECOND: The following amendment to the Articles of Incorporation of the
corporation was duly adopted by unanimous consent of the Board of Directors of
the Corporation in the manner prescribed by the Colorado Revised Statutes, and
by affirmative Vote of stockholders of the Corporation holding two-thirds of the
shares entitled to vote at a meeting held June 9, 1997, to-wit:
ARTICLE I - NAME
The name of this corporation is: "LIBERTY MINT, LTD."
THIRD: This amendment does not provide for any exchange, reclassification
or cancellation of issued shares.
FOURTH: This amendment does not effect a change in the stated capital of
the Corporation.
IN WITNESS WHEREOF, the undersigned President and Secretary, having been
thereunto duly authorized, has executed the foregoing Articles of Amendment for
the CORPORATION UNDER THE PENALTIES OF PERJURY THIS 16TH day of June, 1997.
HANA ACQUISITIONS, INC,
By: /s/ Gary McAdam
-------------------------------
Gary McAdam, President and Secretary
STATE OF COLORADO )
)ss
COUNTY OF DOUGLAS )
53
ARTICLES OF INCORPORATION
OF
LIBERTY MINT, LTD.
THE UNDERSIGNED, having associated ourselves together for the purpose
of forming a corporation for the transaction of business and the promotion and
conduct of the objects and purposes hereinafter stated, under the provisions of
and subject to the requirements of the laws of the State of Nevada, do make,
record and file these Articles of Incorporation, in writing, and we do hereby
certify:
ARTICLE I
NAME
The name of this Corporation shall be: Liberty Mint, Ltd.
ARTICLE II
PURPOSE
The purpose for which said Corporation is formed and the nature of the
objects proposed to be transacted and carried on by it is to engage in any and
all other lawful activity, as provided by the laws of the State of Nevada.
ARTICLE III
CAPITAL STOCK
The authorized amount of Capital Stock of the Corporation shall be
Fifty Million (50,000,000) shares of Common Stock at $.001 par value per share,
there shall also be Ten Million (10,000,000) shares of Preferred Stock at $.001
par value per share, which shares shall be issued at the discretion of the Board
of Directors. The Capital Stock may be increased or
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decreased from time to time in accordance with the provisions of the laws of the
State of Nevada.
ARTICLE IV
GOVERNING BOARD
The members of the Governing Board of the Corporation are styled
Directors. The initial board of directors shall consist of five (5) members. The
names and post office addresses of the First Board of Directors are as follows:
FIRST BOARD OF DIRECTORS
NAME ADDRESS
William C. Schmidt 88 NE 5th Ave
Del Ray Beach, Florida 33483
John Pennington 88 NE 5th Ave
Del Ray Beach, Florida 33483
Robert Joyce 3255 Sunset Blvd. #2200
Hollywood, California 90028
Daniel Southwick 651 Columbia Avenue
Provo, Utah 84604
Creed Law P.O. Box 575
Jackson Hole, Wyoming 83001
ARTICLE V
INCORPORATOR
The name and address of the incorporator signing these Articles of
Incorporation, who is above the age of eighteen (18) years, is as follows:
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<PAGE>
NAME ADDRESS
Cletha A. Walstrand 136 East South Temple, Suite 1700-A
Salt Lake City, Utah 84111
ARTICLE VI
RESIDENT AGENT
The name and address of the Resident Agent is as follows:
NAME ADDRESS
Gateway Enterprises, Inc. 3230 East Flamingo Road, Suite 156
Las Vegas, Nevada 89121
and Gateway Enterprises, Inc., does hereby certify that on the _24th__ day of
May, 1999, they accepted the appointment as Resident Agent of the Corporation in
accordance with Section 78.090, N.R.S.
/s/
-------------------------------------
ARTICLE VII
INDEMNIFICATION
No director or officer of the Corporation shall be personally liable to
the Corporation or any of its stockholders for damages for breach of fiduciary
duty as a director or officer; provided, however, that the foregoing provision
shall not eliminate or limit the liability of a director or officer (i) for acts
or omissions which involve intentional misconduct, fraud or knowing violation
56
<PAGE>
of law, or (ii) the payment of dividends in violation of Section 78.300 of the
Nevada Revised Statutes. Any repeal or modification of an Article by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation of the personal liability of a director or
officer of the Corporation for acts or omissions prior to such repeal or
modification.
ARTICLE VIII
CONTROLLING INTEREST
The provisions of NRS 78.378 to 78.3793, inclusive shall not be
applicable to any acquisition of a controlling interest in the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 21st day
of May, 1999.
/s/
-----------------------------------
Cletha A. Walstrand
State of Utah )
):ss.
County of Salt Lake )
On the 21st day of May, 1999, personally appeared before me, a notary
public (or judge or other authorized person, as the case may be), duly
commissioned and sworn, Cletha A. Walstrand, personally known or proven to me on
the basis of satisfactory evidence to be the person whose name is subscribed to
the foregoing instrument and who acknowledged that she executed the instrument.
IN WITNESS WHEREOF, I have executed this notary and affixed my official
seal.
NOTARY SEAL
/s/
- -----------------------------------
NOTARY PUBLIC
My Commission Expires:__4-19-2001__
57
PLAN AND ARTICLES OF MERGER
OF LIBERTY MINT, LTD., a Colorado corporation
AND LIBERTY MINT, LTD., a Nevada corporation
The corporations named herein do hereby adopt this Plan and these
Articles of Merger pursuant to Section 7-111-101 of the Colorado Corporate Law
and do consent and agree to all of the terms and conditions set forth herein.
I. NAMES
The name of the corporation to be merged is Liberty Mint, Ltd., a
Colorado corporation. The name of acquiring corporation is Liberty
Mint, Ltd., a Nevada corporation,
hereinafter designated "Surviving Corporation", with its principal office
located at 975 N. 1430 W., Orem, UT 84057.
The name of the Surviving Corporation shall be Liberty Mint, Ltd., as
of the date of filing this Plan with the Secretary of State of the State of
Colorado.
II. TERMS AND CONDITIONS
A. TIME. The merger shall be effective when this document is delivered
to the Secretary of State for the State of Colorado and has been stamped
"received."
B. LAW. The laws which are to govern the terms of this merger are the
laws of Colorado. The surviving corporation shall continue to be governed by its
existing Articles of Incorporation and By-Laws.
C. EFFECT OF MERGER. Upon the effective date of such merger, the
following results could occur:
(1) The two corporations which are parties to the Plan of
Merger shall be a single corporation, which shall be the surviving
corporation provided for in the Plan of Merger.
(2) The separate existence of all corporations parties to the
Plan of Merger, except the surviving corporation provided for in the
Plan of Merger, shall end.
(3) Such surviving corporation shall have the rights,
privileges, immunities and powers and shall be subject to all duties
and obligations of a corporation organized under the laws of the State
of Nevada.
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(4) Such surviving corporation shall thereupon and thereafter
possess all the right, privileges, immunities, and franchises, as well
of a public as of a private nature, of each of the merged corporations;
and all property, real, personal and mixed, and all debts due on
whatever account, including subscriptions to shares and all other
choses in action, and all and every other interest, of or belonging to
or due to each of the corporations so merged, shall be taken and deemed
to be transferred to and vested in such single corporation without
further act or deed; and the title to any real estate, or any interest
therein, vested in any of such corporations shall not revert or be in
any way impaired by reason of such merger.
(5) Such surviving corporation shall henceforth be responsible
and liable for all the liabilities and obligations of each of the
corporations so merged; and any claim existing or action or proceeding
pending by or against any of such corporations may be prosecuted as if
such merger had not taken place, or such surviving corporation may be
substituted in its place. Neither the rights of creditors nor any liens
upon the property of such corporation shall be impaired by such merger.
III. MANNER AND BASIS OF CONVERTING SHARES
Liberty Mint, Ltd., a Colorado corporation, the corporation which is to
be merged into Liberty Mint, Ltd., a Nevada Corporation, has 21,601,470 shares
of Common Stock issued and outstanding.
Shareholders of Liberty Mint, Ltd., a Colorado corporation will
exchange their shares on a one for one basis for shares of Liberty Mint, Ltd., a
Nevada corporation.
IV. SHAREHOLDERS APPROVAL
This Plan and these Articles of Merger were approved by the
shareholders of Liberty Mint, Ltd., a Colorado corporation on May 7, 1999 by a
vote of 20,365,530 for and none against which represented approval by 90.8% of
the shares entitled to vote on the issue.
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<PAGE>
This Plan and these Articles of Merger were approved by the
shareholders of Liberty Mint, Ltd., a Nevada corporation on June 1, 1999 by a
unanimous vote of the shares entitled to vote on the issue.
This Plan and these Articles of Merger were executed in duplicate by
the President and Secretary of both corporations this 4th day of October, 1999.
Attest: Liberty Mint, Ltd.
(a Colorado corporation)
BY: /s/ BY: /s/
----------------------------- -------------------------------
Robert Joyce Daniel R. Southwick
Secretary President
Attest: Liberty Mint, Ltd.
(a Nevada corporation)
BY: /s/ BY: /s/
------------------------- ----------------------------------
Robert Joyce Daniel R. Southwick
Secretary President
STATE OF UTAH )
:ss
County of _Utah__ )
I, ___Vicky Lemon____________________________________, a Notary
Public, hereby certify that on the _4th_ day of _October__________, 1999, Daniel
R. Southwick and Robert Joyce, personally appeared before me who, being by me
first duly sworn, severally declared that they are the persons who signed the
foregoing document as President and Secretary, respectively, of Liberty Mint,
Ltd., a Colorado corporation and that the statements therein contained are true.
DATED this 4th day of __October_____, 1999.
MY COMMISSION EXPIRES: /s/
March 9, 2002 --------------------
NOTARY PUBLIC
Residing in:
[SEAL OF NOTARY]
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STATE OF UTAH )
:ss
County of _Utah____ )
I, _____Vicky Lemon___________________________, a Notary Public, hereby
certify that on the _4th day of _____October________, 1999, Daniel R. Southwick
and Robert Joyce, personally appeared before me who, being by me first duly
sworn, severally declared that they are the persons who signed the foregoing
document as President and Secretary, respectively, of Liberty Mint, Ltd., a
Nevada corporation and that the statements therein contained are true.
DATED this 4th day of October, 1999.
MY COMMISSION EXPIRES:
March 9, 2002
NOTARY PUBLIC
Residing in:
[SEAL OF NOTARY]
61
BYLAWS
OF
LIBERTY MINT, LTD.
62
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TABLE OF CONTENTS
ARTICLE I OFFICE ..............................................................1
Section 1.1 Office ...................................................1
ARTICLE II SHAREHOLDERS' MEETING...............................................7
Section 2.1 Annual Meetings ...................................I
Section 2.2 Special Meetings ..................................2
Section 2.3 Notice of Shareholders Meetings ....................2
Section 2.4 Waiver of Notice ...................................3
Section 2.5 Place of Meeting ...................................3
Section 2.6 Closing of Transfer Books or Fixing Records Date....3
Section 2.7 Quorum of Shareholders .............................4
Section 2.8 Voting Lists .......................................5
Section 2.9 Voting .............................................5
Section 2.10 Proxies.............................................5
Section 2.11 Informal Action by Shareholders.................... 6
ARTICLE III BOARD OF DIRECTORS ................................................6
Section 3.1 General Powers .........................................6
Section 3.2 Number, Tenure and Qualifications ......................6
Section 3.3 Election of the Board of Directors .....................6
Section 3.4 Regular Meetings....................................... 6
Section 3.5 Special Meeting ........................................7
Section 3.6 Waiver of Notice .......................................7
Section 3.7 Quorum .................................................7
Section 3.8 Manner of Acting .......................................8
Section 3.9 Powers of Directors ....................................8
Section 3.10 Specific Powers of Directors ...........................8
Section 3.11 Vacancies ..............................................10
Section 3.12 Removals ..............................................10
Section 3.13 Resignations ..........................................11
Section 3.14 Presumption of Assent .................................11
Section 3.15 Compensation ..........................................11
Section 3.16 Emergency Power .......................................12
Section 3.17 Chairman ..............................................12
ARTICLE IV OFFICERS ..........................................................12
Section 4.1 Number ..................................................12
Section 4.2 Election and Term of Office .............................12
Section 4.3 Resignation .............................................13
Section 4.4 Removal .................................................13
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Section 4.5 Vacancies ...............................................13
Section 4.6 President ...............................................13
Section 4.7 Vice President ..........................................14
Section 4.8 Secretary................................................14
Section 4.9 Treasurer ...............................................15
Section 4.10 General Manager ........................................15
Section 4.11 Other Officers .........................................16
Section 4.12 Salaries ...............................................16
Section 4.13 Surety Bonds ...........................................16
ARTICLE V COMMITTEES .........................................................16
Section 5.1 Executive Committee .....................................16
Section 5.2 Other Committees ........................................17
ARTICLE VI CONTRACTS, LOANS, DEPOSITS AND CHECKS..............................17
Section 6.1 Contracts ...............................................17
Section 6.2 Loans ...................................................17
Section 6.3 Deposits ................................................18
Section 6.4 Checks and[ Drafts ......................................18
Section 6.5 Bonds and Debentures ....................................18
ARTICLE VII CAPITAL STOCK ....................................................19
Section 7.1 Certificate of Shares ...................................19
Section 7.2 Transfer of Shares ......................................19
Section 7.3 Transfer Agent and Registrar.............................20
Section 7.4 Lost or Destroyed Certificates ..........................20
Section 7.5 Consideration for Shares.................................20
Section 7.6 Registered Shareholders..................................20
ARTICLE VIII INDEMNIFICATION..................................................21
Section 8.1 Indemnification..........................................21
Section 8.2 Other Indemnification....................................21
Section 8.3 Insurance ...............................................22
Section 8.4 Settlement by Corporation ...............................21
ARTICLE IX AMENDMENT .........................................................22
ARTICLE X FISCAL YEAR ........................................................23
ARTICLE XI DIVIDENDS .........................................................23
ARTICLE CORPORATE SEAL .......................................................23
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BYLAWS
OF
LIBERTY MINT, LTD.
ARTICLE I
OFFICE
SECTION 1.1 OFFICE. The principal office of the Corporation outside the
State of Nevada shall be located at 651 Columbia Lane, Provo, Utah 84604. The
Corporation may maintain such other offices, within or without the State of
Nevada, as the Board of Directors may from time to time designate the location
of the principal office may be changed by the Board of Directors.
ARTICLE II
SHAREHOLDERS' MEETING
SECTION 2.1 ANNUAL MEETINGS The annual meeting of the shareholders of
tile Coil)oration shall be held at such place within or without the State of
Nevada as shall be set forth in compliance with these Bylaws. 'The meeting shall
be held oil the first Monday of April of each year beginning with the year 2000
at 10:00 a.m.. If such day is a legal holiday, the meeting shall be on the next
business day. This meeting shall be for the election of directors and for the
transaction of such other business as may properly come before it.
No change of the time or place of a meeting for the election of
directors as fixed by tile Bylaws, shall be made within sixty (60) days before
the election is to be held. In case of any change in such time or place for such
election of directors, notice thereof shall be given to each stockholder
entitled to vote, in person, or by letter mailed to his last known post office
address as shown on the Corporate books, ten (10) days before the election is
held.
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In the event that such annual meeting is omitted by oversight or
otherwise on the date herein provided for, the directors shall cause a meeting
in lieu thereof to be held as soon thereafter as_ conveniently maybe called, and
any business transacted or elections held at such meeting shall be as valid as
if transacted or held at the annual meeting. If the election of directors shall
not be held oil the date designated herein for an annual meeting of
shareholders, or at any adjournment thereof, the Board of Directors shall cause
the election to be held at a special meeting of shareholders as soon thereafter
as may conveniently be called. Such subsequent meetings shall be called in the
same manner as is provided for the annual meeting of shareholders.
SECTION 2.2 SPECIAL MEETINGS., Special meetings of shareholders, other
than those regulated by statute, may be called at any time by the President, or
by a majority of the directors, and must be called by the President upon written
request of the holders of not less than 10% of the issued and outstanding shares
entitled to vote at such special meeting.
SECTION 2.3 NOTICE OF SHAREHOLDERS' MEETINGS. The President, Vice
President and Secretary shall give written notice stating the place, day and
hour of the meeting, and in the case of a special meeting the purpose or
purposes for which the meeting is called, which shall be delivered not less then
ten nor more than sixty days before the day of the meeting, either personally or
by mail to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
books of the Corporation, with postage thereon prepaid.
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Any meeting of which all shareholders shall at any time waive or have
waived notice in Writing shall be a legal meeting for the transaction of
business notwithstanding that notice has not been given as hereinbefore
provided.
SECTION 2.4 WAIVER OF NOTICE. Whenever any notice is required to be
given by these Bylaws, or the Articles of Incorporation, or by any of the
Corporation Laws of the State of Nevada, a shareholder may waive the notice of
meeting by attendance, either in person or by proxy, at the meeting, or by so
stating in writing, either before or after such meeting. Attendance- at a
meeting for the express purpose of objecting that tile meeting was not lawfully
called or convened shall not, however, constitute a waiver of notice.
SECTION 2.5 PLACE OF MEETING- of the Board of Directors may designate
any place, either with or without the State of Nevada, as the place of meeting
for any annual meeting or for any special meeting called by the Board of
Directors, If no designation is made, or if a special meeting be otherwise
called, the place of meeting shall be the office of the Corporation, in the City
of Provo, Utah.
SECTION 2.6 CLOSING OF TRANSFER BOOKS OR FIXING RECORDS Date. For the
purpose of determining shareholders entitled to notice or to vote at any meeting
of shareholders or any adjournment thereof, or shareholder entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock transfer books be closed for a period not to exceed in any case
fifty (50) days. If the stock transfer books shall be closed for the purpose of
determining shareholders, such books shall be closed for at least ten (10) days
immediately preceding the date determined to be the date of record. In lieu of
closing the stock transfer books, the Board of Directors may fix in advance a
date as the record date for any such
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determination of shareholders, such date in any case to be not more than sixty
(60) days and in case of a meeting of shareholders not less than ten (10) days
prior to the date on which the particular action requiring such determination of
shareholders is to be taken. If the stock transfer books are not closed and no
record date is fixed for the determination of shareholders entitled to notice or
to vote at a meeting of shareholders or shareholders entitled to receive payment
of a dividend, the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be, shall be deemed the
record for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof
SECTION 2.7 QUORUM OF SHAREHOLDERS. Except as herein provided and as
otherwise provided by law, at any meeting of shareholders a minority in interest
of all the shares issued and outstanding represented by shareholders of record
in person or by proxy shall constitute a quorum, but a less interest may adjourn
any meeting and the meeting may be held as adjourned without further notice;
provided, however, that directors shall not be elected at the meeting so
adjourned.
If notice of such adjourned meeting is sent to the stockholders
entitled to receive the same, such notice also containing a statement for the
purpose of the meeting and that the previous meeting failed for lack of a quorum
and that under the provisions of this Section it is proposed to hold the
adjourned meeting with a quorum of those present, then any number of
stockholders, in person or by proxy, shall constitute a quorum at such meeting
unless otherwise provided by statute. When a quorum is present at any meeting, a
majority in interest of the shares represented thereat shall decide any question
brought before such meeting, unless the
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question is one upon which the express provision of law or of the Articles of
Incorporation or of these Bylaws a larger or different vote is required, in
which case such express provision shall govern and control the decision of such
question.
SECTION 2.8 VOTING LISTS The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make a complete list of
the shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which list shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder, for
any purpose germane to the meeting, during the whole time of tile meeting. The
original stock transfer books shall be prima-facie evidence as to which
shareholders are entitled to examine such fist or transfer books or to vote at
any meeting of shareholders.
Failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting of the shareholders.
SECTION 2.9 VOTING-. A holder of an outstanding share entitled to vote
at a meeting may vote at such meeting in person or by proxy. Except as may
otherwise be provided in the Articles of Incorporation, every shareholder shall
be entitled to one vote for each share outstanding in his name on the record of
shareholders. Except as herein or in the Articles of Incorporation otherwise
provided, all corporate action shall be determined by a majority of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
SECTION 2.10 PROXIES At all meetings of shareholders, a shareholder may
vote in person or by proxy executed hi writing by tile shareholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the secretary
of the Corporation before or at the time of the
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meeting. No proxy shall be valid after eleven months from the date of its
execution, unless otherwise provided in the proxy.
SECTION 2.11 INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at a meeting of the shareholders, or any action which may be taken at a
meeting of the shareholders, may be taken without a meeting of the shareholders,
if a consent in writing, setting forth the action so taken, shall be signed by
all of the shareholders entitled to vote with respect to the subject matter
thereof ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1 GENERAL POWERS. Ile business and affairs of the Corporation
shall be managed by its ]Board of Directors. The Board of Directors may adopt
such rules and regulations for the conduct of their meetings and the management
of the Corporation as they deem proper.
SECTION 3.2 NUMBER, TENURE AND QUALIFICATIONS. The number of directors
for the Board of Directors of the Corporation shall be not less than three (3)
nor more than nine (9). Each director shall hold office until the next annual
meeting of the shareholders and until his successor shall have been elected and
qualified. Directors need not be residents of the State of Nevada or
shareholders of the Corporation.
SECTION 3.3 ELECTION OF THE BOARD OF DIRECTORS. The Board of Directors
shall be chosen by ballot at the annual meeting of shareholders or at any
meeting held in place thereof as provided by law.
SECTION 3.4 REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than by this Bylaw, immediately
following and at the same place as the annual meeting of the shareholders. The
Directors may hold their meetings and have one or
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more offices, and keep the books of the corporation outside the State of Nevada,
at any office or offices of the Corporation or at any other place as they may
from time to time by resolution determine.
Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment by
which all persons participating in the meeting can hear each other and
participation in a meeting under this subsection shall constitute presence in
person at the meeting, pursuant to Nevada Revised Statute, Section 78.'315.
SECTION 3.5 SPECIAL MEETING. Special meetings of the Board of
Directors-may be called by order of the Chairman of the Board, the President or
by one-third of the directors. The Secretary shall give notice of the time,
place and purpose or purposes of each special meeting by mailing the same at
least two days before the meeting or by telephoning or telegraphing the same at
least one day before the meeting to each director.
SECTION 3.6 WAIVER OF NOTICE. Whenever any notice whatsoever is
required to be given by these Bylaws, or the Articles of the corporation of the
Corporation, or by any of the Corporation Laws of the State of Nevada, a
director may waive the notice of meeting by ATTENDANCE IN PERSON AT THE MEETING,
OR BY SO STATING IN writing, either before or after such meeting. Attendance at
a meeting for the express purpose of objecting that the meeting was not lawfully
called or convened shall not, however, constitute a waiver of notice.
SECTION 3.7 QUORUM. A majority of the members of tile Board of
Directors shall constitute a quorum for the transaction of business, but less
than a quorum may adjourn any meeting from time to time until a quorum shall be
present, whereupon the meeting may be held,
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as adjourned, without further notice. At any meeting at which every director
shall be present, even though without any notice, any business may be
transacted.
SECTION 3.8 At all meetings of the Board of Directors, each director
shall have one vote. The act of a majority present at a meeting shall be the act
of the Board of Directors, provided a quorum is present. Any action required to
be taken or which may be taken at a meeting of the Board of Directors, may be
taken without a meeting of the Directors, if a consent in writing setting forth
the action so taken shall be signed by all the directors. The directors may
conduct a meeting by means of a conference telephone or any similar
communication equipment by which all persons participating in the meeting can
hear each other.
SECTION 3.9 POWERS OF DIRECTORS. The Board of Directors shall have the
responsibility for the entire management of the business of the Corporation. In
the management and control of tile property, business and affairs of the
Corporation, the Board of Directors is hereby vested with all of the powers
possessed by the Corporation itself so far as to this delegation of authority is
not inconsistent with the laws of the State of Nevada and v@itli the Articles of
Incorporation or with these Bylaws. The Board of Directors shall have the power
to determine what constitutes net earnings, profits and surplus, respectively,
and what amounts shall be reserved for working capital and for any other purpose
and what amounts shall be declared as dividends, and such determination by the
Board of Directors shall be final and conclusive.
SECTION 3.10 SPECIFIC POWERS OF DIRECTORS Without prejudice to such
general powers, it is hereby expressly declared that tile directors shall have
the following powers to-'wit:
(1) To adopt and alter a common seal of the corporation.
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(2) To make and change regulations, not inconsistent with these
By-Laws, for the management of the cog) oration's affairs and
business.
(3) To purchase or otherwise acquire for the corporation any
property, rights' or privileges which the corporation is
authorized to acquire.
(4) To pay for any property purchased for the corporation either
wholly or partly in money, stock, bonds, debentures or other
securities of the corporation.
(5) To borrow money and to make and issue notes, bonds, and other
negotiable and transferable instruments, mortgages, deeds of
trust and trust agreements, and to do every act and thing
necessary to effectuate the same.
(6) To remove any officer for cause, or any officer other than the
President summarily without cause, and in their discretion,
from time to time, to develop the powers and duties of any
officer upon any other person for the time being.
(7) To appoint and remove or suspend such subordinate officers,
agents or factors as they may deem necessary and to determine
their duties and fix, and from time to time change their
salaries or remuneration, and to require security as and when
they think fit.
(8) To confer upon any officer of the corporation the power to
appoint, remove and suspend subordinate officers, agents and
factors. (9) To determine who shall be authorized oil the
corporation's behalf to make
and sign bills, notes, acceptances, endorsements,
checks, releases, receipts, contracts and other
instruments.
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(10) To determine who shall be entitled to vote-iii the name and
behalf of the corporation, or to assign and transfer, any
shares of stock, bonds, or other securities of other
corporations held by this corporation.
(11) To delegate any of the powers of the Board in relation to the
ordinary business of the corporation to any standing or
special committee, or to any officer or agent (with power to
sub-delegate), upon such terms as they think fit.
(12) To call special meetings of the stockholders for any purpose or
purposes. (13) The directors shall have the right and the power to
propose any amendment to the
ByLaws of this corporation at any meeting whether called for
that purpose or not and to submit to the next regular meeting
of directors said proposal or amendment to the By-Laws of this
corporation.
SECTION 3.11 Vacancies. A vacancy in the Board of Directors shall be
deemed to exist in case of death, resignation or removal of any director, or if
the authorized number of directors be increased, or if the shareholders fail at
any meeting of shareholders at which any director is to be elected, to elect the
full authorized number to be elected at that meeting. Any vacancy occurring in
the Board of Directors may be filled by an affirmative vote of the majority of
the remaining directors though less than a quorum of the Board of Directors,
unless otherwise provided by law or the Articles of Incorporation. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office. Any directorship to be filled by reason of an increase in
the number of directors shall be filled by election at the annual meeting or at
a special meeting of shareholders called for that purpose.
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SECTION 3.12 REMOVALS. Directors may be removed at any time, at a
meeting called expressly for that put-pose by a vote of the shareholders holding
a majority of the shares issued and outstanding and entitled to vote. Such
vacancy shall be filled by the directors there in office, though less that of a
quorum, to hold office until the next annual meeting or until his successor is
duly elected and qualified, except that any directorship to be filled by reason
of removal by tile shareholders may be filled by election, by the shareholders,
at the meeting at which the director is removed. No reduction of the authorized
number of directors shall have the effect of removing any director prior to the
expiration of his term of office.
SECTION 3.13 RESIGNATIONS. A director may resign at any time by
delivering written notification thereof to the President or Secretary of the
Corporation. Such resignation &ball become effective upon its acceptance by the
Board of Directors; provided, however, that if the Board of Directors has not
acted thereon within ten days from the date of its delivery, the resignation
shall upon the tenth day be deemed accepted.
SECTION 3.14 PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his dissent shall be entered in the minutes of tile meeting or unless he
shall f:ile his written dissent to such action with the person acting as the
Secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the Corporation immediately after
the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action. SECTION 3.1.5 COMPENSATION. By
resolution of tile Board of Directors, the directors shall be paid 'd their
expenses, if any, of attendance at each meeting of the Board of Directors, and
may be
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paid a fixed slim for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefore
SECTION 3.16 EMERGENCY POWER. When, due to a national disaster or
death, a majority of the directors are incapacitated or otherwise unable to
attend the meetings and function as directors, the remaining members of the
Board of Directors shall have all the powers necessary to function as a complete
Board and, for the purpose of doing business and filling vacancies, shall
constitute a quorum until such time as all directors can attend or vacancies can
be filled pursuant to these Bylaws,
SECTION 3. 1.7 CHAIRMAN. The Board of Directors may elect from its own
number a Chairman of the Board, who shall preside at all meetings of the Board
of Directors, and shall perform such other duties as may be prescribed from time
to time by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 4.1 NUMBER. The officers of the Corporation shall be a
President, one or more Vice Presidents, a Secretary-y and a Treasurer, each of
whom shall be elected by a majority of the Board of Directors. Such other
officers and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. In its discretion the Board of Directors
may leave unfilled for any such period as it may determine any office except
those of President and Secretary. Pursuant to Nevada Revised Statute, Sect
78.130 any two or more offices may be held by the same person, including the
offices of the President and Secretary. Officers may or may not be directors or
shareholders of the Corporation.
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SECTION 4.2 ELECTION AND TERM OF OFFICE.. 'nie officers of the
Corporation are to be elected by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the shareholders. ff
the election of officers shall not be held at such meeting, such election shall
be held as soon thereafter as convenient. Each officer shall hold office until
his successor shall have been daily elected and shall have qualified or until
his death or until he shall resign or shall have been removed in the manner
hereinafter provided.
SECTION 4.3 Any officer may resign at any time by delivering a written
resignation either to the President or to the Secretary. Unless otherwise
specified therein, such. resignation shall take effect upon delivery.
SECTION 4.4 REMOVAL. Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the Corporation will
be served thereby but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights. Any such removal shall
require a majority vote of the Board of Directors, exclusive of the officer in
question if he is also a director.
SECTION 4.5 VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, or if a new office shall be
created, may be fined by the Board of Directors for the unexpired portion of the
term.
SECTION 4.6 PRESIDENT. The President shall be the chief executive and
administrative officer of the Corporation. He shall preside at all meetings of
the shareholders and, in the absence of the Chairman of the Board, at meetings
of the Board of Directors. He shall exercise such duties as customarily pertain
to the office of President and shall have general and active
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supervision over the property, business and affairs of the Corporation and over
its several officers. He may appoint officers, agents or employees other than
those appointed by the Board of Directors. He may sign, execute and deliver in
the name of the Corporation, powers of attorney, certificates of stock,
contracts, bonds, deeds, mortgages and other obligations and shall perform such
other duties as may be prescribed from time to time by the Board of Directors or
by the Bylaws.
SECTION 4.7 VICE PRESIDENT, The Vice President shall have such powers
and perform such duties as may be assigned to him by the Board of Directors or
the President. In the absence or disability of the President, the Vice President
designated by the board or tile President shall perform the duties and exercise
the powers of the President. hi the event there is more than one Vice President
and the Board of Directors has not designated which Vice President is to act as
President, then the Vice President who was elected first shall act as President.
A Vice President may sign and execute contracts and other obligations pertaining
to the regular course of his duties.
SECTION 4.8 SECRETARY. The Secretary shall keep the minutes of all
meetings of the shareholders and of the Board of Directors and to the extent
ordered by the Board of Directors or the President, tile minutes of meetings of
all committees. He shall cause notice to be given of the meetings of
shareholders, of the Board of Directors and any committee appointed by the
Board. He shall have custody of the corporate seal and general charge of the
records, documents and papers of the Corporation not pertaining to the
performance of the duties vested in other officers, which shall at all
reasonable times be open to the examination of any director. He may sign or
execute contracts with the President or Vice President thereunto authorized in
the name
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of the Corporation and affix the seal of the Corporation thereto. He shall
perform such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws. He shall be sworn to the faithful discharge of his
duties. Assistant Secretaries shall assist the Secretary and shall keep and
record such minutes of meetings as shall be directed by the Board of Directors.
SECTION 4.9 TREASURER. The Treasurer shall have general custody of the
collection and disbursement of funds of the Corporation for collection checks,
notes, and other obligations, and shall deposit the same to the credit of the
Corporation in such bank or banks or depositories as the Board of Directors may
designate. He may sign, with the President, or such other persons as may be
designated for the purpose by the Board of Directors, all bills of exchange or
promissory notes of the Corporation. He shall enter or cause to be entered
regularly fii the books of the Corporation full and accurate accounts of all
monies received and paid by him on account of the Corporation; shall at all
reasonable times exhibit his books and accounts to any director of the
Corporation upon application at the office of the Corporation during business
hours; and, whenever required by the Board of Directors or the President, shall
render a statement of his accounts. Upon request by the Board of Directors, he
shall give the corporation a bond for the faithful discharge of his duties in
such amount and with such surety as the Board shall prescribe. He shall perform
such other duties as may be prescribed from time to time by the Board of
Directors or by the Bylaws.
SECTION 4. 1 0 GENERAL MANAGER- The Board of Directors may employ and
appoint a General Manager who may, or may not, be one of the officers or
directors of the Corporation. If employed by the Board of Directors he shall be
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the chief operating officer of the Corporation and, subject to the directions of
the Board of Direction, shall have general charge of the business operations of
the Corporation and general supervision over its employees and agents. He shall
have the exclusive management of the business of the Corporation and of all of
its dealings, but at all times subject to the control of the Board of Directors.
Subject to the approval of the Board of Directors or the executive committee,
lie shall employ all employees of the Corporation, or delegate such employment
to subordinate officers, or such division officers, or such division chiefs, and
shall have authority to discharge any person so employed. He shall make a
quarterly report to the President and directors, or more often if required to do
so, setting forth the result of the operations under his charge, together with
suggestions looking to the improvement and betterment of the condition of the
Corporation, and to perform such other duties as tile Board of Directors shall
require.
SECTION 4.11 OTHER OFFICERS. Other officers shall perform such duties
and haves such powers as may be assigned to them by the Board of Directors.
SECTION 4.12 SALARIES. The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by the Board of
Directors except that the Board of Directors may delegate to any person or group
of persons the power to fix the salaries or other compensation of any
subordinate officers or agents. No officer shall be prevented from receiving any
such salary or compensation by reason of the fact that lie is also a director of
the Corporation.
SECTION 4.13 SURETY BONDS. In case the Board of Directors shall so
require, any officer or agent of the Corporation shall execute to the
Corporation a bond in such sums and with sureties as the Board of Directors may
direct, conditioned upon the faithful performance of his duties to
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the Corporation, including responsibility for negligence and for the accounting
for all property, monies or securities of the Corporation which may come into
his hands.
ARTICLE V
COMMITTEES
SECTION 5.1 EXECUTIVE COMMITTEE. The Board of Directors may appoint
from among its members an Executive Committee of not less than three (3) nor
more than nine (9) members, one of whom shall be the President, and shall
designate one or more of its members as alternates to serve as a member or
members of the Executive Committee in the absence of a regular member or
members. The Board of Directors reserves to itself alone the power to declare
dividends, ISSUE STOCK, RECOMMEND to shareholders any action requiring their
approval change the membership of any committee at any time, fill vacancies
therein, and discharge any committee either with or without cause at any time.
Subject to the foregoing limitations, the Executive Committee shall possess and.
exercise all other powers of the Board of Directors during the intervals between
meetings.
SECTION 5.2 OTHER Committees. Ile Board of Directors may also appoint
from among its own members such other committees as the Board may determine,
which shall in each case consist of not less than two directors, and which shall
have such powers and duties as shall from time to time be prescribed by the
Board. The President shall be a member ex officio of each committee appointed by
the Board of Directors. A majority of the members of any committee may fix its
rules of procedure.
ARTICLE VI
CONTRACTS, LOANS, DEPOSITS AND CHECKS
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SECTION 6.1 Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute and
deliver any instrument in the name of and on behalf of the Corporation, and such
authority may be general or confined to specific instances.
SECTION 6.2 Loans. No loan or advances shall be contracted on behalf of
the Corporation, no negotiable paper or other evidence of its obligations under
any loan or advance shall be issued in its name, and no property of the
Corporation shall be mortgaged, pledged, hypothecated or transferred as security
for the payment of any loan, advance, indebtedness or liability of the
Corporation unless and except as authorized by the Board of Directors. Any such
authorization may be general or con-fined to specific instances.
SECTION 6.3 DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select, or as may be selected by any officer or agent authorized to do so by
tile Board of Directors.
SECTION 6.4 CHECKS AND Drafts. AR notes, drafts, acceptances, checks,
endorsements and evidences of indebtedness of the Corporation shall be signed by
such officer or officers of such agent or agents of the Corporation and in such
manner as the Board of Directors from time to time may determine. Endorsements
for deposit to the credit of the Corporation in any of its duly authorized
depositories shall be made in such manner as the Board of Directors from time to
time may determine.
SECTION 6.5 BONDS AND Debentures. Every bond or debenture issued by the
Corporation shall be evidenced by ail appropriate instrument which shall be
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signed by the President or a Vice President and by the Treasurer or by the
Secretary, and sealed with seal of the Corporation. The seal may be facsimile,
engraved or printed. Where such bond or debenture is authenticated with the
manual signature of an authorized officer of the Corporation or other trustee
designated by tile indenture of trust or other agreement under which such
security is issued, the signature of any of the Corporation's officers named
thereon may be facsimile. In case of any officer who signed, or whose facsimile
signature has been used on any such bond or debenture, shall cease to be an
officer of the Corporation for any reason before the same has been delivered by
the Corporation, such bond or debenture may nevertheless be adopted by the
Corporation and issued and delivered as though the person who signed it or whose
facsimile signature has been used thereon had not ceased to be such officer.
ARTICLE VII
CAPITAL STOCK
SECTION 7. 1 CERTIFICATE OF SHARES. The shares of the Corporation shall
be represented by certificates prepared by the Board of Directors and signed by
the President or the Vice President, and by the Secretary, or an Assistant
Secretary, or the Treasurer, and sealed with the seal of the Corporation or a
facsimile. The signatures of such officers upon a certificate may be facsimiles
if the certificate is counter signed by a transfer agent or registered by a
registrar other than the Corporation itself or one of its employees. All
certificates for shares shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on the
stock transfer books of the Corporation. All certificates surrendered to the
Corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a
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like number of shares shall have been surrendered and cancelled, except that in
case of a lost, destroyed or mutilated certificate a new one may be issued
therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
SECTION 7.2 TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed by
the Corporation to be the owner thereof for all purposes.
SECTION 7.3 TRANSFER AGENT AND REGISTRAR. The Board of Directors shall
have power to appoint one or more transfer agents and registrars for the
transfer and registration of certificates of stock of any class, and may require
that stock certificates shall be countersigned and registered by one or more of
such transfer agents and registrars.
SECTION 7.4 LOST OR DESTROYED CERTIFICATES. The Corporation may issue a
new certificate to replace any certificate theretofore issued by it alleged to
have been lost or destroyed. The Board of Directors may require the owner of
such a certificate or his legal representatives to give the Corporation a bond
in such sum and with such sureties as the Board of Directors may direct to
indemnify the Corporation and its transfer agents and registrars, if ally,
against claims that may be made on account of the issuance of such new
certificates. A new certificate may be issued without requiring any bond.
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SECTION 7.5 CONSIDERATION FOR SHARES. The capital stock of the
Corporation shall be issued for such consideration, but not less than the par
value thereof, as shall be fixed from time to time by the Board of Directors. In
the absence of fraud, the determination of the Board of Directors as to the
value of any property or services received in full or partial payment of shares
shall be conclusive.
SECTION 7.6 REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder
thereof in fact, and shall not be bound to recognize any equitable or other
claim to or on behalf of the Corporation, any and all of the rights and powers
incident to the ownership of such stock at any such meeting, and shall have
power and authority to execute and deliver profiles and consents on behalf of
the Corporation in connection with the exercise by the Corporation of the rights
and powers incident to the ownership of such stock. The Board of Directors, from
time to time may confer like powers upon ally other person or persons.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 INDEMNIFICATION. No officer or director shall be personally
liable for any obligations arising out of any acts or conduct of said officer or
director performed for or on behalf of the Corporation. The Corporation shall
and does hereby indemnify and hold harmless each person and his heirs and
administrators who shall serve at any time hereafter as a director or officer of
the Corporation from and against any and all claims, judgments and liabilities
to which such persons shall become subject by reason of any action alleged to
have been heretofore or hereafter taken or omitted to have been taken by him as
such director or officer, and shall
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reimburse each such person for all legal and other expenses reasonably incurred
by him hi connection with any such claim or liability; including power to defend
such person from all suits as provided, however, that no such person shall be
indemnified against, or be reimbursed for, any expense incurred in connection
with any claim or liability arising out of his own negligence or willful
misconduct. The rights accruing to any person under the foregoing provisions of
this section shall not exclude any other rights to which he may lawfully be
entitled, nor shall anything herein contained restrict the right of the
Coil)oration to indemnify or reimburse such person in any proper case, even
though not specifically herein provided for. The Corporation, its directors,
officers, employees and agents shall be fully protected in taking, any action or
making any payment or in refusing so to do in reliance upon the advice of
counsel.
SECTION 8.2 OTHER INDEMNIFICATION. The indemnification herein provided
shall not be deemed exclusive of any other rights to which those seeking may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors, or otherwise, both as to action in his official capacity and as to
action hi another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer or employee and shall inure to
the benefit of the heirs, executors and administrators of such a person.
SECTION 8.3 INSURANCE The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer or employee
of the Corporation, or is or was serving at the request of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any liability in any capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to
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indemnify him against liability under the provisions of this Article 8 or the
laws of the State of Nevada.
SECTION 8.4 SETTLEMENT BY CORPORATION. The right of any person to be
indemnified shall be subject always to the right of the Corporation by its Board
of Directors, in lieu of such indemnity, to settle any such claim, action, suit
or proceeding at the expense of the Corporation by the payment of the amount of
such settlement and the costs and expenses incurred in connection therewith.
ARTICLE IX
AMENDMENTS
These Bylaws may be altered, amended, repealed, or added to by the
affirmative vote of the holders of a majority of the shares entitled to vote in
the election of any director at an annual meeting or at a special meeting called
for that purpose, provided that a written notice shall have been sent to each
shareholder of record entitled to vote at such meetings at least ten (10) days
before the date of such annual or special meetings, which notice shall state the
alterations, amendments, additions, or changes which are proposed to be made in
such Bylaws. Only such changes shall be made as have been specified in the
notice. The Bylaws may also be altered, amended, repealed, or new Bylaws adopted
by a majority of the entire Board of Directors at any regular or special
meeting. Any Bylaws adopted by the Board may be altered, amended, or repealed by
a majority of the shareholders entitled to vote.
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ARTICLE X
FISCAL.YEAR
The fiscal year of the Corporation shall be December 31 and may be
varied by resolution of the Board of Directors.
ARTICLE XI
DIVIDENDS
The Board of Directors may at any regular or special meeting, as they
deem advisable, declare dividends payable out of the unreserved and unrestricted
earned surplus of the Corporation, such declaration shall be made in accord with
Nevada Revised Statutes Section 78.288 thru 78.300.
ARTICLE XII
CORPORATE SEAL
The corporate seal may be used by causing it or a facsimile thereof to
be impressed affixed or reproduced or otherwise.
Adopted by resolution of the Board of Directors this day of 1999.
Chairman of the Board
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LEASE AGREEMENT
THIS LEASE AGREEMENT (hereinafter the "Lease") is made and entered into
as of the 6th day of October, 1999, by and between A. Blaine Smith, whose
address is 522 South 500 West, Provo, Utah (hereinafter "landlord") and the
Great Western Mint, Inc. , whose address is 975 North 1430 West, Orem, Utah
84057 (hereinafter "Tenant").
W I T N E S S E T H:
In consideration of the rents, covenants and agreements hereinafter set
forth, Landlord and Tenant mutually agree as follows:
ARTICLE I: PREMISES
Landlord hereby leases and demises to Tenant and Tenant hereby leases
from Landlord that certain real property located in Utah County, State of Utah
and more particularly described as 975 North 1430 West, Orem, Utah 84057
(hereinafter the "Property"), which consists of approximately 6,000 square feet
together with all buildings and other improvements now or hereafter located
thereon and affixed thereto (hereinafter collectively "improvements"), (not
including any of Tenant's machinery and equipment) and any and all privileges,
easements, and appurtenances belonging thereto or granted herein. The Property
and the Improvements are hereinafter collectively referred to as the "Premises'.
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ARTICLE II: LEASE TERM AND COMMENCEMENT
2.1 TERM OF LEASE. This Lease shall be for a term of thirty-six (36)
months commencing on November 1, 1999 or upon completion of tenant improvements,
(hereinafter the "Commencement Date") unless sooner terminated pursuant to the
terms, covenants and conditions of this Lease or pursuant to law. If tenant
improvements are not completed by the commencement date rent will be adjusted to
date of occupancy.
2.2 CONDITION OF PREMISES. When Landlord puts Tenant in possession of
the Premises, the Premises shall be structurally sound and in broom clean
condition and all plumbing, utility, electrical and HVAC systems shall be in
good working condition. Tenant shall be entitled to conduct an inspection of the
Premises upon any offer by Landlord to put Tenant in possession of the Premises
in order to verify compliance with the provisions hereof.
2.3 LEASE YEAR. The term "Lease Year" as used in this Lease shall mean
a period of twelve (12) consecutive calendar months during the term of this
Lease. The first Lease Year shall begin on the Commencement Date if the
Commencement Date occurs on the first day of a calendar month; if not, the first
Lease Year shall begin on the first day of the calendar month next following the
Commencement Date. Each succeeding Lease Year shall begin at the expiration of
the immediately preceding Lease Year.
ARTICLE III: RENT
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3.1 PAYMENT OF MONTHLY BASE RENT. As Monthly Base Rent for the
Premises, Tenant shall pay to Landlord, in advance on or before the first day of
each calendar month during the term of this Lease, an amount equal to the
"Monthly Base Rent" as defined in Section 3.2.
3.2 MONTHLY BASE RENT. The "Monthly Base Rent" payable during each
Lease Year shall be determined in accordance with the following:
(a)For the First Lease Year, the Monthly Base Rent shall be
equal to Three Thousand Three Hundred Eight dollars and no/100 ($
3,338.00.)
(b) As an inducement for Tenant to consummate this Lease
Agreement, Tenant shall receive free rent during the second
month of this Lease Agreement
3.3 ANNUAL RENTAL INCREASES. The Monthly Base Rent shall be
subject to annual increases beginning in the second year of
the Lease term equal to three (3%) percent per year.
3.4 OPTION TO RENEW LEASE AGREEMENT: Tenant shall have the option
to renew this Lease Agreement for a period of three (3)
additional years at the same terms herein and with the same
annual rental increases set forth above.
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ARTICLE IV: LATE CHARGES AND INTEREST
If Tenant fails to pay any Monthly Base Rent when such Monthly Base
Rent is due and payable in accordance with Article III of this Lease or if
Tenant fails to pay any additional amounts or charges of any character which are
payable under this Lease, Landlord, at Landlord's election, may assess and
collect a late fee charge equal to five percent (5 %) of each payment of rent
not received within ten (10) days from the date such rent payment is due.
Furthermore, and in addition to any late charges payable pursuant to
the provisions of this Article, to the extent that any payment of Monthly Base
Rent or any other amount payable to Landlord by Tenant pursuant to any provision
of this Lease is more than thirty (30) days past due, Tenant shall pay Landlord
interest at the rate of eighteen percent (18%) per annum on all such past due
amounts.
ARTICLE V: SECURITY DEPOSIT
Concurrently with Tenant's execution of this Lease, Tenant shall
deposit with Landlord the sum equal to one month's rent (hereinafter the
"Security Deposit"). The Security Deposit shall be held by Landlord for the
faithful performance by Tenant of all of the terms, covenants, and conditions of
this Lease to be kept and performed by Tenant during the term of this Lease. If
Tenant defaults with respect to any provision of this Lease, including but not
limited to the provisions relating to the payment of Monthly Base Rent, and any
costs, expenses, and charges payable under the provisions of this Lease,
Landlord may, but shall not be obligated to use, apply or retain all or a part
of the Security Deposit for the payment of any amount which Landlord may spend
by reason of Tenant's default or to compensate Landlord for
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any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the Security Deposit is so used or applied, Tenant
shall, within ten (10) days after written demand, deposit with Landlord an
amount sufficient to restore the Security Deposit to its original amount; and
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep the Security Deposit separate from Landlord's
general funds, and Tenant shall not be entitled to interest on the Security
Deposit. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by Tenant, the Security Deposit or any balance thereof
shall be returned to Tenant or, at Landlord's option, to the last permitted
assignee of Tenant's interest under this Lease within thirty (30) days of the
expiration of the term of this Lease and after Tenant or Tenant's permitted
assignee has vacated the Premises or within fifteen (15) days of receipt of
Tenant's new mailing address, whichever is later. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer the Security Deposit
to Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of the Security Deposit or any accounting
therefore.
ARTICLE VI: QUIET ENJOYMENT
Landlord hereby covenants to Tenant that, subject to Tenant's
compliance with the terms and provisions of this Lease, Tenant shall peaceably
and quietly hold and enjoy the full possession and use of the Premises during
the term of this Lease.
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ARTICLE VII: TAXES, ASSESSMENTS AND OTHER CHARGES
7.1 REAL ESTATE TAXES, PROPERTY INSURANCE AND OTHER ASSESSMENTS. Tenant
shall pay for all real estate taxes, property insurance and Common Area Charges
(CAM charges) at the first of each month.
7.2 RIGHT TO CONTEST TAXES. Tenant, at its sole cost, shall have the
right to contest, in accordance with the provisions of the laws relating to such
contests, any real estate taxes, assessments, or other charges against the
promises and the failure of Tenant to pay such taxes, assessments, or charges
shall not constitute a default by Tenant so long as Tenant complies with the
provisions of this Section 7.2. Prior to initiating any contest or proceeding,
Tenant shall give Landlord written notice of such contest, or proceeding and
shall either deposit with Landlord, or furnish good and sufficient undertaking
and sureties designating Landlord as the beneficiary thereof, in such amount as
Landlord deems to be sufficient, considering the amount of such taxes, charges,
assessments, any potential penalties and interest thereon, and any potential
expenses that might be incurred by Landlord with respect thereto. Landlord shall
not be required to join in any proceeding or contest brought by Tenant unless
the provisions of any law require that the proceeding or contest be brought by
or in the name of Landlord or any owner of the Premises. In that case, Landlord
shall join in the proceeding or contest or permit such proceeding or contest to
be brought in its name as long as Landlord is not required to bear any cost.
Tenant, on final determination of the proceeding or contest, shall immediately
pay or discharge any decision or judgment rendered, together with all costs,
charges, interest and penalties incidental to the decision or judgment.
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ARTICLE VIII: UTILITIES
Tenant shall be solely responsible for, and pay when due, all charges
for water, gas, heat, light, power, telephone, and other utilities or services
used by or supplied to Tenant or to the Promises, together with any taxes
thereon, during the term of this Lease. These payments are to be made directly
to the supplier or vendor.
ARTICLE IX: INSURANCE
9.1 TENANT'S INSURANCE COVERAGE. Tenant shall, at all times during the
term of this Lease, and at Tenant's own cost and expense, procure and continue
in force the following insurance coverage:
(a) Comprehensive liability insurance with limits of not less
than $ 1,000,000.00 per person and $ 1,000,000.00 per occurrence
insuring against any and all liability of the insured with respect to
the Premises or arising out of the maintenance, use or occupancy
thereof, and property damage liability insurance with a limit of not
less than $1,000,000.00 per accident or occurrence.
(b) Insurance covering any buildings and all improvements on
the Premises, including Tenant's leasehold improvements and personal
property in or upon the Premises in an amount not less than one hundred
percent (100 %) of full replacement cost, providing protection against
any peril generally included within the classification "Fire and
Extended Coverage", together with insurance against sprinkler damage,
vandalism and malicious mischief and a standard inflation guard
endorsement. Tenant hereby assigns Landlord any and all proceeds
payable with respect to such
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policies except to the extent such proceeds are payable with respect to
any property that would remain the property of Tenant upon the
termination of this Lease provided, however, that to the extent
required pursuant to the provisions of Article MN, such proceeds will
be applied to the repair and restoration of the Premises.
9.2 INSURANCE POLICIES. The minimum limits of insurance policies as set
forth in Section 9.1 shall in no event limit the liability of Tenant hereunder.
The insurance policies shall name Landlord as an additional insured and shall be
with companies having a rate of not less than an "A" company rating and a
Financial Rating of Class VI in "Best's Insurance Reports." Tenant shall furnish
from the insurance companies or cause the insurance companies to furnish to
Landlord certificate of coverage. No such policy shall be cancelable or subject
to reduction of coverage or other modification or cancellation except after
thirty (30) days prior written notice to Landlord by the insurer. All such
policies shall be written as primary policies, not contributing with and not in
excess of any coverage which Landlord may carry. Tenant shall at least twenty
(20) days prior to the expiration of such policies furnish Landlord with
renewals or binders. If Tenant does not procure and maintain such insurance,
Landlord may, but is not obligated to, procure such insurance on Tenant's behalf
and all sums paid by Landlord shall bear interest at the rate of eighteen
percent (18%) and shall be immediately due and payable. (Landlord shall give
Tenant written notice prior to charging the 18% interest rate). Tenant shall
have the right to provide such insurance coverage pursuant to blanket policies
obtained by Tenant provided such blanket policies expressly afford coverage to
the Premises and to Landlord as required by this Lease.
9.3 WAIVER OF SUBROGATION. To the extent permitted under the insurance
policies obtained by Landlord, if any, and Tenant, Landlord and Tenant each
hereby waive any and all right of recovery
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against the other or against the officers, employees, agents and representatives
of the other, on account of loss or damage occasioned to such waiving party or
its property or the property of others under its control to the extent that such
loss or damage is insured against under any fire and extended coverage insurance
policy which either may have in force at the time of such loss or damage.
ARTICLE X: USE OF PREMISES
10.1 USE. The Premises shall be used and occupied by Tenant solely for
Warehouse and light manufacturing of coins and for no other purpose without the
prior written consent of Landlord, which consent may be withheld by Landlord in
Landlord's sole discretion.
10.2 SUITABILITY. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty with respect to the
Premises or the improvements or with respect to the suitability of either for
the conduct of Tenant's business, nor has Landlord agreed to undertake any
modification, alteration or improvement to the Promises except as specifically
provided in this Lease. The continued possession of the Premises by Tenant shall
conclusively establish that the Premises and the improvements are at the date of
possession in satisfactory condition. Landlord shall not be responsible for any
unknown latent defects or deficiencies in the construction of the Premises or
the Improvements or any improvements or fixtures therein. Tenant shall have the
right to inspect the property and contact the builder if there are any concerns.
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10.3 PROHIBITED USES.
(a) Tenant shall not do or permit anything to be done in or
about the Premises, nor bring or keep anything therein which will cause
a cancellation of any insurance policy covering the Premises, nor shall
Tenant sell or permit to be kept, used or sold in or about the Premises
any articles which may be prohibited by a standard form policy of fire
insurance unless Tenant provides additional insurance coverage
extending protection to cover all risks associated with these articles.
(b) Tenant shall not use the Premises or permit anything to be
done in or about the Premises which will in any way conflict with any
law, statute, ordinance or governmental rule or regulation or
requirement of duly constituted public authorities now in force or
which may hereafter be enacted, promulgated or created. Tenant shall,
at Tenant's sole cost and expense, promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or
requirements now in force or which may hereafter be in force and with
the requirements of any board of fire underwriters or other similar
body now or hereafter constituted relating to or affecting the use or
occupancy of the Premises, including structural changes that relate to
or affect the use
(c) Tenant shall comply with all requirements of any recorded
restrictive covenants or bylaws of any association affecting the
Premises.
(d) Tenant shall not permit smoking on the Premises at any
time.
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ARTICLE XI: MAINTENANCE AND REPAIRS
11.1 TENANT MAINTENANCE AND REPAIRS. During the Term of the Lease,
Tenant, at Tenant's expense, shall keep the Premises in good order and condition
and shall maintain and shall make any and all repairs and replacements to the
interior surfaces of the Premises (including, but not limited to, floor
coverings, window coverings, and wall coverings), all windows and glass which
are part of the Premises, all light fixtures, and all doors to the Premises.
Tenant shall, at all times, and at Tenant's expense, keep the Premises in a
neat, clean, and sanitary condition and shall comply with all valid federal,
state, county and city laws and ordinances and all rules and regulations of any
duly constituted authority, present or future, affecting or respecting the use
or occupancy of the Premises by Tenant. Tenant, at Tenant's expense, shall also
repair any structural damage to the Premises caused by Tenant, or Tenant's
employees, agents, contractors, invitees licensees, customers, or clients.
11.2 LANDLORD MAINTENANCE AND REPAIRS. Subject to the provisions of
Article XIV below, Landlord shall, during the Term of this Lease, maintain and
make necessary structural repairs to the Premises not included as Tenant's
responsibility pursuant to the provisions of Section 11.1, 14.3, and repairs to
heating, ventilation or air conditioning equipment servicing the Promises;
provided, however, that damage to such equipment caused by Tenant shall be
repaired at Tenant's expense. Tenant shall promptly notify Landlord in writing
of any condition requiring maintenance or repair and Tenant shall also
IMMEDIATELY NOTIFY LANDLORD BY TELEPHONE IN THE CASE OF AN EMERGENCY. LANDLORD
SHALL MAKE THE REPAIRS REQUIRED UNDER THIS SECTION IN A REASONABLE TIME, WITHIN
FOURTEEN (14) WORKING DAYS, AFTER RECEIVING WRITTEN NOTICE BY TENANT. IF ONE OR
ALL UTILITIES ARE SHUT DOWN FOR 24+ HOURS, LANDLORD SHALL HAVE RENT ABATED FOR
THE TENANT PER DIEM.
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ARTICLE XII: HAZARDOUS SUBSTANCES
12.1 ENVIRONMENTAL COMPLIANCE. Tenant (a) shall at all times comply
with, or cause to be complied with, any "Environmental Law" (hereinafter
defined) governing the Premises or the use thereof by Tenant or any of Tenant's
employees, agents, contractors, invitees, licensees, customers, or clients, (b)
shall not use, store, generate, treat, transport, or dispose of, or permit any
of Tenant's employees, agents, contractors, invitees, licensees, customers, or
clients to use, store, generate, treat, transport, or dispose of, any "Hazardous
Substance" (hereinafter defined) on the Premises without first obtaining
Lessor's written approval, (c) shall promptly and completely respond to, and
clean up, in accordance with applicable laws and regulations, any Release (as
hereinafter defined) occurring on the Premises as a direct result of actions of
Tenant or Tenant's employees or authorized agents; and (d) shall pay all costs
incurred as a result of any failure by Tenant to comply with any Environmental
law, which failure results in a Release or other change in the environmental
state, condition, and quality of the Premises necessitating action under
applicable Environmental Laws, including with limitation the costs of any
Environmental Cleanup Work (hereinafter defined) and the preparation of any
closure or other required plans (all of the foregoing obligations of Tenant
under this Section 12.1 are hereinafter collectively (Tenant's Environmental
Obligations). Landlord hereby releases and indemnifies Tenant from and against
any and all claims, damages, or liabilities (including, without limitation,
attorneys' fees and reasonable investigative and discovery cogs) resulting from
the environmental condition or quality of the Premises prior to the Commencement
date or from actions of Landlord or its agents or employees. The provisions of
this Article XII shall survive the expiration or other termination of this
Lease.
12.2 DEFINITIONS. As used in this Lease (a) "Hazardous Substance" shall
mean (1) any "hazardous waste", "hazardous substance", and any other hazardous,
radioactive, reactive, flammable,
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infectious, solid wastes, toxic or dangerous substances or materials, or related
materials, as defined in, regulated by, or which form the basis of liability now
or hereafter under any Environmental law; (2) asbestos, (3) polychlorinated
biphonyls (PCBs); (4) petroleum products or materials; (5) underground storage
tanks, whether empty or filled or partially filled with any substance; (6)
flammable explosives (7) any substance the presence of which on the Premises is
or becomes prohibited by Environmental Law; (8) urea formaldehyde foam
insulation; and (9) any substance which under Environmental Law requires special
handling or notification in its use, collection, storage, treatment or disposal;
(b) "Environmental Cleanup Work" shall mean an obligation to perform work,
cleanup, removal, repair, remediation, construction, alteration, demolition,
renovation or installation in or in connection with the Premises in order to
comply with any Environmental Law; (c) 'Environmental Law" shall mean any
federal, state or local law, regulation, ordinance or order, whether currently
existing or hereafter enacted, concerning the environmental state, condition or
quality of the Premises or use, generation, transport, treatment, removal, or
recovery of Hazardous Substances, including building materials, and including,
but not limited to, the following: (1) the Solid Waste Disposal Act as amended
by the Resource Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901,
et seq.), as amended, and all regulations promulgated thereunder, (2) the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601, et seq.), as amended, and all regulations promulgated
thereunder, (3) the Hazardous Materials Transportation Act (49 U.S.C. Section
1801, et seq.), as amended, and all regulations promulgated thereunder, (4) the
Toxic Substances Control Act (15 U.S.C. Section 2601, et seq. as amended, and
regulations promulgated thereunder, (5) the Clean Air Act (42 U.S.C. Section
7401, et seq.), as amended, and all regulations promulgated thereunder, (6) the
Federal Water Pollution Control Act (33 U.S.C. Section 125 1, et seq.), as
amended, and all regulations promulgated thereunder, and (7) the Occupational
Safety and Health Act (29 U.S.C. Section 651, et seq.), as amended, and all
regulations promulgated
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thereunder, and (d) "Release" means the actual or threatened spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, presence, dumping, migration of Hazardous Substances on or from the
Premises or adjacent property, or disposing of Hazardous Substances into the
environment.
ARTICLE XIII: FIXTURES AND ALTERATIONS
13.1 ALTERATIONS. Tenant shall not make any physical alterations in the
Premises or any of the fixtures located therein or install or cause to be
installed any trade fixtures, exterior signs, floor coverings, interior or
exterior lighting, plumbing fixtures, shades or awnings or make any changes to
the Improvements front without first obtaining the written consent of Landlord,
which consent shall not be unreasonably withheld. Tenant shall present to
Landlord plans and specifications for the installation of any improvements or
fixtures at the time approval is sought from Landlord. Any physical change and
all rearrangements which are made by Tenant with the approval of Landlord shall
be made at Tenant's expense. Such alterations, decorations, additions and
improvements shall not be removed from the Premises. Upon expiration of this
Lease all such alterations, decorations, additions and Improvements shall at
once become the Property of Landlord. At Lease expiration, Tenant shall be
responsible for removing any logo lettering on the glass door and/or windows of
the unit.
13.2 CONDITIONS AND LIMITATIONS. Landlord may impose as a condition to
granting any consent required by Section 13.1, such requirements, restrictions
and limitations as Landlord may deem necessary in Landlord's sole discretion,
including without limitation, the manner in which the work is done, the
contractors by whom it is performed, and the time during which the work is
accomplished.
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13.3 CONTRACTORS AND MATERIALMEN. If any fixtures, alterations or
improvements are allowed by Landlord, Tenant shall promptly pay all contracts
and materialmen, so as to eliminate the possibility of a lien attaching to the
Improvements or the Land, and should any such lien be made or filed by reason of
any fault of Tenant, Tenant shall bond against or discharge the same within ten
(10) days after written request by Landlord. Landlord shall have the right, but
not the obligation, to pay and discharge any such lien that attaches to the
Premises and Tenant shall reimburse Landlord for any such sums paid together
with interest at the rate of eighteen percent (18%) within thirty (30) days
after written demand by Landlord.
ARTICLE XIV: DAMAGE OR DESTRUCTION
14.1 LANDLORD TO REPAIR IMPROVEMENT. Subject to the provisions of
Sections 11.1; 14.2 and 14.3, if during the term of this Lease any of the
Improvements are damaged or destroyed by fire or other casualty, Landlord shall
repair or restore the Improvements. The work of repair or restoration, which
shall be completed with due diligence, shall be commenced within a reasonable
time after the damage or loss occurs. To the extent that such damage or
destruction interferes with Tenant's ability to use the Premises, as determined
by Landlord, rent shall be abated after the damage or destruction of the
Improvements until the repair or restoration of the Improvements has been
completed. Tenant shall have the right to terminate this Lease if the effects of
delayed repair has potential to impair success of Tenant's business.
14.2 LANDLORD'S OPTION TO TERMINATE LEASE. Notwithstanding anything
to the contrary in this Article XIV, in the event that any of the Improvements
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Landlord shall have the right to terminate this Lease, which termination shall
be deemed to be effective as of the date of such casualty, upon the occurrence
of any of the following events:
(a) Insurance proceeds payable with respect to such damage or
destruction are not sufficient to pay for the repair and/or restoration of the
Improvements;
(b) Repair and restoration of the Improvements cannot be completed
within sixty (60) days after the occurrence of the casualty causing such damage
or destruction;
(c)More than thirty percent (30%) of the Improvements have been damaged
or destroyed by such casualty.
Landlord's option to terminate the Lease pursuant to the provisions of
this Section 14.2 must be exercised within thirty (30) days of the date of the
casualty causing such damage or destruction by written notice from Landlord to
Tenant. In the event that Landlord elects to terminate the Lease pursuant to
this Section 14.2, Tenant shall immediately surrender possession of the Premises
to Landlord and shall assign to landlord (or if the same has already been
received by Tenant, pay to Landlord) all of Tenant's right, title, and interest
in and to the insurance proceeds payable with respect to the Premises.
14.3 TENANT'S OPTION TO TERMINATE LEASE. If no default by Tenant under
this Lease has occurred and is then continuing and if no event has occurred and
is then continuing which, with the giving of notice or lapse of time, or both,
would become such a default, Tenant shall, if the Improvements are damaged or
destroyed by fire or other casualty and repair or restoration of the
Improvements cannot be
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completed within sixty (60) days following the occurrence of the casualty
causing such damage or destruction, have the option of terminating this Lease by
written notice to Landlord, which termination shall be deemed to be effective as
of the date of the casualty. Tenant's option to terminate the Lease pursuant to
the provisions of this Section 14.3 must be exercised within thirty (30) days of
the date of the casualty causing such damage or destruction. In the event that
Tenant elects to terminate this Lease pursuant to this Section 14.3, Tenant
shall immediately surrender possession of the Premises to Landlord and shall
assign to landlord (or if the same has already been received by Tenant, pay to
Landlord) all of Tenant' a right, title, and interest in and to the insurance
proceeds payable with respect to the Premises.
ARTICLE XV: CONDEMNATION
If all or any part of the Premises is taken or appropriated for public
or quasi-public use by right of eminent domain with or without litigation or
transferred by agreement in connection with such public or quasi-public use,
Landlord and Tenant shall each have the right within thirty (30) days of receipt
of notice of taking, to terminate this Lease on of the date possession is taken
by the condemning authority; provided, however, that before Tenant may terminate
this Lease by reason of taking or appropriation, such taking or appropriation
shall be of such an extent and nature as to substantially handicap, impede or
impair Tenant's use of the Premises. No award for any partial or entire taking
shall be apportioned, and Tenant hereby assigns to Landlord any award which may
be made in such taking or condemnation, together with any and all rights of
Tenant now or hereafter arising in or to the award or any portion thereof,
provided, however, that nothing contained herein shall be deemed to give
Landlord any interest in or to require Tenant to assign to Landlord any award
made to Tenant for the taking of personal property and fixtures belonging to
Tenant, for the interruption of or damage to Tenant's business and for Tenant's
unamortized
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cost of leasehold improvements. In the event of a partial taking which does not
result in a termination of this Lease, rent shall be abated in the proportion
which the part of the Premises so made unusable bears to the rented area of the
Premises immediately prior to the taking. No temporary taking of the Premises or
Tenant's right therein or under this Lease shall terminate this Lease or give
Tenant any right to any abatement of rent thereunder, and any award made to
Tenant by reason of any such temporary taking shall belong entirely to Tenant,
and Landlord shall not be entitled to any portion thereof.
ARTICLE XVI: ASSIGNMENT AND SUBLETTING
16.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate or encumber this Lease or any interest therein,
either voluntarily or involuntarily by operation of law or otherwise, and Tenant
shall not sublet the Premises or any part thereof, without the prior written
consent of Landlord and any attempt to do so without such consent being first
had and obtained shall be void and shall constitute a breach of this Lease, such
consent shall not be unreasonably withheld.
16.2 NO RELEASE OF TENANT. No consent by Landlord to any assignment or
subletting by Tenant shall relieve Tenant of any obligation to be performed by
Tenant under this Lease, whether occurring before or after such consent,
assignment or subletting. The consent by Landlord to any assignment or
subletting shall not relieve Tenant from the obligation to obtain Landlord's
express written consent to any other assignment or subletting. The acceptance of
rent by Landlord from any other person or legal entity shall not be deemed to be
a waiver by Landlord of any provision of this Lease or to be a consent to any
assignment, subletting or other transfer. Consent to one assignment, subletting
or other
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transfer shall not be deemed to constitute consent to any subsequent assignment,
subletting or other transfer.
16.3 INCREASED EXPENSES. Tenant shall pay Landlord the amounts of any
increase in costs or expenses incident to the occupancy of the Premises by such
assignee or subtenant, including but not limited to, reasonable attorney's fees
incurred in connection with giving such consent.
ARTICLE XVII: SUBORDINATION, ATTORNMENT AND ESTOPPEL
CERTIFICATES
17.1 SUBORDINATION. This Lease at Landlord's option shall be subject
and subordinate to the lien of any mortgages or deeds of trust in any amount or
amounts whatsoever now or hereafter placed on or against the Premises, the
Improvements, or on or against Landlord's interest or estate therein, without
the necessity of the execution and delivery of any further instruments on the
part of Tenant to effectuate such subordination. Notwithstanding anything to the
contrary in this Article XVII, this Lease shall remain in full force and effect
for the full term hereof, including any extensions, so long as Tenant is not in
default hereunder.
17.2 SUBORDINATION AGREEMENT. Tenant shall execute and deliver upon
demand without charge therefore, such further instruments evidencing such
subordination of this Lease to the lien of any such mortgages or deeds of trust
as may be required by Landlord.
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17.3 ATTORNMENT. In the event of any foreclosure or the exercise of the
power of sale under any mortgage or deed of trust made by Landlord covering the
Premises or the Building, Tenant shall attorn to the purchaser upon any such
foreclosure or ale and recognize such purchaser as the Landlord under this
Lease, provided said purchaser expressly agrees in writing to be bound by the
terms of this Lease.
17.4 ESTOPPEL CERTIFICATES. Tenant shall, from, time to time and within
thirty (30) days from receipt of prior written notice from Landlord, execute,
acknowledge and deliver to Landlord a statement in writing (a) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect and the date to which the rent and other charges are
paid in advance, if any, (b) certifying that the Lease and any modifications of
this Lease constitute the entire agreement between Landlord and Tenant with
respect to the Premises and, except as set forth in this Lease and any
modification of this Lease, Tenant does not claim any right, title, or interest
in or to the Promises or any part thereof, (c) acknowledging that there are not,
to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults, if any are claimed, and (d) certifying such other
matters with respect to the Lease. and/or the Premises as Landlord may
reasonably request.
17.5 FAILURE TO DELIVER CERTIFICATE. If Tenant fails to deliver such
statement within the time period referred to in Section 17.4 above, it shall be
deemed conclusive upon Tenant that the (a) this Lease is unmodified and in full
force and effect, (b) this Lease constitutes the. entire agreement between
Landlord and Tenant with respect to the Promises and, except as set forth in
this Lease, Tenant does not claim any right, title, or interest in or to the
Premises, or any pad thereof, (c) there are no uncured defaults
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in Landlord's performance of Landlord's obligations under this Lease, and (d)
not more than one month's Monthly Base Rent has been paid in advance.
17.6 TRANSFER OF LANDLORD'S INTEREST. In the event of a sale or
conveyance by Landlord of Landlord's interest in the Premises other than a
transfer for security purposes only, Landlord shall be relieved from and after
the date specified in any such notice of transfer of all obligations and
liabilities to Tenant which accrue after such sale or conveyance on the part of
Landlord, provided that any funds in the possession of Landlord at the time of
transfer in which Tenant has an interest shall be delivered to the successor
Landlord. This Lease shall not be affected by any such sale or transfer and
Tenant shall attorn to the purchaser or other transferee provided that all of
Landlord's obligations accruing hereunder from and after such sale or transfer
are assumed in writing by such purchaser or transferee.
18.1 DEFAULT. The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:
(a) Any failure by Tenant to pay the Monthly Base Rent, or any
other monetary sums required to be paid under this Lease, where such
failure continues for five (5) days after written notice thereof by
Landlord to Tenant;
(b) Any material false statement made by Tenant to Landlord or
its agents in any document delivered to Landlord in connection with the
negotiation of this Lease.
(c) The abandonment or vacation of the Premises by Tenant;
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(d) A failure by Tenant to observe and perform any other term,
covenant or condition of this Lease to be observed or performed, by
Tenant, whom such failure continues for thirty (30) days after written
notice thereof by Landlord to Tenant; provided, however, that if the
nature of the default is such that the default cannot reasonably be
cured within the thirty (30) day period, Tenant shall not be deemed to
be in default if Tenant shall within the thirty (30) day period
commence action to cure the default and thereafter diligently prosecute
the same to completion;
(e) The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; the filing by or against
Tenant of a petition to have Tenant adjudged a bankrupt or of a
petition for reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant, the
same is dismissed within sixty (60) days); the appointment of a trustee
or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within thirty (30) days; or the
attachment, execution, or other judicial seizure of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in
this Lease, where such seizure is not discharged within thirty (30)
days.
19.2 NONEXCLUSIVE REMEDIES. In the event of any such material default
or breach by Tenant Landlord shall have, in addition to any other remedies
provided in this Lease, the following nonexclusive remedies:
(a) At Landlord's option and without waiving any default by
Tenant, Landlord shall have the right to continue this Lease in full
force and effect and to collect all Monthly Base Rent, and any
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other amounts to be paid by Tenant under this Lease as and when due.
During any period that Tenant is in default, Landlord shall have the
right, pursuant to legal proceedings or pursuant to any notice provided
for by law, to enter and take possession of the Premises, without
terminating this Lease, for the purpose of reletting the Premises or
any part thereof and making any alterations and repairs that may he
necessary or desirable in connection with such reletting. Any such
relating or relettings may be for such term or terms (including periods
that exceed the balance of the term of this Lease), and upon such other
terms, covenants and conditions as Landlord may in Landlord's sole
discretion deem advisable. Upon each and any such reletting, the rent
or rents received by Landlord from such reletting shall be applied as
follows: (1) to the payment of any indebtedness (other than rent) due
hereunder from Tenant to Landlord; (2) to the payment of costs and
expenses of such reletting, including brokerage fees, reasonable
attorney's fees, court costs, and costs of any alterations or repairs;
(3) to the payment of any Monthly Base Rent and any other amounts due
and unpaid hereunder, and (4) the residue, if any, shall be held by
Landlord and applied in payment of future Monthly Base Rent and any
other amounts as they become due and payable hereunder. If the rent or
rents received during any month and applied as provided above shall be
insufficient to cover all such amounts including the Monthly Base Rent
and any other amounts to be paid by Tenant pursuant to this Lease for
such month, Tenant shall pay to Landlord any deficiency; such
deficiencies shall be calculated and paid monthly. No entry or taking
possession of the Premises by Landlord shall be construed as an
election by Landlord to terminate this Lease, unless Landlord gives
written notice of such election to Tenant or unless such termination
shall be decreed by a court of competent jurisdiction. Notwithstanding
any reletting by Landlord without termination, Landlord may at any time
thereafter terminate this Lease for such previous default by giving
written notice thereof to Tenant.
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(b) Terminate Tenant's right to possession by notice to
Tenant, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default, including without
limitation the following: (1) all unpaid rent which has been earned at
the time of such termination plus (2) the amount by which the unpaid
rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that is proved could have
been reasonably avoided; plus (3) any other amount necessary to
compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform Tenant's obligations under this Lease, or
in addition to or in lieu of the foregoing such damages as may be
permitted from time to time under applicable State law. Upon any such
reentry Landlord shall have the right to make any reasonable repairs,
alterations or modifications to the Premises, which Landlord in
Landlord's sole discretion deems reasonable and necessary.
ARTICLE XIV: ENTRY BY LANDLORD
Landlord shall, during the term of this Lease, have the right to enter
the Premises at reasonable times and upon reasonable notice to Tenant, to
inspect or to show to prospective tenants or purchasers, or to make necessary
repairs. For purposes of this section, twenty-four (24) hours is deemed to be
reasonable notice. In the event of an emergency, however, Landlord shall not be
required to give Tenant such notice, provided that Landlord furnishes Tenant
with the reason for the emergency entry within three days of such entry.
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ARTICLE XX: INDEMNITY
Tenant shall indemnify and hold Landlord harmless from any and all
claims of liability for any injury or damage to any person or property
whatsoever occurring in, on or about the Premises or any part thereof during the
term of this Lease. Tenant shall further indemnify and hold Landlord harmless
from and against any and all claims arising from any breach or default in the
performance of any obligation on Tenant's part to be performed under the terms
of this Lease, or arising from any act or negligence of Tenant, or any of
Tenant's agents, contractors, employees, licensees or invitees and from and
against all costs, reasonable attorney's fees, expenses and liabilities incurred
in the defense of any such claim or any action or proceeding brought thereon.
Tenant shall not, however, be liable for damage or injury occasioned by the
negligence, intentional acts, or omissions of Landlord and Landlord's designated
agents or employees. Tenant's obligations under this Article XX shall survive
the expiration or other termination of this Lease.
ARTICLE XXI: SURRENDER
21.1 SURRENDER. Upon the expiration or other termination of this Lease,
Tenant shall quit and surrender to Landlord the Premises, together with the
Improvements and all other property affixed to the Promises, excluding Tenant's
equipment and fixtures, in good order and condition, ordinary wear and tear
excepted. Tenant shall, prior to the expiration or other termination of this
Lease remove all personal property belonging to Tenant and failing to do,
Landlord may cause all of said personal property to be removed at the cost and
expense of Tenant. Tenant's obligation to observe and perform this covenant
shall survive the expiration or other termination of this Lease. In the
alternative, Landlord may, at Landlord's
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option, treat any and all items not removed by Tenant on or before the date of
expiration or of the termination of this Lease as having been relinquished by
Tenant and such items shall become the property of Landlord with the same force
and effect as if Tenant had never owned or otherwise had any interest in such
items.
21.2 HAZARDOUS SUBSTANCES. No spill, deposit, emission, leakage or
other release of Hazardous Substance in the soils, groundwaters or waters shall
be deemed to result in either (a) wear and tear that would be normal for the
term of the Lease; or (b) a casualty to the Premises. Tenant shall be
responsible to promptly and completely cleanup any Release occurring on the
Premises during the term of the Lease which directly results form the actions of
Tenant or its employees or authorized agents. Tenant shall surrender the
Premises free of any contamination or other damage caused by such a Release
during the term of the Lease. Tenant's obligation to cleanup the Premises
pursuant to the provisions of this Article XXI shall survive the expiration or
other termination of this Lease.
ARTICLE XXII: OPTION TO PURCHASE
22. Intentionally Deleted.
ARTICLE XXIII: MISCELLANEOUS
23.1 SIGNS. Tenant, at its own cost, may place and maintain a sign
advertising Tenant's business in the window of the Premises so long as the sign
complies with the rules and regulations of the Condominium Owners' Association
for the Premises.
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23.2 PARKING SPACE. Tenant shall be entitled to the use of 13
unreserved parking spaces appurtenant to the Premises for the benefit of Tenant,
its employees, agents, and invitee for the Term of the Lease.
23.3 ENTIRE AGREEMENT. This instrument along with any exhibits and
attachments hereto constitutes the entire agreement between Landlord and Tenant
relative to the Premises and this Lease and the exhibits and attachments may be
altered, amended or revoked only by an instrument in writing signed by both
Landlord and Tenant. All prior or contemporaneous oral agreements between and
among Landlord and Tenant and their agents or representatives relative to the
leasing of the Premises are merged in or revoked by this Lease.
23.4 SEVERABILITY. If any term or provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
each term and provision of this Lease shall be valid and be enforceable to the
fullest extent permitted by law.
23.5 COSTS OF SUIT. If Tenant or Landlord shall bring any action for
any relief against the other, declaratory or otherwise, arising out of this
Lease, including any suit by Landlord for the recovery of rent or possession of
the Premises, the losing party shall pay the successful party a reasonable sum
for attorney's fees whether or not such action is prosecuted to judgment.
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23.6 TIME AND REMEDIES. Time is of the essence of this Lease and every
provision hereof. All rights and remedies of the parties shall be cumulative and
nonexclusive of any other remedy at law or in equity.
23.7 BINDING EFFECT, SUCCESSORS AND CHOICE OF LAW. All time provisions
of this Lease are to be construed as both covenants and conditions as though the
words importing such covenants and conditions were used in each separate Section
of this Lease. Subject to any provisions restricting assignment or subletting by
Tenant as set forth in Article XVI, all of the terms here-of shall bind and
inure to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
This Lease shall be governed by the laws of the State of Utah.
23.8 WAIVER. No term, covenant or condition of this Lease shall be
deemed waived, except by written consent of the party against whom the waiver is
claimed, and any waiver of the breach of any term, covenant or condition shall
not be deemed to be a waiver of any preceding or succeeding breach of the same
or any other term, covenant or condition. Acceptance by Landlord of any
performance by Tenant after the time the same shall have become due shall not
constitute a waiver by Landlord of the breach or default of any term, covenant
or condition unless otherwise expressly agreed to by Landlord in writing.
23.9 HOLDING OVER. If Tenant remains in possession of all or any part
of the Premises after the expiration of the term of this Lease, with or without
the express or implied consent of Landlord, such tenancy shall be from month to
month only, and not a renewal hereof or an extension for any further term, and
in such case, rent and other sums due hereunder shall be payable at one hundred
fifty percent (150 %) of the Monthly Base Rent in effect immediately prior to
such holdover period.
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23.10 RECORDING. No copy of this Lease will be recorded on behalf of
either party, but in lieu thereof, Landlord and Tenant agree that each will ,
upon the request of the other, execute, in recordable form, a 'short form' of
the Lease, which "short form* shall contain a description of the premises, the
term of the Lease, the parties to the Lease. The 'short form' of the Lease shall
not modify the terms of the Lease or be used in interpreting the Lease and in
the event of any inconsistency between this Lease and the "short form* of the
Lease, the terms and conditions of this Lease shall control.
23.11 REASONABLE CONSENT. Except as limited elsewhere in this Lease,
wherever in this Lease Landlord or Tenant is required to give consent or
approval to any action on the part of the other, such consent or approval shall
not be unreasonably withheld. In the event of failure to give any such consent,
the other party shall be entitled to specific performance at law and shall have
such other remedies as am reserved to such party under this Lease.
23.12 NOTICE. Any notice required to be given under this Lease shall be
given in writing and shall be delivered in person or by registered or certified
mail, postage prepaid, and addressed to the addresses for Landlord and Tenant ad
forth above. Such notice shall be deemed delivered when personally delivered or
upon deposit of the notice in the United States mail in the manner provided
above.
23.13 NO PARTNERSHIP. Landlord does not, as a result of entering into
this Lease, in any way or for any purpose become partner of Tenant in the
conduct of Tenant's business, or otherwise, or joint venturer or a member of a
joint enterprise with Tenant.
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23.14 EXHIBITS AND/OR ADDENDUMS. There shall be an Exhibit or Addendum
A attached to this Lease.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written.
LANDLORD: TENANT: The Great Western Mint, Inc.
BY: /S/ A. BLAINE SMITH BY: /S/ EUGENE PANKRATZ
----------------------- -------------------------
BLAINE SMITH ITS: PRESIDENT
Tenant is a corporation, each individual executing this lease on behalf
of Tenant represents and warrants that he is duly authorized to execute and
deliver this lease on behalf of the corporation, in accordance with a duly
adopted resolution of the Board of Directors of the corporation or in accordance
with the By-Laws of the corporation, and that this lease is binding upon said
corporation in accordance with its terms.
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CORPORATE GUARANTEE OF LEASE OBLIGATIONS
For value received, the receipt of which is hereby acknowledged, and in
consideration of executing this lease of the premises,
I/We, the undersigned, hereby execute this Corporate Guarantee, wherein Liberty
Mint, LTD, a Colorado corporation does hereby guarantee all obligations with
regard to this lease both monetary and non- manetary. This Guarantee shall not
be affected or prejudiced by any extension of time, payment agreement or other
indulgence granted to tenant, or by agreement affecting said obligations under
the Lease, and the undersigned hereby waives notice of all the aforesaid. In the
event that it becomes necessary to institute collection proceedings on this
Guarantee, Liberty Mint, LTD hereby agrees to pay any and all collection costs
incurred including court costs and attorneys fees along with accrued interest.
Guarantor: LIBERTY MINT, LTD
BY: /S/ DAN SOUTHWICK
----------------------------------
ITS: PRESIDENT
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LEASE ADDENDUM "A"
This Lease Addendum is entered into effective October 6, 1999, regarding
the "Lease Agreement" dated October 6, 1999 between The Great Western Mint, Inc.
as Tenant and A. Blaine Smith as Landlord, pursuant to the office/warehouse at
975 North 1430 West, Orem, Utah.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, notwithstanding anything to the
contrary, it is hereby agreed that the Landlord shall provide at Landlord's
expense, the following tenant improvements to the leased premises:
1. Any electrical work after occupancy of building to be paid for
by tenant, including 277/480Y Voltage. 2. Change hinges on front
door from right to left side. Cost of $600.00. This cost to be
split 1/2 each. 3. Cost of building press and safe room in
warehouse area to be split 1/2 each: tenant & landlord. This area
to be considered warehouse area for purpose of rental at $0.45
Signed effective the October 6, 1999.
/S/ EUGENE H. PANKRATZ
- ------------------------------------
Landlord, A. Blaine Smith
/S/ A. BLAINE SMITH
- ------------------------------------
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LEASE ADDENDUM "B"
This Lease Addendum is entered into effective December 20, 1999, regarding
the "Lease Agreement" dated October 6, 1999 between The Great Western Mint, Inc.
as Tenant, and A. Blaine Smith as Landlord, pursuant to the office/warehouse at
975 North 1430 West, Orem, Utah.
Now therefore, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, notwithstanding anything to the
contrary, it is hereby agreed that the first year base lease amount shall be $
4,546.00 per month. This is based on the following formula:
Tenant Improvements (paid by Tenant) $ 45,340 (including electrical)
less Landlord share of back room - 2,250
less Tenant deposit paid - 7,500
PLUS TENANT CARPET UPGRADE + 1,645
----------
Total $37,235
PLUS 2 POINTS FOR FINANCING 745
----------
Total $37,980 @ 9% for 36 months = $ 1,208
PLUS ORIGINAL LEASE AMOUNT $ 3,338
-------
new Monthly Base Rent $ 4,546
An electrical charge of $12,185 is included above. If the actual electrical
charge is more or less than $12,185, the new Monthly Base Rent amount shall be
adjusted according to the above formula proportionately.
Signed effective the December 20, 1999.
/S/ A. BLAINE SMITH
- -----------------------------------
Landlord, A. Blaine Smith
/S/ EUGENE PANKRATZ
- -----------------------------------
Tenant, The Great Western Mint, Inc.
by Gene PanKratz, President
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MANUFACTURING AND JOINT DISTRIBUTION
MERCHANDISING AGREEMENT
This MANUFACTURING AND JOINT DISTRIBUTION MERCHANDISING AGREEMENT (THIS
"AGREEMENT") is made and entered into as of September 1, 1996 by and between
SONY SIGNATURES INC., A DELAWARE CORPORATION ("SIGNATURES"), and LIBERTY MINT, a
Utah corporation.("Distributor").
RECITALS
A. Signatures is in the business of, among other things, manufacturing
and selling, and licensing others to manufacture and sell, merchandise embodying
the name and/or image of musical artists.
B. Distributor is in the business of, among other things, manufacturing
and selling commemorative coins, primarily through wholesale and catalog
channels of distribution.
C. Signatures has the ability to sell merchandise embodying the name
and/or image of musical artists through unique channels of distribution,
including at venues where such artists are performing (either directly or
through a program insert or handout), CD inserts, and various affiliated
websites.
D. The parties hereto desire to establish terms and conditions of a
manufacturing and joint distribution arrangement under which Signatures and
Distributor will manufacture, use and sell Articles (as defined herein) in the
manner provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement without
definition shall have the meanings ascribed to them in Paragraph 15, unless the
context indicates otherwise.
2. GRANT OF RIGHTS.
2.1 Signatures hereby grants to Distributor, and Distributor hereby
accepts, the exclusive right in the Domestic Territory and the non-exclusive
right in the International Territory to utilize during the Term the Proprietary
Subject Matter solely on or in connection with the manufacture and sale of
Articles, subject to the terms and conditions hereunder.
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2.2 Distributor's rights and obligations hereunder are personal to
Distributor and shall not be sublicensed, assigned, mortgaged or otherwise
transferred or encumbered by Distributor or by operation of law, unless
otherwise previously agreed in writing by Signatures.
2.3 Specifically, Distributor shall not be entitled to sublicense the
right to manufacture ARTICLES TO ANY THIRD PARTY ("SUPPLIER"), in whole or in
part, without Signatures' prior written consent. If such consent is granted by
Signatures, Distributor represents and warrants that it shall familiarize each
such Supplier with the terms and conditions of this Agreement as they apply to
such Supplier. In addition, Distributor acknowledges and agrees that
Distributor's use of any such Supplier shall in no way derogate from or relieve
Distributor of any of its obligations under this Agreement. Distributor further
acknowledges and agrees that it shall be responsible and primarily liable for
all activities and obligations of all such Suppliers with respect to the
Articles. Furthermore, if Signatures so requests, Distributor shall cause each
such Supplier to sign an agreement with Distributor for the manufacture of the
Articles, in whole or in part, in a form satisfactory to Signatures.
3. TERM.
3.1, THE TERM OF THIS AGREEMENT (THE "TERM") shall commence as of
September 1, 1996 and end on August 31, 1999, unless sooner terminated as
provided herein.
3.2 Notwithstanding anything to the contrary contained in Paragraph
3.1, Signatures shall have the right to terminate this Agreement as of October
1, 1997 if Distributor has not sold a sufficient number of Articles during the
period September 1, 1996 through August 31, 1997 to have generated at least
Three Hundred Thousand Dollars ($300,000) of gross sales. In order to exercise
this right, Signatures must provide Distributor with written notice of its
intention to exercise such right no later than September 30, 1997.
3.3 Notwithstanding anything to the contrary contained in Paragraph
3.1, Signatures shall have the right to terminate this Agreement as of October
1, 1998 if Distributor has not sold a sufficient number of Articles during the
period September 1, 1997 through August 31, 1998 to have generated at least Six
Hundred Thousand Dollars ($600,000) of gross sales. In order to exercise this
right, Signatures must provide Distributor with written notice of its intention
to exercise such right no later than September 30, 1998.
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4. PAYMENTS:
4.l Distributor shall pay Signatures and, as applicable, Signatures shall
pay Distributor, and amount equal to fifty percent (50%) of the Net Profit
therefrom. In no event will Signatures be liable to Distributor for any Net
Losses, and in no event may any Net Losses be used to offset any Licensor
Royalties to be paid hereunder. Notwithstanding the foregoing, Net Losses may be
carried forward by Distributor during the Term to offset Net Profit.
4.2 Signatures' share of the Net Profits as set forth in Paragraphs 4.1
shall be referred to as "ROYALTIES." Royalties hereunder shall accrue when the
Articles are sold, shipped, distributed, billed and/or paid for, whichever
occurs first.
4.3 In addition to the applicable Royalties, under all circumstances,
Distributor shall pay Signatures an amount equal to the applicable Licensor
Royalties.
5. ACCOUNTING; AUDITING.
5.1 DISTRIBUTOR SHALL (I) RENDER ROYALTY REPORTS ("ROYALTY REPORTS") to
Signatures on a quarterly basis within thirty (30) days after the close of each
calendar quarter during the Term hereof, whether or not any payment is shown to
be due to Signatures thereunder, and (ii) remit payments due Signatures, if any,
along with such Royalty Reports. In addition, to Royalties, such payments due
Signatures shall include Licensor Royalties and the reimbursement of expenses
incurred by Signatures which are deducted from the calculation of Net Profits.
If the Territory covers more than one country, Royalty Reports shall be prepared
on a country-by-country basis. Royalties shall be paid in U.S. Dollars and
acceptance thereof by Signatures shall not preclude Signatures from questioning
the correctness of same at any time. All Royalties shall be made without set-off
of any amount whatsoever, whether based upon any claimed debt or liability of
Signatures to Distributor. All Royalties and Royalty Reports (which shall be on
statement forms to be furnished by Signatures to Distributor) shall be sent to:
Sony Signatures Inc., Two Bryant Street, San Francisco, CA 94105, Attn.:
Accounting.
5.2 Distributor shall keep and maintain accurate books of account and
records covering all transactions relating to this Agreement. Signatures shall
be entitled to (i) audit such books and records once during each calendar year,
upon five (5) days prior written notice to Distributor, and (ii) make copies
arid summaries of such books and records. All such books of account and records
shall be retained
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by Distributor for a minimum of three (3) years after expiration or termination
of this Agreement. If Signatures' duly authorized representative discovers a
deficiency in the Royalties paid to Signatures for ANY PERIOD UNDER AUDIT, (AN
"AUDIT DEFICIENCY"), Distributor shall promptly pay such Audit Deficiency to
Signatures and, if such Audit Deficiency is five percent (5%) or more of the
Royalties paid to SIGNATURES FOR SUCH AUDIT PERIOD, DISTRIBUTOR SHALL ALSO
REIMBURSE SIGNATURES FOR ALL costs and expenses incurred by Signatures in
connection with such audit (including, without limitation, reimbursement of
Signatures' overhead expenses in an amount equal to what the reasonable expenses
would have been if such services were performed by third-party auditors in the
event Signatures uses its in-house auditors to examine Distributor's books and
records).
5.3 Without prejudice to any other rights of Signatures hereunder, time is
of the essence regarding all payments due hereunder and Distributor shall pay
interest on any Audit Deficiency, as well as on all delinquent Royalty payments
hereunder, at two percent plus the "prime rate" established by the Bank of
America in San Francisco, compounded daily at the rate from time to time in
effect and calculated from the date on which such payment was due.
5.4 Royalties shall be credited to Signatures' account and paid to
Signatures in U.S. Dollars at the exchange rate received by Distributor at the
time of conversion. If Distributor is required by law to pay a tax on the
applicable Licensor's behalf due to the earnings or liability of such Licensor
in the Territory, Distributor may deduct the full amount of such tax from any
moneys payable to Signatures. After any such deduction or advance, Distributor
shall provide Signatures with tax certificates in the applicable Licensor's name
for such amount.
6. COPYRIGHT: TRADEMARKS.
6.1 Distributor's use of the Proprietary Subject Matter shall inure
exclusively to the benefit of Signatures and the Licensor for which such
Proprietary Subject Matter relates and Distributor shall not acquire any rights
therein. All ownership, copyrights, trademarks and other rights in the
Proprietary Subject Matter, and in all artwork, packaging, copy, literary text,
advertising material and promotion material of any sort utilizing the
Proprietary Subject Matter, including all such material developed by
Distributor, shall vest with Signatures and title thereof shall be in the name
of Signatures or its designee. All such items and all Articles shall bear the
copyright and trademark notices and any other legal notices which Signatures may
from time to time prescribe.
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6.2 Distributor recognizes the value of the goodwill associated with the
Proprietary Subject Matter, and that the Proprietary Subject Matter has acquired
secondary meaning in the mind of the public. Distributor agrees, during the
T'erm and thereafter, never to contest the rights of any Licensor or Signatures
in such Proprietary Subject Matter or the validity of the license herein granted
to it. DISTRIBUTOR SHALL NOT AT ANY TIME APPLY FOR any registration of any
copyright, trademark or other designation which would affect any Licensor's
ownership of, or Signatures' rights to, the Proprietary Subject Matter nor file
any document with any governmental authority to take any action which would
affect any Licensor's ownership of, or Signatures' rights to, the Proprietary
Subject Matter, or assist anyone else in doing so. Distributor further agrees
that it shall not at any time use and/or authorize the use of any configuration,
trademark, trade name or other designation confusingly similar to the
Proprietary Subject Matter.
6.3 Distributor shall assist Signatures, at Signatures' request and
expense, in the procurement and maintenance of each Licensor's and/or
Signatures' rights in the Proprietary Subject Matter (including trademark and
copyright protection). In connection therewith, Distributor shall, without
limitation, execute and deliver to Signatures in such form as Signatures may
reasonably request, all instruments necessary to (i) effectuate copyright and
trademark protection, (ii) record Distributor as a registered user of any
trademarks pursuant to this Agreement, or (iii) cancel any such registration.
Signatures makes no warranty or representation that trademark or copyright
protection shall be secured in the Proprietary Subject Matter.
6.4 Signatures and Distributor shall cooperate to ensure that third parties
may not unlawfully infringe on or imitate the Proprietary Subject Matter or
engage in any acts of unfair competition involving the Proprietary Subject
Matter. Each party shall promptly notify the other of any such infringements,
imitations, or acts by third parties that comes to its attention. Signatures
shall have the exclusive right, exercisable at its sole discretion, to institute
in its own name and/or Distributor's name and to control, all actions against
third parties relating to a Licensor's copyrights and trademarks in the
Proprietary Subject Matter, at Signatures' expense. Signatures shall be entitled
to receive and retain all amounts awarded, if any, as damages, profits or
otherwise in connection with such suits. If Signatures does not institute such
an action, Distributor may initiate and prosecute any claims or suits in its
name and/or, with Signatures' prior approval, in Signatures' name, to enjoin
such infringement and to recover damages based thereon. Distributor shall keep
Signatures informed of all material developments and events relating to such
action. Signatures shall also have the right to participate in any action
initiated by Distributor. No claim or action instituted by Distributor shall be
settled without the approval of Signatures. In the event- that any sums are
recovered from prosecution
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or settlement of a claim or suit initiated by Distributor, Distributor shall pay
Signatures fifty percent (50%) of the recovery, after deduction of costs and
expenses, including attorneys' fees. To the extent costs and expenses of the
prosecution or settlement of a claim or suit initiated by Distributor exceeds
any recovery, or in the event there is no recovery, then Distributor shall bear
all of such expenses.
7. INDEMNIFICATION
7.1 Signatures shall indemnify and hold harmless Distributor and its
parent, subsidiaries, affiliates, officers, directors, representatives,
employees and agents from and against any and all claims, liabilities, demands,
causes of action, judgments, settlements and expenses (including, but not
limited to, reasonable attorney's fees and court costs) arising solely out of or
in connection with Distributor's use of the Proprietary Subject Matter as
authorized hereunder; provided, however, that Distributor shall notify
Signatures in writing within ten (10) days after Distributor receives
notification of any claim or suit relating to the Proprietary Subject Matter;
provided, further, however, that the failure to so notify Signatures shall not
relieve Signatures from any liability under this Paragraph 7.1 unless, and only
to the extent that, such failure results in prejudice to or forfeiture of,
substantive rights or defenses of Signatures. The foregoing indemnity shall not
be construed to cover any claim with respect to which Distributor has committed
to indemnify Signatures under Paragraph 9.2 below. In no event shall Signatures
be liable for any consequential damages or loss of profits which Distributor may
suffer arising out of same. Signatures shall have the option to undertake and
control the defense and settlement of any such claim or suit and Distributor
shall cooperate fully with Signatures in connection therewith; provided,
however, that in no event shall any such claim affecting the rights of
Distributor be settled without the prior written consent of Distributor, such
consent not to be unreasonably withheld. In the event Signatures does not
exercise its option to undertake and control the defense and settlement of any
such claim or suit, then Distributor shall have the right to defend any such
action with attorneys of its own selections.
7.2 During and after the Term hereof, Distributor shall indemnify and
hold harmless Signatures and each Licensor, and their respective parents,
subsidiaries, affiliates, officers, directors, representatives, employees and
agents, and all persons whose names and/or likenesses are licensed hereunder
from and against any and all claims, liabilities, demands, causes of action,
judgments, settlements and expenses (including, but not limited to, reasonable
attorney's fees and court costs) arising out of or in connection with (i) the
design, manufacture, packaging, distribution, shipment, advertising, promotion,
sale or exploitation of the Articles, and (ii) any breach of any representation
or warranty made by Distributor
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hereunder. Without limiting the generality of the foregoing, Distributor's
indemnity shall specifically apply to claims relating to or based upon defects
in the Articles, ' whether hidden or obvious, and despite Signatures' approval
of the Articles " it being agreed that any governmental order of recall or
injunction against distribution and/or sale (other than any injunction arising
out of Signatures' breach of any warranty hereunder) shall, as between
Distributor and Signatures, be deemed conclusive proof of such defect for
purposes of invoking Distributor's indemnity hereunder. Signatures shall notify
Distributor in writing within ten (10) days after it receives notification of
any claim or suit relating to the Proprietary Subject Matter; provided, however,
that the failure to so notify Distributor shall not relieve Distributor from any
liability under this Paragraph 7.2 unless, and only to the extent that, such
failure results in prejudice to or forfeiture of, substantive rights or defenses
of Distributor. The foregoing indemnity shall not be construed to cover any
claim with respect to which Signatures has committed to indemnify Distributor
under Paragraph 9.1 above. In no event shall any such claim affecting the rights
of Licensor or Signatures be settled without the prior written consent of
Signatures, such consent not to be unreasonably withheld. At Signatures' option
and expense, Signatures shall have the right to defend any such action with
attorneys of its own selection.
8. INSURANCE. Distributor shall at all times while this Agreement is in effect
and for three (3) years thereafter, obtain and maintain at its own expense, from
a qualified insurance carrier, first and third party insurance, including,
without limitation, products and contractual liability coverage, which includes
as additional insureds each Licensor and Signatures, and their respective
parents, subsidiaries, affiliates, officers, directors, employees,
representatives and agents. The amount of coverage shall be a minimum of One
Million ($1,000,000) combined single limit (with no deductible amount) for each
single occurrence for personal injury, bodily injury and/or property damage. The
policy shall provide for thirty (30) days written notice to Signatures from the
insurer by registered or certified mail, return receipt requested, in the event
of any modification, cancellation or termination. tjpon execution of this
Agreement, Distributor shall furnish Signatures with a certificate of insurance
issued by the carrier evidencing same. In no event shall Distributor
manufacture, advertise, distribute or sell any Articles prior to Signatures'
receipt of such certificate of insurance.
9. ARTWORK; APPROVALS; SAMPLES; QUALITY CONTROL.
9.1 For each individual Property, promptly after receipt of promotional
materials and/or photographs, designs, materials, film, and artwork embodying
the Proprietary Subject Matter ("ARTWORK") therefor, Distributor shall notify
Signatures
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if it does not intend to manufacture and Articles embodying such the
Proprietary Subject Matter relating to such Property. In the event Signatures
receives .such notification, then the exclusive right and license granted to
Distributor pursuant to Paragraph 2.1 shall, with respect to such Licensor's
Proprietary Subject Matter and/or product category or categories of Articles,
terminate and Distributor shall have no rights with respect thereto. As a
result, in such event, Signatures shall be entitled to license the same to any
other person or entity without any liability to Distributor whatsoever.
Distributor shall indemnify Signatures for any losses it suffers arising out of
Distributor's failure to timely notify Signatures as hereinabove provided.
9.2 Distributor shall have the right to create, or have a third-party
create, artwork in original form and/or artwork derived from Artwork, which
includes the Proprietary Subject Matter for use on the ARTICLES ("DISTRIBUTOR
ORIGINAL AND DERIVATIVE ARTWORK"). All intellectual property rights (including
but not limited to copyright) in Distributor Original and Derivative Artwk)rk
shall be owned by Signatures; provided, however, that Distributor shall leave a
non-exclusive license to copy and use such Distributor Original and Derivative
Artwork for the purposes specified in this Agreement. If Distributor engages any
third parties who are not employees of Distributor to make any contribution to
the invention or creation of any Distributor Original and Derivative Artwork so
that such third parties might be deemed "authors" or "inventors" of such artwork
or designs (as such terms are used in present or future United States copyright
and or patent statutes or judicial decisions), then Distributor shall obtain
from all such parties, and furnish to Signatures, a full assignment of rights in
and to such artwork and/or designs (free and clear of any and all claims or
rights of any nature) vesting same in Signatures.
9.3 All Articles and all artwork (whether Artwork or Distributor
Original and Derivative Artwork), copy, packaging, literary text and all
promotional material related to the Articles, including the QUALITY AND STYLE
THEREOF (COLLECTIVELY "MATERIALS"), shall be subject to Signatures'
discretionary approval at all stages of development and production. Distributor
may not manufacture, use, offer for sale, sell, advertise, ship or distribute
any Articles or packaging and/or promotional material related thereto, without
Signatures' prior written approval. For each Property, promptly after receipt of
Artwork therefor, Distributor shall, at its own cost, furnish to Signatures for
preliminary approval, one (1) PROTOTYPE OF EACH ARTICLE ("PROTOTYPE") and/or one
(1) drawing or rough cut of each Article and MATERIAL (COLLECTIVELY "PRELIMINARY
ARTWORK"), as applicable. All such Prototypes and/or Preliminary Artwork shall
be sent to: Sony Signatures Inc., Two Bryant Street, San Francisco, CA 94105,
Attn.: Gladys Ng. In the event that, for any particular Property, Preliminary
Artwork relating thereto is not promptly furnished
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to Signatures, then, the exclusive right and license granted to Distributor
pursuant to Paragraph 2.1 shall, with respect to such Property, become a
non-exclusive right and license. Signatures shall promptly notify Distributor as
to whether Signatures has approved or disapproved such Prototype and/or
Preliminary Artwork, it being understood by Distributor that each Prototype
and/or Preliminary Artwork may be subject to the approval of the applicable
Licensor. Any changes required by Signatures to any such Prototypes and/or
Preliminary Artwork which have been disapproved by Signatures, shall be made by
Distributor. Thereafter, Distributor shall submit final samples of all Articles
and Materials to Signatures for filial approval. With respect to all such
samples which have received Signatures' final approval, Distributor shall not
depart therefrom in any respect, without Signatures' prior written approval.
9.4 Distributor shall furnish to Signatures, at cost, a minimum of six
(6) samples of each finished Article from the first production run, together
with its packaging and promotional materials. Distributor shall permit
Signatures to inspect the production of the Articles on Distributor's premises
at all reasonable times, to ensure that the provisions of this Agreement are
being fully complied with.
9.5 Distributor acknowledges that if the Articles were proven to be
unsafe or were of inferior quality in design, material or workmanship, the
substantial value and goodwill which Licensors and Signatures have built up and
now possess in the Proprietary Subject Matter would be impaired. Accordingly, it
is an essential condition of this Agreement, and Distributor hereby covenants
and agrees: that the Articles shall be safe for use, free of defects in
materials and workmanship, fit for their intended purpose, and of such quality,
style and appearance as the final approved samples submitted to Signatures; that
such Articles will be manufactured, packaged, sold, distributed and advertised
in accordance with all applicable (whether national, federal, state, provincial
or local) laws; and that the policy of sale, distribution and/or exploitation by
Distributor shall be of high standard and to the best advantage of the
Proprietary Subject Matter and that the same shall in no manner reflect
adversely upon the good name of Signatures, any of the Licensors, or the
Proprietary Subject Matter.
10. RESERVED RIGHTS.
10.1 Signatures shall not be prevented from granting third parties the
right to use the Proprietary to use the Proprietary Subject Matter in any manner
whatsoever, except as otherwise provided herein.
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10.2 Signatures reserves all rights not expressly granted to
Distributor hereunder.
10.3 Notwithstanding anything to the contrary contained in this
Agreement, this Agreement is expressly subject and subordinate to any rights
each of the respective Licensors retain pursuant to his/her/its License. Nothing
in this Agreement is intended to conflict with, affect, or diminish the rights
of any Licensor pursuant to his/her/its License. Signatures shall use its
reasonable efforts to :inform Distributor of any restrictions in a License which
would conflict with or affect the rights granted by Signatures hereunder. In
this connection, if Signatures is recluired under its License for a particular
Licensor to stop using the Proprietary Subject Matter of such Licensor,
Distributor sl-iall immediately stop making Articles embodying such Proprietary
Subject Matter and shall immediately, or at the end of any applicable sell-off
period specified in such License, stop offering for sale, using or distributing
any such Articles.
10.4 Notwithstanding anything to the contrary contained in this
Agreement, this Agreement is expressly subject and subordinate to any joint
venture, partnership, or other arrangements Signatures has entered into, or may
enter into in the future, in order to obtain the Merchandising Rights of a
Licensor or with respect to the artwork for a particular Property. Signatures
shall use its reasonable efforts to inform Distributor of any such arrangements
to the extent they would conflict with or affect the rights granted by
Signatures hereunder.
10.5 Notwithstanding anything to the contrary contained in this
Agreement, Distributot, acknowledges that when Signatures acts as the
merchandising licensing agent for a Property, it has a fiduciary duty to the
Licensor thereof to fully exploit the merchandising potential of the Property.
Such duty may require Signatures to grant alternative or additional competing
licenses to other Merchandise manufacturing companies. If Signatures determines
that this action is necessary, then the exclusive right granted in Paragraph 2.1
shall, with respect to such Property, become a non-exclusive righter or
terminate altogether as specified by Signatures. The Properties subject to this
Paragraph as set forth on the date hereof are specified on Exhibit A, attached
hereto and incorporated herein by this reference.
11. MANUFACTURE AND DISTRIBUTION
11.1 The Proprietary Subject Matter may only be used in connection with
the manufacture, actual packaging and advertising of the Articles.
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11.2 For each Licensor/ Distributor shall commence distribution,
shipment and sale of substantial quantities of Articles embodying the
Proprietary Subject Matter thereof promptly following Signatures' approval of
the final samples of the Prototype and/or Preliminary Artwork therefor, or such
later time period as may agreed to by Signatures based on the circumstances of
the particular Proprietary Subject Matter, which agreement shall not
unreasonably be withheld. In the event that, for any particular Property's
Proprietary Subject matter, substantial quantities of Articles embodying the
same have not promptly commenced to be distributed, shipped, and sold, then the
exclusive right and license granted to Distributor pursuant to Paragraph 2.1
shall, with respect to such Property, become a nonexclusive right and license.
11.3 The Proprietary Subject Matter of each Licensor shall not be used
in conjunction with any other licensed name, character, symbol, design, likeness
or literary or artistic material, except that actual representations of an
Article and its packaging may be shown in advertising and catalogs showing other
articles sold by Distributor, provided such use is not made in a manner that may
be likely to cause doubt or confusion in the mind of the public as to the
ownership of the Proprietary Subject Matter, and in no event may the Articles be
packaged for sale with other articles.
11.4 During the Term, Distributor shall (i) continue to diligently and
continuously distribute, ship and sell the Articles in the Territory, and (ii)
use its reasonable best efforts to make and maintain adequate arrangements for
the distribution, shipment and sale necessary to meet the demand for such
Articles in the Territory.
12.. REPRESENTATIONS AND WARRANTIES; NONCOMPETITION.
12.1 Signatures represents and warrants to Distributor as follows: (a)
Signatures owns or controls all rights in and to the Proprietary Subject Matter
pursuant to the Licenses; (b) Signatures has the full right, authority and power
to enter into this Agreement and to perform all its obligations hereunder,
subject to any rights of a Licensor in his/her/its Licen,,e.
12.2 During the Term, Signatures shall use its best reasonable efforts
to arrange for the distribution of Articles at or about any of Licensor's live
performances and/or pursuant to an insert in Licensor's CD package or tour
program, it being acknowledged by Distributor that this Agreement is in no way
conditioned on Signatures successfully arranging the same and failure of
Signatures to arrange the same shall not be considered a breach of this
Agreement by Signatures.
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12.3 Distributor represents and warrants to Signatures as follows: (i)
Distributor has full power and authority to enter into this Agreement and
perform its obligations herein; and (ii) Distributor's execution, delivery, and
performance of this Agreement will not infringe upon the rights of any third
party or violate the provisions of any agreement to which Distributor is a
party.
12.4 During the Term, Distributor and Signatures will work together to
round out the collection of Articles by securing rights (on terms to be approved
by both parties) from various other musical artists themselves, as well as from
competitors of Signatures such as GIANT Merchandising, Nice Man Merchandising,
Winterland Productions, GEM (Great Entertainment Merchandising), and Brockum.
Both Distributor and Signatures agree that any agreements entered into by either
Distributor or Signatures with these musical artists or merchandising companies
relating to Merchandise will be used only for purposes of expanding the business
generated from this Agreement. In addition, all profits made from any such
agreements will be considered Net Profits under this Agreement and distributed
accordingly.
13. TERMINATION
13.1 In addition to any and all other remedies available to it
hereunder, Signatures shall have the right to immediately terminate this
Agreement upon written notice to Distributor upon the occurrence of any of the
following:
13.1.1 Distributor makes, sells, offers for sale, uses or distributes
any Article without having the prior written approval of Signatures as specified
in Paragraph 8.4 hereof.
13.1.2 Distributor becomes subject to any voluntary or involuntary
order of any government agency involving the recall of any of the Articles
because of safety, health or other hazards or risks to the public.
13.2 In addition to any and all other remedies available to it
hereunder, Signatures may terminate this Agreement upon the occurrence of any of
the following circumstances which has not been cured within seven days after
written notice thereof from Signatures to Distributor, or if such circumstance
cannot be cured within seven days, then for such period as shall be reasonable,
provided that Distributor is capable of curing such circumstance and has
proceeded diligently to cure spn,,e:
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13.2.1 Distributor fails to immediately discontinue the advertising,
distribution or sale of Articles which do not contain the appropriate copyright,
trademark, or other similar legal legend.
13.2.2 Distributor breaches any provision of the provisions of this
Agreement relating to the unauthorized assertion of rights in the Proprietary
Subject Matter.
13.2.3 Distributor fails to make timely payment of Royalties, Licensor
Royalties, or other applicable payments when due or fails to make timely
submission of Royalty Reports when due.
13.2.4 Distributor breaches any provision of Paragraph 2 hereof.
13.3 In addition to any and all other remedies available to it
hereunder, Signatures may terminate this Agreement upon the occurrence of any of
the following circumstances which has not been cured within thirty days after
written notice thereof from Signatures to Distributor, or if such circumstance
cannot be cured within thirty days, then for such period as shall be reasonable,
provided that Distributor is capable of curing such circumstance and has
proceeded diligently to cure same:
13.3.1 Distributor continues to make, sell, offer for sale, use or
distribute any Article after receipt of notice from Licensor withdrawing
approval of same, pursuant to Paragraph 9.3.
13.3.2 Distributor fails to obtain or maintain insurance as required
under Paragraph 8 hereof.
13.3.3 A petition in bankruptcy is filed by or against Distributor;
Distributor is adjudicated a bankrupt or insolvent, or makes an assignment for
the benefit of creditors or an arrangement pursuant to any bankruptcy law;
Distributor discontinues its business; or a receiver is appointed for
Distributor or Distributor's business and such receiver is not discharged within
thirty (30) days.
13.3.4 Distributor violates any of its other obligations or breaches
any of its representations and warranties hereunder.
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14. EFFECT OF TERMINATION
14.1 On expiration or termination of this Agreement, all Royalties,
Licensor Royalties, and other applicable payments shall be immediately due and
payable without set-off of any kind. Except as noted in Paragraph 14.2 below,
Distributor shall immediately stop the manufacture, sale and distribution of all
Articles and shall send Signatures a complete inventory report and accounting
with full payment due, within thirty (30) days after sucl-i expiration or
termination.
14.2 On expiration of this Agreement only, Distributor shall have a
period of ninety (90) days commencing with the expiration date, in which to
sell-off Articles which are on hand or in process as of the expiration date;
provided, however, (a) Distributor complies with all the terms and conditions of
this Agreement, including, but not limited to, Distributor's obligation to pay
Royalties on and to account to Signatures for such sales (such accounting to be
provided to Signatures within fifteen (15) days after the expiration of the
sell-off period), (b) Distributor has not manufactured Articles solely or
principally for sale during the sell-off period, and (ii) Distributor has given
Signatures the opportunity to purchase such Articles at Distributor's cost of
manufacture thereof, which purchase may be of some or all of such units, in
Signatures' discretion. During the sell-off period., Signatures may use or
license the use of the Proprietary Subject Matter in any manner, at any time,
anywhere in the world.
14.3 On expiration or termination of this Agreement, except as noted in
Paragraph 14.2 above, Distributor shall have no further right to exercise the
rights licensed hereunder or otherwise acquired in relation to this Agreement
and such rights shall forthwith revert to Signatures. All Artwork and other
materials supplied to Distributor by Signatures hereunder, and all Dies, shall
be immediately returned to Signatures. All remaining Articles and component
parts thereof shall be destroyed and Distributor shall promptly deliver to
Signatures a certificate of destruction evidencing same. Distributor agrees that
(i) its failure to cease the manufacture, sale and/or distribution of Articles
upon the expiration or termination of this Agreement will result in immediate
and irreparable damage to Signatures, (ii) there is no adequate remedy at law
for such failure and (iii) in the event of such failure, Signatures shall be
entitled to injunctive relief.
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15. DEFINITIONS
15.1 The following terms are defined in the Agreement in the Paragraphs
set forth below:
TERM PARAGRAPH
Agreement Preamble
Artwork 9.1
Audit Deficiency 5.2
Distributor Preamble
Distributor Original and
Derivative Artwork 9.2
Materials 9.3
Preliminary Artwork 9.3
Prototype 9.3
Royalties 4.2
Royalty Reports 5.1
Signatures Preamble
Supplier 2.3
Term 3.1
15.2 In addition, the following terms shall have the following meanings
for purposes of this Agreement:
"ARTICLES" shall mean Merchandise utilizing, bearing, or otherwise
relating to the Proprietary Subject Matter.
"DIES" shall mean the devices used to shape or stamp an object or
material to create the Articles.
"DOMESTIC TERRITORY" shall mean the United States of America, its
territories and possessions, and Canada.
"INTERNATIONAL TERRITORY" shall mean tl)e world excluding the Domestic
Territory.
"LICENSE" shall mean a merchandising license agreement, effective
during the Term, by which a Licensor grants Merchandising Rights to Signatures.
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"LICENSOR" shall mean a musical artist who has granted Merchandising
Rights to Signatures pursuant to a License. In addition, on a case-by-case
basis, Signatures may designate other entertainment properties which it controls
to be included within the definition of Licensor.
"LICENSOR ROYALTIES" shall mean the royalty rate payable by Signatures
to the applicable Licensor pursuant to such Licensor's License.
"MERCHANDISE" shall mean, with respect to each Licensor, commemorative
coins in gold, silver, and non-precious metals, in various sizes and
presentation formats as approved by Signatures, at retail pi- ices ranging from
$10.00 to $500.00, subject to any restrictions specified in such Licensor's
License.
"MERCHANDISING RIGHTS" shall mean the right to utilize the Proprietary
Subject Matter owned by a particular Licensor on or in connection with the
manufacture, distribution, sale, advertisement and/or promotion of Articles.
"NET LOSSES" shall mean the amount by which (b) exceeds (a) in the
definition of Net Profit.
"NET PROFIT" shall mean an amount equal to (a) the total gross revenues
received by Distributor (INCLUDING ANY SHIPPING AND HANDLING CHARGES) OR
SIGNATURES (IF APPLICABLE), LESS (b) the sum of the following expenses: (i)
returns and allowances, (ii) the applicable Licensor Royalties; (iii) actual
shipping, packaging, and handling for the Articles themselves, (iv) Product
Costs; (v) Tariffs and Taxes; (vi) the actual cost of Dies; (vii) actual
out-of-pocket sampling costs incurred pursuant to Paragraph 9.3 and 9.4; and
(viii) fees charged by a venue for the right to sell Articles at a Licensor's
live performances, and all vending expenses associated therewith. No expense
deductions shall be made from revenues for Distributor's finance costs,
warehousing costs, storage costs, distribution costs, corporate overhead
including, but not limited to, management and supervisory personnel, or in-house
direct selling costs. In situations where Distributor is not selling Articles
through its established distribution channels, the parties may mutually agree in
writing upon additional deductions from gross revenues, which may include, for
example, third party catalog development, fulfillment and customer service
support expenses (for example, in the situation of album or program inserts);
third party selling expenses (for example, third party participations), and
direct marketing expenses (for example, for tradeshows or print advertising).
"PRODUCT COSTS" shall mean shall mean the direct manufacturing costs of
the Articles charged to Distributor, as specified on the Schedule attached
hereto, as the same may be amended from time to time. The parties acknowledge
and agree that Distributor solely shall bear the Product Costs of Articles
manufactured but not sold, but that the cost of any unsold inventory may be
deducted for purposes of calculating Net Profit; provided, however, that unsold
inventory which is then reused as other products
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by Distributor shall not be so deducted (for example, if an Article is melted
down and reused as another product).
"PROPERTY" shall mean, for each License, the musical artist or group
which is the subject of the License.
"PROPRIETARY SUBJECT MATTER" shall mean, for each Property, the name,
symbols, logos, trademarks, designs, copyrights, likenesses and/or images
thereof, subject to the terms and conditions upon which the rights thereto are
owned or controlled by Signatures pursuant to the applicable License.
"TARIFFS AND TAXES" shall mean all sales taxes, tariffs, levies, duties,
assessments, surcharges, ad valorem taxes and other impositions paid or incurred
by Distributor that are directly related to Product Costs. Tariffs and Taxes
specifically excludes income taxes.
"TERRITORY" shall mean the Domestic 'Territory and the International
Territory.
16. NOTICES. All notices, demands, contracts or waivers hereunder shall be given
in writing by mail, messenger, overnight air courier or telecopier addressed as
indicated below or as otherwise indicated in writing by a party hereto. The date
of messengering or telecopying shall be deemed to be the date of service. Three
(3) business days from the date of mailing shall be deemed to be the date of
service for mailed notices. One (1) business day from the date of overnight air
courier handling shall be deemed to be the date of service for courier handled
notices.
IF TO SIGNATURES:
Mail and
Messenger: Sony Signatures !nc.
Two Bryant Street
San Francisco, CA 94105
Attention: Senior Vice President, Business
Affairs and General Counsel
Telecopier: (415) 247-7407
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IF TO DISTRIBUTOR:
Mail and
Messenger: Liberty Mint
651 Columbia Lane
Provo, Utah 84604
Attention: Mr. Larry Ruff, President
Telecopier: (801) 377-7832
17. NO MODIFICATION; WAIVER. The terms of this Agreement shall not be modified
except by an agreement in writing signed by both parties hereto. No waiver by
either party of a breach or default hereunder shall be deemed a waiver by such
party of a subsequent breach or default of a like or similar nature.
18. ENTIRE AGREEMENT. This Agreements all constitute the entire understanding of
the parties with respect to the subject matter, superseding all prior and
contemporaneous promises, agreements and understandings, whether written or oral
pertaining thereto.
19. RELATIONSHIP OF THE PARTIES. This Agreement does not appoint either party as
the agent of the other party, or create a partnership of joint venture between
the parties.
20. GOVERNING LAW. This Agreement shall be construed and interpreted pursuant to
the laws of the State of California, and the parties hereto submit and consent
to the jurisdiction of the courts of the State of California, including Federal
Courts located therein, should Federal jurisdiction requirements exist, in any
action brought to enforce (or otherwise relating to) this Agreement.
Notwithstanding the preceding sentence, nothing contained in this Agreement
shall preclude Signatures from bringing an action in any appropriate forum to
enforce the terms and provisions of this Agreement. Distributor also consents to
service of process in any manner permitted by the laws of the State of
California.
21. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable, such decision shall not affect the
validity or enforceability of any of the remaining provisions, which remaining
provisions shall continue to have full force and effect.
22. CONFIDENTIALITY. The parties hereto shall keep the terms of this Agreement
confidential and shall not deliberately disclose information regarding but not
limited to Royalties, Advances, and gross sales of Articles, other than to
agents, employees and representatives as necessary for the performance of their
respective obligations herein.
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23. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together .
shall be deemed to be one and the same Agreement.
24. FURTHER ASSURANCES.. The parties hereto shall execute such further documents
and perform such further acts as may be necessary to comply with the terms of
this Agreement and consummate the transactions herein provided.
25. HEADINGS. The headings contained in this Agreement are for convenience and
reference purposes only. They do not form a part hereof and sl-iall not affect
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the pirties hereto have executed this Agreement or
caused it to be executed on their behalf as of the day first above written.
SONY SIGNATURES INC.
BY: /S/ CARL E. WALTER
--------------------------------
TYPE OR PRINT NAME: CARL E. WALTER
TITLE: SR. VP
LIBERTY MINT
BY: /S/ LARRY RUFF
--------------------------------
TYPE OR PRINT NAME: LARRY RUFF
TITLE: PRESIDENT
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FROM Liberty Mint PHONE N0. : 801 377 7832 Oct. 31 1996 05:09PM P2
EXHIBIT A
PARAGRAPH 10.5 PROPERTIES
The Beatles
The Blues Brothers (House of Blues)
John Lennon
Grateful Dead utilizing Rick Griffin artwork
Janis Joplin
Sony Signatures by
/s/ Carl E. Walter
- -------------------
Liberty Mint by
/s/ Larry Ruff - President
- ---------------------
OCT 31 '96 16:09 801 377 7832 PAGE.002
141
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FROM : Liberty Mint PHONE NO. : 801 377 7832 Oct. 31 1996 05:10PM P3
EXHIBIT B
Schedule of Product Costs
Minting fees calculated at 3/4 of minimum price schedule
Dies, Metal, packaging, and other product materials will be charged at
actual cost. Sample minting costs based on various quantity runs for
silver one ounce size MINIMUM MINTING FEE PRICING - EFFECTIVE MARCH 1,
1995
Qty. Run 100 500 1,000 2,000 5,000
QUALITY
Minimum Proof 5.96 5.03 4.48 4.36 4.27
Pricing Proof-Like 2.98 2.74 2.43 2.37 2.31
SONY MINTING FEE PRICING (BASED ON 3/4 OF MINIMUM PRICING)
Qty. Run 100 500 1,000 2,000 5,000
QUALITY
Minimum Proof 4.47 3.77 3.36 3.27 3.20
Pricing Proof-Like 2-24 2.06 1.82 1.78 1.73
SELECTED PACKAGING COSTS (BASED ON Current Costs):
One ounce size acrylic airtight capsule 0.19
One coin velvet gift box (standard black) 0.90
One coin velvet gift box (custom color) 0.97
Custom puff silk screening 0.50
Gold Select Plating (per side) 7.50
Four Coin Box 1.75
Cardboard Sleeve for Four Coin Box 0.09
Sony Signatures by
/s/ Carl E. Walter
Liberty Mint by
/s/ Larry Ruff - President
OCT 31 '96 16:09 10/31196 04:05 PM PRODCOST.WK4 801 377 7832 PAGE.003
142
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("AGREEMENT") IS MADE EFFECTIVE THIS 23RD
day of SEPTEMBER, 1999 BY AND BETWEEN LIBERTY MINT, LTD. ("Seller"), a Colorado
corporation having principal offices in Provo, Utah and a mailing address of
P.O. Box 1950, Orem, Utah 84059, and CALBEAR GAS, LLC ("Buyer"), a Texas limited
liability company having principal offices at 268 West 400 South, Suite 300,
Salt Lake City, Utah 84101, with respect to the following:
RECITALS
WHEREAS, Seller owns a controlling interest, amounting to 88.2% of the
outstanding common shares, in its subsidiary Liberty Mint, Inc., a Utah
corporation ("the Subsidiary"), which percentage equates to approximately
7,291,326 shares of the Subsidiary's common stock; and
WHEREAS, Seller desires to sell and Buyer desires to purchase all of
Seller's shares in the Subsidiary;
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and adequacy of which is expressly acknowledged, Seller and Buyer agree
as follows:
1. PURCHASE AND SALE OF STOCK
Upon the terms and conditions contained in this Agreement, Buyer agrees
to purchase and acquire, and Seller agrees to sell, transfer, assign and convey,
Eighty Eight and Two Tenths percent (88.2%) of the issued and outstanding shares
of the Subsidiary (the "Subsidiary Control Shares"), which percentage equates to
approximately 7,291,326 shares of the Subsidiary's common stock, all of which
shares shall be restricted pursuant to Rule 144 of the Securities Act of 1933
(the "Act"). Upon execution of this Agreement, all shares will be deemed fully
paid and non-assessable.
2. PURCHASE PRICE.
Buyer agrees to pay, and Seller agrees to accept as payment in full,
the aggregate purchase price of Twenty-Five Dollars ($25.00) cash in exchange
for the Subsidiary Control Shares. Seller hereby acknowledges the receipt and
adequacy of this amount. Upon the execution of this Agreement ("Closing"), the
certificate for the Subsidiary Control Shares shall be delivered to Buyer not
later than 3 days thereafter, and the parties hereby acknowledge that Seller is
relying upon representations made herein by Buyer in making this sale.
3. REPRESENTATIONS AND WARRANTIES OF BUYER:
a. Buyer is acquiring the Shares for its own account and not with a
view to any distribution within the meaning of the Securities Act
of 1933, as amended (the "Act"). Buyer acknowledges that it has
been advised and is aware that (i) the Seller is relying upon an
exemption under the Act predicated upon the Buyer's
representations and warranties contained in this Agreement, and
(ii) the Shares sold to the Buyer pursuant to this Agreement will
be "restricted stock" within the meaning of the rules and
regulations (the "Rules") promulgated by the United States
Securities and Exchange Commission ("SEC") pursuant to the Act.
Unless, and until, the Shares are registered under the Act, they
will be subject to limitations upon resale set forth in the Rules
or in other administrative interpretations by the SEC in effect
at the time of the proposed sale or other disposition.
b. Buyer has received all of the information it considers necessary
or appropriate for determining whether to purchase the Shares.
Buyer is familiar with the business, affairs, risks and
properties of the Seller and the Subsidiary. Buyer has had an
opportunity to ask questions of and receive answers from the
Seller, and its officers, directors and other
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<PAGE>
representatives, regarding the Subsidiary and the terms and cond-
itions of the sale of the Subsidiary Control Shares. Buyer has
had the opportunity to obtain any additional information the
Seller possesses or could acquire without unreasonable effort
or expense, necessary to verify the accuracy of the information
furnished.
c. Buyer has such knowledge and expertise in financial and business
matters that it is capable of evaluating the merits and
substantial risks of an investment in the Subsidiary Control
Shares and is able to bear the economic risks relevant to the
purchase of such Shares.
d. Buyer is relying solely upon independent consultation with its
professional, legal, tax and accounting advisors and such others
as Buyer deems to be appropriate in purchasing the Subsidiary
Control Shares; Buyer has been advised to, and has consulted
with, its professional tax and legal advisors with respect to any
tax consequences of investing in the Subsidiary.
e. Buyer recognizes that an investment in the securities of the
Subsidiary involves substantial risk and understands all of the
risk factors related to the purchase of the Subsidiary Control
Shares.
f. Buyer understands that there may be no market for the Subsidiary
Control Shares.
g. Buyer's financial condition is such that Buyer is under no
present or contemplated future need to dispose of any portion of
Subsidiary Control Shares to satisfy any existing or contemplated
undertaking, need or indebtedness.
h. It is understood that the certificates evidencing the Subsidiary
Control Shares will bear substantially the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. THE SHARES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED
OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THESE SHARES UNDER THE SECURITIES ACT OF 1933 OR
AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT."
i. The Buyer confers full authority upon the Seller and the
Subsidiary (i) to instruct its transfer agent not to transfer any
of the Shares until it has received written approval from the
Seller and (ii) affix the legend in subparagraph (h) above to the
certificate or certificates representing the Shares.
j. Buyer understands that the Seller is relying upon Buyer's
representations and warranties as contained in this Agreement in
consummating the sale and transfer of the Shares without
registering them under the Act or any law. Therefore, Buyer
agrees to indemnify the Seller against, and hold it harmless
from, all losses, liabilities, costs, penalties and expenses
(including attorney's fees) which arise as a result of a sale,
exchange or other transfer of the Shares other than as permitted
under this Agreement. Buyer further understands that the
Subsidiary will make an appropriate notation on its transfer
records of the restrictions applicable to these Shares.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and
warrants that:
a The Seller is a corporation duly organized, validly existing
under the laws of the State of Colorado.
b. The Seller has all necessary corporate power and authority under
the laws of Colorado and all other applicable provisions of law
to own its properties and other assets now owned by it, to carry
on its business as now being conducted, and to execute and
deliver and carry out the provisions of this Agreement.
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<PAGE>
c. All corporate action on the part of the Seller required for
the lawful execution and delivery of this Agreement and the
sale, transfer, and delivery of the Shares has been duly and
effectively taken. Upon execution and delivery, this Agreement
will constitute a valid and binding obligation of the Seller,
enforceable in accordance with its terms, except as the
enforceability may be limited by applicable bankruptcy,
insolvency or similar laws and judicial decisions affecting
creditors' rights generally.
5. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. The
representations, warranties and covenants made by the Seller and Buyer
in this Agreement shall survive the purchase and sale of the Shares.
6. TRANSFER AGENT INSTRUCTIONS. The Subsidiary's transfer agent will be
instructed to issue one or more stock certificates representing the
Common Stock with the restrictive legend set forth in Paragraph 3 above
in the name of Buyer and will be advised that the Shares have been
issued pursuant to Rule 144 of the Securities Act of 1933. The Seller
further warrants that no stop transfer instructions other than as
referred to in Paragraph 3 above will be given to its Subsidiary's
transfer agent and that these Shares shall be freely transferable on
the books and records of the Subsidiary, subject to compliance with
applicable securities laws.
7. STOCK DELIVERY INSTRUCTIONS. The share certificates shall be delivered
to the Buyer at such times and places to be mutually agreed.
8 GOVERNING LAW. This Consulting Agreement shall be governed by and
interpreted in accordance with the laws of the State of Utah, without
regard to its law on the conflict of laws. Any dispute arising out of
this Consulting Agreement shall be brought in a court of competent
jurisdiction in Salt Lake City, Utah.
9. MISCELLANEOUS
A. NOTICES. Any notice under this Agreement shall be deemed to have
been sufficiently given if sent by registered or certified mail,
postage prepaid, addressed as follows:
To the attention of the President at the address first written
above for each respective entity, or any new address which the
parties may hereafter designate by written notice. All notices
shall be deemed to have been given as of the date of receipt.
B. ENTIRE AGREEMENT. This instrument sets forth the entire agreement
between the parties hereto, and no prior or contemporaneous
written or oral statement or agreement shall be recognized or
enforced.
C. SEVERABILITY. If a court of competent jurisdiction determines
that any clause or provision of this Agreement is invalid,
illegal or unenforceable, the other clauses and provisions of the
Agreement shall remain in full force and effect. The clauses and
provisions which the Court determines are void, illegal or
unenforceable shall be limited so that they remain in effect to
the full extent permissible by law.
D. ASSIGNMENT. Neither party may assign this Agreement without the
express written consent of the other party. However, if the other
party consents to the assignment, such assignment will be binding
on and inure to the benefit of the assignee.
G. WAIVER OF JURY TRIAL. To the extent permitted by law, the parties
hereby irrevocably waive a jury trial in the event of litigation.
The parties included this provision because of the cost and delay
of a jury trial and because the parties believe that a jury trial
would not be necessary to resolve any dispute or claim between
them.
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<PAGE>
H. ATTORNEY'S FEES. If either party institutes legal action or other
proceeding (including, but not limited to, arbitration) to
enforce or to declare any right or obligation under this
Agreement or as a result of a breach, default or misrep-
resentation in connection with any of the provisions of this
Agreement, or otherwise because of a dispute among the parties
the successful or prevailing party will be entitled to recover
reasonable attorney's fees. Attorney's fees shall include fees
for appeals, collections and other expenses incurred in such
action or proceeding. Legal fees shall be awarded in addition to
any other relief to which the prevailing party may be entitled.
I. NO THIRD PARTY BENEFICIARY. Nothing in this Agreement, expressed
or implied, is intended to confer any rights or remedies upon any
person other than the parties hereto and their successors.
J. FACSIMILE COUNTERPARTS. If a party signs this Agreement and
transmits an electronic facsimile of the signature page to the
other party, the party who receives the transmission may rely
upon the electronic facsimile as a signed original of this
Agreement.
K. FURTHER ASSURANCES. At any time and from time to time, after the
date of this Agreement, each party will execute such additional
instruments and take such actions as are reasonably necessary to
confirm or perfect title to the Share or otherwise to carry out
the intent and purposes of this Agreement.
L. AMENDMENT OR WAIVER. At any time, this Agreement may be amended
by a writing signed by both parties. Any term or condition of
this Agreement may be waived, or the time for performance may be
extended, by a writing signed by the party or parties for whose
benefit the original term, condition, or time of performance was
intended. Every right and remedy provided herein shall be
cumulative with every other right or remedy at law, or in equity,
and may be enforced concurrently with any other right or remedy
available. No waiver by any party of the performance of any
obligation by the other shall be construed as a waiver of the
same or any other default occurring or existing before, during,
or after the express waiver.
M. HEADINGS. The section and subsection headings in this Agreement
are inserted for convenience only. In the event of a conflict
between a heading and the text of this Agreement, the text shall
control the meaning and interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement on the date first written above.
LIBERTY MINT, LTD., Seller
/s/
------------------------
Dan Southwick, President
CALBEAR GAS, LLC, Buyer
/s/
------------------------
BonnieJean C. Tippetts, President
146
OPTION AGREEMENT
THIS OPTION AGREEMENT ("AGREEMENT") between and among Dan Southwick, an
individual ("Buyer") and Calbear Gas, L.L.C., a Texas Limited Liability Company
("Seller"), is ENTERED INTO AS OF THIS 23RD day of September, 1999.
RECITALS
WHEREAS, Liberty Mint, Ltd., a Colorado Corporation ("Liberty Mint,
LTD."), was the parent corporation of Liberty Mint, Inc., a Utah Corporation
("Liberty Mint, Inc.");
WHEREAS, Seller recently purchased from Liberty Mint, Ltd., 100% of
Liberty Mint, Ltd.'s controlling interest of Liberty Mint, Inc. via a Stock
Purchase Agreement dated September 23, 1999, ("Stock Purchase Agreement");
WHEREAS, pursuant to the Stock Purchase Agreement, Seller purchased
7,291,326 shares of Liberty Mint, Inc. common stock from Liberty Mint, Ltd.,
which constitutes approximately an 88.2% controlling interest in Liberty, Mint,
Inc.; and
WHEREAS, Seller wishes to give Buyer the option of buying back the
7,291,326 shares of Liberty Mint, Inc. common stock that Seller purchased from
Liberty Mint, Ltd. pursuant to the Stock Purchase Agreement.
NOW THEREFORE, in consideration of ten dollars ($10.00) and other good
and valuable consideration already received Seller and Buyer agree as follows:
AGREEMENT
For a ninety (90) day period from the date first written above, Seller
hereby gives Buyer, the option, for Twenty-five dollars ($25.00) cash, the right
to buy back the 7,291,326 shares of Liberty Mint, Inc. common stock that Seller
purchased from Liberty Mint, Ltd. pursuant to the Stock Purchase Agreement
described above.
This Agreement constitutes the complete understandings and agreements
between you and Buyer with respect to the matters referred to herein, and all
other prior representations, negotiations and understandings, whether oral or
written, are superseded by and merged into this Agreement. Neither you or Seller
shall be liable or bound to any other person in any agreement, warranty,
representation or guarantee, except as explicitly set forth herein.
Calbear Gas, L.L.C. Dan Southwick,
a Texas Limited liability company an individual
/S/ Bonniejean C. Tippetts /S/ Dan Southwick
- --------------------------- --------------------
By: BonnieJean C. Tippetts By: Dan Southwick
Its: President
147
STATEMENT OF SUBSIDIARIES
OF
LIBERTY MINT, LTD.
Liberty Mint, Ltd. has two (2) Subsidiaries. They are:
(1) Liberty Mint Marketing, Inc., a Utah Corporation, which does business
under the name "Liberty Mint Marketing, Inc."; and
(2) Great Western Mint, Inc., a Utah Corporation, which does business under
the name "Great Western Mint, Inc."
148
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED AUDITED AND UNAUDITED FINANCIAL STATEMENTS FOR THE PERIODS
ENDED DECEMBER 31, 1998 AND SEPTEMBER 30, 1999 RESPECTIVELY, THAT WERE
FILED WITH THE COMPANY'S REPORT ON FORM 10-SB/A AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001042420
<NAME> Liberty Mint, Ltd.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-1-1998 JAN-1-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 82,223 10,459
<SECURITIES> 4,857 0
<RECEIVABLES> 389,374 304,334
<ALLOWANCES> (217,631) (156,372)
<INVENTORY> 250,124 68,663
<CURRENT-ASSETS> 543,145 227,084
<PP&E> 602,186 23,147
<DEPRECIATION> (509,061) 0
<TOTAL-ASSETS> 660,530 265,831
<CURRENT-LIABILITIES> 1,845,625 981,465
<BONDS> 0 0
0 0
159,792 0
<COMMON> 3,798,277 2,710,126
<OTHER-SE> (5,339,282) (3,561,558)
<TOTAL-LIABILITY-AND-EQUITY> 660,530 265,831
<SALES> 4,398,558 153,262
<TOTAL-REVENUES> 4,430,950 153,262
<CGS> 3,750,357 69,160
<TOTAL-COSTS> 3,750,357 2,702,240
<OTHER-EXPENSES> 1,571,017 0
<LOSS-PROVISION> 108,040 0
<INTEREST-EXPENSE> 50,844 134,991
<INCOME-PRETAX> (1,720,525) (2,753,130)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,720,525) 0
<DISCONTINUED> 0 (643,088)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,720,525) (3,396,217)
<EPS-BASIC> (2.15) (1.49)
<EPS-DILUTED> 0 0
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