<PAGE> 1
As filed with the Securities and Exchange Commission on
_______________. Registration No. _________.
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------------------------
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------------------
MAXAM GOLD CORPORATION
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(Exact name of Registrant specified in charter)
Utah 1330 88-0203182
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)
528 Fon du Lac Drive
East Peoria, Illinois 61611
Tel: (309) 699-8725
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(Address, including zip code of principal place of business and
telephone number, including area code of Registrant's principal
executive offices.)
Conrad C. Lysiak
Attorney and Counselor at Law
West 601 First Avenue, Suite 503
Spokane, Washington 99204
(509) 624-1475
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(Name, address, including zip code and telephone number, including
area code of agents for service.)
Approximate date of commencement date or proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box [x].
The Exhibit Index for this Registration Statement begins on
sequential page number _____.
====================================================================
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Proposed Proposed
Title of Maximum maximum
each class of offering aggregate
securities to Amount to be price per offering Amount of
be registered registered Share [1] price registration fee
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Warrants 9,109,172 $ 0.00 $ 0 $ 0.00
Shares issuable 9,109,172 $ 1.00 $ 9,109,172 $ 2,760.36
upon the exercise
of the Warrants
- -------------------------------------------------------------------------------
TOTAL REGISTRATION FEE 9,109,172 $ 1.00 $ 9,109,172 $ 2,760.36
- -------------------------------------------------------------------------------
</TABLE>
[1] Estimated solely for the purpose of calculating the registration
fee.
The Registrant hereby amends this registration statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that the registration statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933 or until this registration statement shall be come effective on
such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE> 3
MAXAM GOLD CORPORATION
CROSS REFERENCE SHEET PURSUANT TO
RULE 404 (a) AND ITEM 501 (b) OF REGULATION S-B
Form S-B Item #
and Caption Caption in Prospectus
- -------------------------------------------------------------------
1 Front of Registration
Statement and Outside Front
Cover of Prospectus FACING PAGE; CROSS REFERENCE
SHEET; OUTSIDE FRONT COVER PAGE
2 Inside Front and
Outside Back Cover of
Pages of Prospectus INSIDE FRONT COVER PAGE; OUTSIDE
BACK COVER PAGE
3 Summary Information and
Risk Factors PROSPECTUS SUMMARY; RISK FACTORS;
THE COMPANY
4 Use of Proceeds PROSPECTUS SUMMARY; USE OF
PROCEEDS
5 Determination of
Offering Price OUTSIDE FRONT COVER PAGE; PLAN OF
DISTRIBUTION
6 Dilution DILUTION
7 Selling Securityholders NOT APPLICABLE
8 Plan of Distribution INSIDE FRONT COVER PAGE; PLAN OF
DISTRIBUTION
9 Legal Proceedings BUSINESS
10 Directors, Executive
Officers, Promoters
and Control Persons MANAGEMENT
11 Security Ownership of
Certain Beneficial
Owners and Management MANAGEMENT
12 Description of
Securities OUTSIDE FRONT COVER PAGE;
DESCRIPTION OF SECURITIES; PLAN OF
DISTRIBUTION
13 Interest of Named Experts
and Counsel LEGAL MATTERS; EXPERTS
<PAGE> 4
Form S-B Item #
and Caption Caption in Prospectus
- ------------------------------------------------------------------
14 Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities BUSINESS
15 Organization Within
Last 5 Years THE COMPANY; BUSINESS
16 Description of Business PROSPECTUS SUMMARY; BUSINESS
17 Management's Discussion
and Analysis or Plan of
Operation MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
18 Description of Property BUSINESS
19 Certain Relationships and
Related Transactions MANAGEMENT
20 Market for Common Equity
and Related Stockholder
Matters DIVIDEND POLICY; PRINCIPAL
SHAREHOLDERS; SHARES AVAILABLE FOR
FUTURE SALES
21 Executive Compensation MANAGEMENT
22 Financial Statements FINANCIAL STATEMENTS
23. Changes In and Disagreements
with Accountants on
Accounting and Financial
Disclosures NOT APPLICABLE
<PAGE> 5
PROSPECTUS
MAXAM GOLD CORPORATION
9,109,172 Warrants to Purchase, 9,109,172 Shares of Common Stock
and 9,109,172 Shares of Common Stock.
This Prospectus relates to the issuance of 9,109,172 Warrants to
purchase 9,109,172 shares of Common Stock (the "Warrants") of MAXAM
GOLD CORPORATION (the "Company") and 9,109,172 shares of Common Stock
of the Company, $0.00001 par value (the "Common Stock"), underlying
the Warrants which are offered by the Company. Each Redeemable
Warrant (the Redeemable Warrant") entitled the holder to purchase one
share of Common Stock at $1.00, until March 13, 1999. The Redeemable
Warrants are callable by the Company upon thirty (30) days written
notice. Beginning on the effective date of the offering, the holders
thereof may offer the Warrants and/or Common Stock for sale in
regular market transactions or through broker/dealers at prevailing
market prices or otherwise from time to time. The Company will
receive the exercise price of each Warrant, but will not receive any
of the proceeds of from the sale of the Warrants or Common Stock.
Warrants are being issued exclusively to shareholders of the
Company. Warrants will be issued to shareholders of record on March
13, 1997. One Warrant will be issued for each five shares owned by a
shareholder. Fractional Warrants will not be issued. Fractional
Warrants will be rounded down to the next whole Warrant.
The Warrants are not traded, however, the Common Stock is traded
in the over-the-counter market. Quotations for the Common Stock are
published on the OTC Bulletin Board operated by the National
Association of Securities Dealers, Inc. (the "Bulletin Board") under
the symbol "MXAM." On October 7, 1997, the closing per share bid
price for the Company's Common Stock, as reported on the Bulletin
Board was $0.86. This price does not represent a transaction price
and there is no assurance that a significant quantity of the Common
Stock could be sold at this price.
FOR A DISCUSSION OF CERTAIN RISKS OF AN INVESTMENT IN THE COMMON
STOCK AND WARRANTS, SEE "RISK FACTORS at page 7."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNTIL ________________________, (NINETY DAYS AFTER THE EFFECTIVE
DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
The date of this Prospectus is _________________.
<PAGE> 6
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PROSPECTUS SUMMARY
- ---------------------------------------------------------------------
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
The Company MAXAM GOLD CORPORATION (the "Company") is a U.S.
mineral resource company incorporated under the
laws of the State of Utah. The Company is
engaged in the business of acquiring and
exploring mineral properties containing gold. See
"Business."
The Company's offices are located at 528 Fon du
Lac Drive, East Peoria, Illinois 61611. The
Company's telephone number is (309) 699-8725.
The Offering The Company is distributing 9,109,172 Warrants
(the "Warrants") to purchase 9,109,172 Shares of
common stock of the Company. In addition, the
Company is registering 9,109,172 shares of common
stock (the "Common Stock") underlying the
Warrants. See "Description of Securities."
<TABLE>
<CAPTION>
50% of the 100% of the
Warrants Warrants
Exercised Exercised
<S> <C> <C>
Shares being Offered. . . 4,554,586 9,109,172
Shares Outstanding . . . . 45,545,863 45,545,863
Shares to be Outstanding . . . 50,100,449 54,655,035
Gross Proceeds from the
Exercise of the Warrants . . $4,554,586 $9,109,172
Estimated Expenses of the Offering . $ 20,000 $ 20,000
Net Proceeds to the Company After
Deducting Estimated Expenses . . $4,534,586 $9,089,172
</TABLE>
Use of Proceeds The net proceeds available to the Company upon
completion of this offering and after deducting
the estimated offering expenses will be
approximately $4,534,586 if 50% of the Warrants
are exercised and $9,089,172 if 100% of the
Warrants are exercised. The Company intends to
use the proceeds for working capital. The
Company will not receive any proceeds from the
distribution of the Warrants or sale of the
Shares. See "Use of Proceeds" and "Business."
<PAGE> 7
Risk Factors Investment in the Warrants and/or Shares should
be considered highly speculative. The Company
has a limited operating history and is subject to
all of the inherent risks of a developing
business enterprise. The Company is in need of
additional capital and has no revenues. There
are non-arms length transactions with affiliates
involving conflicts of interest. The Company
does not anticipate paying any dividends on its
Common Stock.
Selected Financial
Information The Company has no operating history and maybe
considered a developmental enterprise. The
Company has no revenues and there is no assurance
that the Company will ever have material revenues
or that its operations will be profitable. The
following financial data summarizes certain
information concerning the Company is based upon
the financial statements and notes, thereto,
contained in this Prospectus. See "Financial
Statements."
Balance Sheet as of June 30, 1997 (unaudited):
<TABLE>
<S> <C>
Assets
Current Assets . . . . . . $ 309,404
Total Assets . . . . . . . 1,415,618
Current Liabilities . . . . . 1,088,408
Stockholders' Equity . . . . . 327,210
Total Liabilities
& Stockholders' Equity. . . . . . 1,415,618
Net Tangible Book Value Per Share . . . $ 0.01
</TABLE>
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RISK FACTORS
- ---------------------------------------------------------------------
THE SECURITIES BEING OFFERED INVOLVE A HIGH DEGREE OF RISK AND,
THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. THEY SHOULD
NOT BE PURCHASED BY PERSONS WHO CANNOT AFFORD THE POSSIBILITY OF THE
LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS SHOULD READ
THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER FACTORS
AND FINANCIAL DATA DESCRIBED HEREIN, AND THE FOLLOWING RISK FACTORS:
1. Lack of Revenue. The Company needs additional capital and
currently has no revenues. Substantial expenditures are required to
establish ore reserves through drilling, to determine metallurgical
processes to extract the mineralization from the ore and, in the case
of new properties, to construct mining and processing facilities.
The Company lacks a constant and continual flow of revenue. The
Company currently holds certain royalty interests in several mining
<PAGE> 8
properties previously sold, but there is no assurance that the
Company will receive royalty payments, or that the Company will
otherwise receive adequate funding to be able to finance its
exploration activities. The Company is looking for revenue sources
on an on-going basis, but there can be no assurance that such sources
can be found or that, if available, the terms of such financing will
be commercially acceptable to the Company. Because of the Company's
need for additional capital to fund its present operations, to
complete the acquisition of certain mineral rights, and to provide
for further exploration and development, the lack of consistent
revenue could be a detrimental factor in the progress of the Company.
See "Business" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
2. Realization of Investments in Mineral Properties and
Additional Capital Needs. The ultimate realization of the Company's
investments in mineral properties is dependent upon the existence of
economically recoverable reserves, the ability of the Company to
obtain financing or make other arrangements for development and upon
future profitable production. The Company expects to finance its
operations for fiscal 1997 through the exercise of the Warrants and
loans from Phoenix International Mining, Inc., a Nevada corporation.
The Company does not have sufficient capital of its own to explore
and develop its mineral properties and there can be no assurance that
the Company will be successful in obtaining the required funds to
finance its long-term capital needs. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
3. Retention and Attraction of Key Personnel. The Company's
success will depend, in large part, on its ability to retain and
attract highly qualified personnel. The Company's success in
retaining its present staff and in attracting additional qualified
personnel will depend on many factors, including its ability to
provide them with competitive compensation arrangements, equity
participation and other benefits. There is no assurance that the
Company will be successful in retaining or attracting highly
qualified individuals in key management positions.
4. Regulatory Concerns. Environmental and other government
regulations at the federal, state and local level pertaining to the
Company's business and properties may include: (a) surface impact;
(b) water acquisition; (c) site access; (d) reclamation; (e) wildlife
preservation; (f) licenses and permits; and, (e) maintaining the fees
for unpatented mining claims. See "Business - Government Regulation
and Environmental Concerns."
5. Working Capital Deficits; Accumulated Deficit; Working
Capital Deficit; Auditor's Report. Although it commenced operations
more than twelve years ago, the Company remains in the development
stage. At June 30, 1997, the Company had a negative working capital
deficit of $(779,004) and an accumulated deficit of $(2,302,389)
which deficits and losses are expected to continue for the
foreseeable future. The Company's operations are subject to numerous
risks associated with the mining industry. See "Financial
Statements."
<PAGE> 9
6. Exercise Price Arbitrarily Determined. The exercise price
of the Warrants was established arbitrarily by the Company. There is
no direct relationship between the exercise price and the assets or
shareholders' equity of the Company of any other criterion of value.
Further, since the Company has not retained an underwriter in
connection with this offering, the exercise price has not been
determined by negotiation with an underwriter.
7. Risk Relating to Partial Exercise of Warrants. In the
event only a small portion of the Warrants are exercised, the Company
will receive only a small portion of the proceeds that it may need to
complete its planned activities. There is a risk that the lack of
contemplated working capital so resulting could have a materially
detrimental impact on the financial condition of the Company. See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
8. Reliance Upon Directors and Officers. The Company is
wholly dependent, at the present, upon the personal efforts and
abilities of its Officers and Directors who exercise control over the
day to day affairs of the Company. There can be no assurance as to
the volume of business, if any, which the Company may succeed in
obtaining, nor that its proposed operations will prove to be
profitable. See "Business" and "Management."
9. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company may
indemnify any Director, Officer, agent and/or employee as to those
liabilities and on those terms and conditions as are specified in the
Utah Business Corporation Act. Further, the Company may purchase and
maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against the
liability insured against. The foregoing could result in substantial
expenditures by the Company and prevent any recovery from such
Officers, Directors, agents and employees for losses incurred by the
Company as a result of their actions. Further, the Company has been
advised that in the opinion of the Securities and Exchange
Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore,
unenforceable. See "Management."
10. Cumulative Voting, Preemptive Rights and Control. There
are no preemptive rights in connection with the Company's Common
Stock. The shareholders purchasing in this offering may be further
diluted in their percentage ownership of the Company in the event
additional shares are issued by the Company in the future.
Cumulative voting in the election of Directors is not provided for.
Accordingly, the holders of a majority of the shares of Common Stock,
present in person or by proxy, will be able to elect all of the
Company's Board of Directors. See "Description of the Securities."
<PAGE> 10
11. Potential Future Sales Pursuant to Rule 144. Approximately
45,545,863 shares of Common Stock are presently issued and
outstanding of which 33,825,563 shares are "Restricted Securities" as
that term is defined in Rule 144 promulgated under the Securities Act
of 1933, as amended. In general, under Rule 144, a person (or
persons whose shares are aggregated) who has satisfied a one year
holding period, may sell within any three month period, an amount
which does not exceed the greater of 1% of the then outstanding
shares of Common Stock or the average weekly trading volume during
the four calendar weeks prior to such sale. Rule 144 also permits
the sale of shares, under certain circumstances, without any quantity
limitation, by persons who are not affiliates of the Company and who
have beneficially owned the shares for a minimum period of two (2)
years. Hence, the possible sale of these restricted shares may, in
the future dilute an investors percentage of free-trading shares and
may have a depressive effect on the price of the Company's securities
and such sales, if substantial, might also adversely effect the
Company's ability to raise additional equity capital. See
"Description of Securities - Shares Eligible for Future Sale."
12. No Dividends. The holders of the Common Stock are entitled
to receive dividends when, as and if declared by the Board of
Directors out of funds legally available therefore. To date, the
Company has not paid any cash dividends. The Board does not intend
to declare any dividends in the foreseeable future, but instead
intends to retain all earnings, if any, for use in the Company's
business operations. As the Company will be required to obtain
additional financing, it is likely that there will be restrictions on
the Company's ability to declare any dividends. See "Dividend
Policy" and "Description of Securities."
13. No Market for the Warrants. There is no market for the
Warrants and none is expected to ever develop. See "Description of
the Securities - Market for the Company's Securities."
14. Warrant Holders May be Unable to Exercise Warrants. The
exercise by the holders of the Warrants to be sold pursuant to this
offering is subject to the Company either maintaining the
effectiveness of the registration statement, of which this Prospectus
forms a part, on a current basis or filing an effective registration
statement with the Securities and Exchange Commission and complying
with the appropriate state securities laws. While the Company has
agreed to use its best efforts to so make the underlying stock
available for the Warrant Holders, no assurance can be given that at
the time that a Warrant Holder seeks to exercise the right to
purchase the Company's stock that an effective registration statement
will in fact be in, effect. The Company is obligated under the
Warrant Agreements to maintain this Prospectus current by making such
post-effective amendments as may be necessary from time to time. See
"Description of Securities - Redeemable Warrants."
<PAGE> 11
15. Redeemable Warrants. The Warrants are by the Company.
Each Redeemable Warrant entitles the holder to purchase one share of
Common Stock at a price of $1.00, until March 13, 1999. The Warrants
are callable by the Company upon thirty (30) days written notice, if
the holder does not exercise the Redeemable Warrants, the Redeemable
Warrants will loose all value. See "Description of Securities -
Redeemable Warrants."
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN,
THE PURCHASE OF THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. ANY PERSON CONSIDERING AN INVESTMENT IN THE SHARES OFFERED
HEREBY SHOULD BE AWARE OF THESE AND OTHER FACTORS SET FORTH IN THIS
PROSPECTUS. THE SHARES SHOULD BE PURCHASED ONLY BY PERSONS WHO CAN
AFFORD TO ABSORB A TOTAL LOSS OF THEIR INVESTMENT IN THE COMPANY AND
HAVE NO NEED FOR A RETURN ON THEIR INVESTMENT.
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CAPITALIZATION
- ---------------------------------------------------------------------
The following table sets forth the capitalization of the Company
as of June 30, 1997, as adjusted to reflect the exercise of 50% of
the Warrants and 100% of the Warrants. This table should be reviewed
in conjunction with the financial statements of the Company and the
notes thereto included elsewhere in this Prospectus. See "Financial
Statements."
<TABLE>
<CAPTION>
June 30, 1997
As Adjusted for the As Adjusted for the
Exercise of 50% of Exercise of 100% of
Actual Warrants Pro Forma the Warrants Pro Forma
<S> <C> <C> <C>
Stockholder's Equity:
Common Stock $0.00001
par value 100,000,000
shares authorized
45,545,863 shares
outstanding $ 455
50,100,449 shares
outstanding (50% of
Warrants Exercised) $ 501
54,655,035 shares
outstanding (100% of
Warrants Exercise) $ 547
Paid-In Capital $ 2,629,144 $ 7,163,229 $11,717,769
Accumulated
Deficit-Estimate $(2,302,389) $(2,302,389) $(2,302,389)
TOTAL STOCKHOLDERS'
EQUITY $ 327,210 $ 4,861,796 $ 9,416,382
</TABLE>
<PAGE> 12
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DILUTION
- ---------------------------------------------------------------------
As of June 30, 1997, the Company had 45,545,863 shares of Common
Stock outstanding with a net tangible book value of approximately
$0.01 per share.
Assuming the exercise of all of the Warrants (9,109,172 at $1.00
per warrant) and assuming no other changes to the Company's financial
position, the net tangible book value of the Company would be
$9,416,382 or approximately $0.1722 per share. This represents an
immediate dilution of 0.83 per share to new investors and an
immediate increase in the net tangible book value of shares held by
present shareholders of $0.16 per share.
Assuming the exercise of 50% of the Warrants (4,554,586 at $1.00
per Warrant), and assuming no other changes to the Company's
financial position, the net tangible book value of the Company would
be $4,861,796 or approximately $0.10 per share. This represents an
immediate dilution of $0.90 per share to new investors and an
immediate increase in the net tangible book value of shares held by
present shareholders of $0.09 per share.
"Net tangible book value" is the amount that results from
subtracting the total liabilities, deferred costs, and intangible
assets of the Company from its total assets. "Dilution" is the
difference between the public offering price and the net tangible
book value of the shares immediately after the offering.
Additionally, dilution is calculated based on book value of the
Company's assets, which may not necessarily reflect the actual market
value of such assets.
The following table illustrates the per share dilution:
<TABLE>
<CAPTION>
Assuming 50% Assuming 100%
of the Warrants of the Warrants
Exercised Exercised
<S> <C> <C>
Exercise Price per Share . . . $ 1.00 $ 1.00
Net tangible book value per share
before Warrants Exercised . . . $ 0.01 $ 0.01
Increase per share attributable
to existing investors . . . . $ 0.09 $ 0.16
Net tangible book value per
share after Warrants Exercised . . $ 0.10 $ 0.17
Dilution of net tangible book
value per share of Warrants exercised . $ 0.90 $ 0.83
</TABLE>
<PAGE> 13
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SELECTED FINANCIAL DATA
- ---------------------------------------------------------------------
The selected financial data presented below has been derived
from the financial statements of the Company, which financial
statements have been examined by Morgenstern & Alexander, independent
public accountants, as indicated in their report included elsewhere
herein. The information below should be read in conjunction with the
Company's Financial Statements and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." For the reasons set forth in the "Prospectus
Summary - Risk Factors" the information shown below may not be
indicative of the Company's future results of operations.
<TABLE>
<CAPTION>
June 30, June 30, December December
1997 1996 31, 1996 31, 1995
(Unaudited) (Unaudited) (Audited) (Audited)
<S> <C> <C> <C> <C>
Statement of Operations and
Accumulated Deficit Data:
Revenues $ 11,014 $ -0- $ 21,398 $ -0-
Operating Expenses $ 743,107 $ 477,895 $ 1,045,314 $ 157,017
Net loss $ 730,653 $ 477,845 $ 1,021,566 $ 157,017
Net Loss per share $ (0.02) $ (0.01) $ 0.02 $ -0-
Balance Sheet Data:
Work Capital
(Deficit) $ (779,004) $ 25,142 $ 312,458 $ 550,009
Total Assets $1,415,618 $ 1,350,650 $ 1,688,199 $ 829,561
Long-term Debt $ -0- $ -0- $ -0- $ -0-
Stockholders'
Equity $ 327,210 $ 640,683 $ 1,057,863 $ 629,429
</TABLE>
- ---------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------------------------------
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.
General
The Company has not generated any revenues from its operations
during the last two fiscal years or through the date of this
registration statement. There is no assurance that the Company will
generate any revenues in the future. The Company is currently
developing the Peoria Seven mine site located seven miles south of
Gila Bend, Arizona.
<PAGE> 14
The Company intends to use the proceeds from the exercise of the
Redeemable Warrants to cover the cost of operating the Peoria Seven
site for the next twelve months. There is no assurance however, that
any of the Redeemable Warrants will be exercised and in the event
that only 3,720,000 Redeemable Warrants are exercised, the Company
will have to raise additional capital through the sale of securities
or borrowed funds. At the present time the Company has no plans to
issue additional securities, other than the Redeemable Warrants being
registered herein and the shares of common stock underlying the
Redeemable Warrants. On May 9, 1997, the Company entered into an
agreement with Phoenix International Mining, Inc., a Nevada
corporation, ("Phoenix") wherein Phoenix agreed to loan to the
Company up to $2,000,000. As of September 29, 1997, Phoenix has
loaned the Company $1,126,000. Accordingly, if only 3,720,000
Redeemable Warrants are exercised or the Company will have to borrow
additional funds from Phoenix or raise additional capital. In the
event that a sufficient number of Redeemable Warrants are not
exercised and/or the Company is unable to borrow more than $874,000
from Phoenix, the Company may have to cease its operations on the
Peoria Seven site.
In the last twelve months, the Company has spent funds for
drilling and surveying ($14,800); the acquisition of an on-site house
trailer ($6,500); the development of an on-site laboratory to
evaluate the results of the Company's operations ($35,000); the
acquisition of equipment to operate the Peoria Seven site ($400,000);
and the payment of fees to laborers and consultants ($302,000).
Further, the Company intends to spend additional funds to move its
corporate headquarters from East Peoria, Illinois to Phoenix, Arizona
(estimated at $165,000) and to pay all moving expenses for two of the
current directors (estimated at $15,000).
The Company intends to continue the foregoing plan of operations
until such time as it begins generating revenues or ceases
operations.
- ---------------------------------------------------------------------
USE OF PROCEEDS
- ---------------------------------------------------------------------
The net proceeds from the exercise of the Warrants offered
hereby will be approximately $4,534,586 if the 50% of the Warrants
are exercised and $9,089,172 if the maximum number of Warrants are
exercised. The Company will not receive any proceeds from the sale
of the Warrants or sale of the Shares.
The Company intends to utilize the proceeds from the exercise of
the Warrants for working capital.
Until required for working capital, the net proceeds may be
invested temporarily in short-term obligations such as certificates
of deposit issued by banks and short term government obligations.
The Company reserves the right to amend the use of proceeds, by vote
of a majority of the Board of Directors.
<PAGE> 15
It is anticipated that the exercise of 3,720,000 Warrants will
be sufficient to fund operations for a period of at least twelve (12)
months. It is, however, impossible to predict what additional
expenses may be since the costs of operations associated with
development stage companies frequently involve unanticipated
expenditures. If the Company should be unable to meet currently
unanticipated expenses, the Company expects that it will have cash
requirements for working capital which will have to be met through
bank indebtedness or through the private or public sale of the
Company's debt or equity securities. There can be no assurance that
the Company would be able to obtain such financing or that such
financing, if available, would be on terms and conditions acceptable
to the Company. If the Company were unable to obtain needed funds,
it could be forced to curtail or cease its activities. See "Risk
Factors - Need for Additional Financing."
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DIVIDEND POLICY
- ---------------------------------------------------------------------
The Company has never paid a cash dividend on its Common Stock
and does not expect to pay a cash dividend in the foreseeable future,
but intends to devote all funds to the operations of its business.
See "Risk Factors - No Dividends Anticipated."
- ---------------------------------------------------------------------
GLOSSARY
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Acid Mine Drainage Acidic run-off water from mine waste dumps
and mill tailings ponds containing sulfide
minerals. Also refers to ground water
pumped to surface from mines.
Active Mining and milling of ore.
Adit An opening driven horizontally into the side
of a mountain or hill for providing access
to a mineral deposit.
Alteration Any physical or chemical change in a rock or
mineral subsequent to its formation. Milder
and more localized than metamorphism.
Anticline An arch or fold in layers of rock shaped
like the crest of a wave.
Assay A chemical test performed on a sample of
ores or minerals to determine the amount of
valuable metals contained.
Backfill Waste material used to fill the void created
by mining an orebody.
<PAGE> 16
Ball Mill A steel cylinder filled with steel balls
into which crushed ore is fed. The ball
mill is rotated, causing the balls to
cascade and grind the ore.
Basement Rocks The underlying or older rock mass. Often
refers to rocks of Precambrian age which may
be covered by younger rocks.
Base Metal Any non-precious metal (e.g. copper, lead,
zinc, nickel, etc.).
Bedding The arrangement of sedimentary rocks in
layers.
Block Caving An inexpensive method of mining in which
large blocks of ore are undercut, causing
the ore to break or cave under its own
weight.
Breccia A rock in which angular fragments are
surrounded by a mass of fine-grained
minerals.
Bulk Mining Any large-scale, mechanized method of mining
involving many thousands of tons of ore
being brought to surface per day.
Cathode A rectangular plate of metal, produced by
electrolytic refining, which is melted into
commercial shapes such as wirebars, billets,
ingots, etc.
Chalcocite A sulfide mineral of copper common in the
zone of secondary enrichment.
Channel Sample A sample composed of pieces of vein or
mineral deposit that have been cut out a
small trench or channel, usually about ten
cm wide and two cm deep.
Chute An opening, usually constructed of timber
and equipped with a gate, through which ore
is drawn from a stope into mine cars.
Complex Ore An ore containing a number of minerals of
economic value. The term often implies that
there are metallurgical difficulties in
liberating and separating the valuable
metals.
Cone Crusher A machine which crushes ore between a
gyrating cone or crushing head and an
inverted, truncated cone known as a bowl.
<PAGE> 17
Concentrate A fine, powdery product of the milling
process containing a high percentage of
valuable metal.
Conglomerate A sedimentary rock consisting of rounded,
water-worn pebble or boulders cemented into
a solid mass.
Contact A geological term used to describe the line
or plane along which two different rock
formations meet.
Core The long cylindrical piece of rock, about an
inch in diameter, brought to surface by
diamond drilling.
Crosscut A horizontal opening driven from a shaft and
(or near) right angles to the strike of a
vein or other orebody.
Cut-and-fill A method of stopping in which ore is removed
in slices, or lifts, and then the excavation
is filled with rock or other waste material
(backfill), before the subsequent slice is
extracted.
Cyanidation A method of extracting exposed gold or
silver grains from crushed or ground ore by
dissolving it in a weak cyanide solution.
May be carried out in tanks inside a mill or
in heaps of ore out of doors.
Decline An underground passageway connecting one or
more levels in a mine, providing adequate
traction for heavy, self-propelled
equipment. Such underground openings are
often driven in an upward or downward
spiral, much the same as a spiral staircase.
Development Work carried out for the purpose of opening
up a mineral deposit and making the actual
ore extraction possible.
Development Drilling Drilling to establish accurate estimates of
mineral reserves.
Diamond Drill A rotary type of rock drill that cuts a core
of rock that is recovered in long
cylindrical sections, two centimeters or
more in diameter.
Dilution (mining) Rock that is, by necessity, removed along
with the ore in the mining process,
subsequently lowering the grade of the ore.
<PAGE> 18
Dip The angle at which a vein, structure or rock
bed is inclined from the horizontal as
measured at right angles to the strike.
Disseminated Ore Ore carrying small particles of valuable
minerals spread more or less uniformly
through the hose rock.
Dore Unparted gold and silver poured into molds
when molten to form buttons or bars.
Further refining is necessary to separate
the gold and silver.
Drift A horizontal underground opening that
follows along the length of a vein or rock
formation as opposed to a cross-cut which
crosses the rock formation.
Drill-Indicated Reserves The size and quality of a potential orebody
as suggested by widely spaced drill holes;
more work is required before reserves can be
classified as probable or proven.
Due Diligence The degree of care and caution required
before making a decision; loosely, a
financial and technical investigation to
determine whether an investment is sound.
Electrolytic Refining The process of purifying metal ingots that
are suspended as anodes in an electrolytic
bath, alternated with refined sheets of the
same metal which act as starters or
cathodes.
Environmental Impact
Study A written report, compiled prior to a
production decision, that examines the
effects proposed mining activities will have
on the natural surroundings.
Epithermal Deposit A mineral deposit consisting of veins and
replacement bodies, usually in volcanic or
sedimentary rocks, containing precious
metals, or, more rarely, base metals.
Exploration Work involved in searching for ore, usually
by drilling or driving a drift.
Face The end of a drift, crosscut or stope in
which work is taking place.
Fissure An extensive crack, break or fracture in
rocks.
<PAGE> 19
Float Pieces of rock that have been broken off and
moved from their original location by
natural forces such as frost or glacial
action.
Flotation A milling process in which valuable mineral
particles are induced to become attached to
bubbles and float, and others sink.
Footwall The rock on the underside of a vein or ore
structure.
Fracture A break in the rock, the opening of which
allows mineral bearing solutions to enter.
A "cross-fracture" is a minor break
extending at more-or-less right angles to
the direction of the principal fractures.
Free Milling Ores of gold or silver from which the
precious metals can be recovered by
concentrating methods without resort to
pressure leaching or other chemical
treatment.
Galena Lead sulfide, the most common ore mineral of
lead.
Gossan The rust-colored capping or staining of a
mineral deposit, generally formed by the
oxidation or alteration of iron sulfides.
Grab Sample A sample from a rock outcrop that is assayed
to determine if valuable elements are
contained in the rock. A grab sample is not
intended to be representative of the
deposit, and usually the best-looking
material is selected.
Grade The average assay of a ton of ore,
reflecting metal content.
Hangingwall The rock on the upper side of a vein or ore
deposit.
Head Grade The average grade of ore fed into a mill.
Heap Leaching A process involving the percolation of a
cyanide solution through crushed ore heaped
on an impervious pad or base to dissolve
minerals or metals out of the ore.
High Grade Rich ore. As a verb, it refers to selective
mining of the best ore in a deposit.
<PAGE> 20
Host Rock The rock surrounding an ore deposit.
Hydrometallurgy The treatment of ore by wet processes (e.g.,
leaching) resulting in the solution of a
metal and its subsequent recovery.
Intrusive A body of igneous rock formed by the
consolidation of magma intruded into other
rocks, in contrast to lavas, which are
extruded upon the surface.
Lagging Planks or small timbers placed between steel
ribs along the roof of a stope or drift to
prevent rocks from falling, rather than to
support the main weight of the overlying
rocks.
Lens Generally used to describe a body of ore
that is thick in the middle and tapers
towards the ends.
Level The horizontal openings on a working horizon
in a mine; it is customary to work mines
from a shaft, establishing levels at regular
intervals, generally about 50 meters or more
apart.
Limestone A bedded, sedimentary deposit consisting
chiefly of calcium carbonate.
Lode A mineral deposit in solid rock.
Metamorphic Rocks Rocks which have undergone a change in
texture or composition as the result of heat
and/or pressure.
Mill A processing plant that produces a
concentrate of the valuable minerals or
metals contained in an ore. The concentrate
must then be treated in some other type of
plant, such as a smelter, to affect recovery
of the pure metal.
Milling Ore Ore that contains sufficient valuable
mineral to be treated by the milling
process.
Mineable Reserves Ore reserves that are known to be
extractable using a given mining plan.
Mineral A naturally occurring homogeneous substance
having definite physical properties and
chemical composition and, if formed under
favorable conditions, a definite crystal
form.
<PAGE> 21
Mineralized Material
or Deposit A mineralized body which has been delineated
by appropriate drilling and/or underground
sampling to support a sufficient tonnage and
average grade of metal(s). Under SEC
standards, such a deposit does not qualify
as a reserve until a comprehensive
evaluation, based upon unit cost, grade,
recoveries, and other factors, conclude
economic feasibility.
Muck Ore or rock that has been broken by
blasting.
Native Metal A metal occurring in nature in pure form,
uncombined with other elements.
Net Profit Interest A portion of the profit remaining after all
charges, including taxes and bookkeeping
charges (such as depreciation) have been
deducted.
Net Smelter Return A share of the net revenues generated from
the sale of metal produced by a mine.
Open Pit A mine that is entirely on surface. Also
referred to as open-cut or open-cast mine.
Ore Material that can be mined and processed at
a positive cash flow.
Ore Pass Vertical or inclined passage for the
downward transfer of ore connecting a level
with the hoisting shaft or a lower level.
Ore body A natural concentration of valuable material
that can be extracted and sold at a profit.
Ore Reserves The calculated tonnage and grade of
mineralization which can be extracted
profitably; classified as possible, probable
and proven according to the level of
confidence that can be placed in the data.
Oreshott The portion, or length, of a vein or other
structure, that carries sufficient valuable
mineral to be extracted profitably.
Oxidation A chemical reaction caused by exposure to
oxygen that results in a change in the
chemical composition of a mineral.
<PAGE> 22
Participating Interest A company's interest in a mine, which
entitles it to a certain percentage of
profits in return for putting up an equal
percentage of the capital cost of the
project.
Patent The ultimate stage of holding a mineral
claim in the United States, after which no
more assessment work is necessary because
all mineral rights have been earned.
Patented Mining Claim A parcel of land originally located on
federal lands as an unpatented mining claim
under the General Mining Law, the title of
which has been conveyed from the federal
government to a private party pursuant to
the patenting requirements of the General
Mining Law.
Pillar A block of solid ore or other rock left in
place to structurally support the shaft,
walls or roof of a mine.
Porphyry Any igneous rock in which relatively large
crystals, called phenocrysts, are set in a
fine-grained groundness.
Precambrian Shield The oldest, most stable regions of the
Earth's crust, the largest of which is the
Canadian Shield.
Prospect A mining property, the value of which has
not been determined by exploration.
Proven and Probable
Mineral Reserves Reserves that reflect estimates of the
quantities and grades of mineralized
material at a mine which the Company
believes could be recovered and sold at
prices in excess of the cash cost of
production. The estimates are based largely
on current costs and on projected prices and
demand for such mineralized material.
Mineral reserves are stated separately for
each such mine, based upon factors relevant
to each mine. Proven and probable mineral
reserves are based on calculations of
reserves provided by the operator of a
property that have been reviewed but not
independently confirmed by the Company.
Changes in reserves represent general
indicators of the results of efforts to
develop additional reserves as existing
reserves are depleted through production.
<PAGE> 23
Grades of ore fed to process may be
different from stated reserve grades because
of variation in grades in areas mined from
time to time, mining dilution and other
factors. Reserves should not be interpreted
as assurances of mine life or of the
profitability of current or future
operations.
Probable Reserves Resources for which tonnage and grade and/or
quality are computed primarily from
information similar to that used for proven
reserves, but the sites for inspection,
sampling and measurement are farther apart
or are otherwise less adequately spaced.
The degree of assurance, although lower than
that for proven reserves, is high enough to
assume continuity between points of
observation.
Proven Reserves Resources for which tonnage is computed from
dimensions revealed in outcrops, trenches,
workings or drill holes and for which the
grade and/or quality is computed from the
results of detailed sampling. The sites for
inspection, sampling and measurement are
spaced so closely and the geologic character
is so well defined that size, shape, depth
and mineral content of reserves are well
established. The computed tonnage and grade
are judged to be accurate, within limits
which are stated, and no such limit is
judged to be different from the computed
tonnage or grade by more than 20 percent.
Raise A vertical or inclined underground working
that has been excavated from the bottom
upward.
Rake The trend of an orebody along the direction
of its strike.
Reclamation The restoration of a site after mining or
exploration activity is completed.
Recovery The percentage of valuable metal in the ore
that is recovered by metallurgical
treatment.
Replacement Ore Ore formed by a process during which certain
minerals have passed into solution and have
been carried away, while valuable minerals
from the solution have been deposited in the
place of those removed.
<PAGE> 24
Reserves That part of a mineral deposit which could
be economically and legally extracted or
produced at the time of the reserve
determination. Reserves are customarily
stated in terms of "Ore" when dealing with
metalliferous minerals.
Resources The calculated amount of material in a
mineral deposit, based on limited drill
information.
Rib Samples Ore taken from rib pillars in a mine to
determine metal content.
Rockbolting The act of supporting openings in rock with
steel bolts anchored in holes drilled
especially for this purpose.
Rockburst A violent release of energy resulting in the
sudden failure of walls or pillars in a
mine, caused by the weight or pressure of
the surrounding rocks.
Rock Mechanics The study of the mechanical properties of
rocks, which includes stress conditions
around mine openings and the ability of
rocks and underground structures to
withstand these stresses.
Room-and-Pillar Mining A method of mining flat-lying ore deposits
in which the mined-out area, or rooms, are
separated by pillars of approximately the
same size.
Rotary Drill A machine that drills holes by rotating a
rigid, tubular string of drill rods to which
is attached a bit. Commonly used for
drilling large-diameter blastholes in open
pit mines.
Royalty An amount of money paid at regular intervals
by the lessee or operator of an exploration
or mining property to the owner of the
ground. Generally based on a certain amount
per ton or a percentage of the total
production or profits. Also, the fee paid
for the right to use a patented process.
Run-of-Mine A loose term used to describe ore of average
grade.
Sample A small portion of rock or a mineral
deposit, taken so that the metal content can
be determined by assaying.
<PAGE> 25
Secondary Enrichment Enrichment of a vein or mineral deposit by
minerals that have been taken into solution
from one part of the vein or adjacent rocks
and redeposited in another.
Shaft A vertical or steeply inclined excavation
for the purpose of opening and servicing a
mine. It is usually equipped with a hoist
at the top which lowers and raises a
conveyance for handling personnel and
materials.
Shear or Shearing The deformation of rocks by lateral movement
along unnumberable parallel planes,
generally resulting from pressure and
producing such metamorphic structures as
cleavage and schistosity.
Shrinkage Stopping A stopping method which uses part of the
broken ore as a working platform and as
support for the walls of the stope.
Siderite Iron carbonate, which when pure, contains
48.2% iron; must be roasted to drive off
carbon dioxide before it can be used in a
blast furnace. (Roasted product is called
sinter.)
Skarn Name for the metamorphic rocks surrounding
an igneous intrusive where it comes in
contact with a limestone or dolomite
formation.
Solvent Extraction-Electrowinning
G(SX/EW) A metallurgical technique, so far applied
only to copper ores, in which metal is
dissolved from the rock by organic solvents
and recovered from solution by electrolysis.
Sphalerite A zinc sulfide mineral; the most common ore
mineral of zinc.
Step-out Drilling Holes drilled to intersect a mineralization
horizon or structure along strike or down
dip.
Stockpile Broken ore heaped on surface, pending
treatment or shipment.
Stope Underground excavation from which ore has
been extracted either above or below mine
level.
<PAGE> 26
Stratigraphy Strictly, the description of bedded rock
sequences; used loosely, the sequence of
bedded rocks in a particular area.
Strike The direction, or bearing from true north,
of a vein or rock formation measured on a
horizontal surface.
Stringer A narrow vein or irregular filament of a
mineral or minerals traversing a rock mass.
Stripping Ratio The ratio of tons removed as waste relative
to the number of tons or ore removed from an
open pit mine.
Sublevel A level or working horizon in a mine between
main working levels.
Sulfide A compound of sulfur and some other element.
Tailings Material rejected from a mill after more of
the recoverable valuable minerals have been
extracted.
Tailings Pond A low-lying depression used to confine
tailings, the prime function of which is to
allow enough time for heavy metals to settle
out or for cyanide to be destroyed before
water is discharged into the local
watershed.
Trend The direction, in the horizontal plane, or a
linear geological feature (for example, an
ore zone), measured from true north.
Troy Ounce Unit of weight measurement used for all
precious metals. The familiar 16-ounce
avoirdupois pound equals 14.583 Troy Ounces.
Unpatented Mining Claim A parcel of property located on federal
lands pursuant to the General Mining Law and
the requirements of the state in which the
unpatented claim is located, the paramount
title of which remains with the federal
government. The holder of a valid,
unpatented lode mining claim is granted
certain rights including the right to
explore and mine such claim under the
General Mining Law.
Vein A mineralized zone having a more or less
regular development in length, width and
depth which clearly separates it from
neighboring rock.
<PAGE> 27
Volcanogenic A term used to describe the volcanic origin
of mineralization.
Vug A small cavity in a rock, frequently lined
with well-formed crystals. Amethyst
commonly forms in these cavities.
Wall Rocks Rock units on either side of an orebody.
The hanging-wall and footwall rocks of an
orebody.
Waste Barren rock in a mine, or mineralized
material that is too low in grade to be
mined and milled at a profit.
Winze An internal shaft.
Zone of Oxidation The upper portion of an ore body that has
been oxidized.
<PAGE> 28
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BUSINESS
- ---------------------------------------------------------------------
General
MAXAM Gold Corporation (the "Company") was formed on August 7,
1974, as a natural resource company. The Company was originally
named State Cycle. Since that time the following name changes have
occurred:
Universal AMC, Inc. February 19, 1975
Caption Industries, Inc. November 15, 1993
Madonna Mining Co., Inc. February 7, 1984
Maxam International Corp. June 12, 1985
Maxam Gold Corporation December 26, 1995
The business of the Company is the acquisition, exploration, and if
warranted, development of mineral properties and the production of
minerals therefrom.
Property Location, Description and Access.
The Company owns 456 unpatented mining claims contained on
approximately 72,960 acres. The claims are located in La Paz,
Maricopa and Yuma counties, Arizona. The unpatented mining claims
are possessory only and are held by right of location. Management
believes that all of its unpatented claims are properly staked and
recorded, and that it has the right to possession of them and the
right to remove minerals therefrom. Unpatented mining claims require
an annual payment of $100 to the Bureau of Land Management (the
"BLM"), to date all payments to the BLM have been made. The claims
have been properly recorded at the BLM, and with the various county
recorders, in compliance with federal and state filing requirements.
A general description of the properties is as follows:
# of 160
Property Name Acre Claims Location
Peoria Seven 4 Maricopa County
7 miles south of
Gila Bend, AZ
Peoria South 6 8 miles south of
Gila Bend, AZ
Gila Claims 25 East of Peoria
Seven
<PAGE> 29
SRF Claims 48 East of Gila Claims
Uranco Claims 24 South and southeast
of Peoria Seven
Vekol Valley 212 20 miles east and
10 miles south of
Gila Bend
Copper Valley 26 Approximately 55 miles
northeast of Gila Bend
Copper Wash 48 Approximately 55 miles
northeast of Gila Bend
Coyote Peak 63 Approximately 10 miles
southeast of I-10, Exit 53
Peoria Seven Properties.
The Peoria Seven properties ("Peoria Seven Properties") consists
of four claims of 160 acres each and are located in Maricopa County,
Arizona. Management believes the Peoria Seven Properties are ready
to commence mining, milling and leaching ore on a five acre track,
which is exempt from the BLM. The ore can be leached in a closed
loop leaching system without the need of a permit.
The tails are being analyzed to determine if they are inert. If
inert the Department of Environmental Quality will issue an opinion
allowing the Company to return the tails to the pit whence they came.
Should the tails be active the Company will leach on a pilot scale
basis and stock pile the ore while a full scale permit is processed.
The time frame to apply for and have a permit issued is approximately
six months.
Peoria South Properties
The Peoria South properties ("Peoria South Properties") consist
of six claims containing 640 acres which are located immediately
south of the Peoria Seven Properties. The Peoria South Properties
have been partially drilled and assays indicate approximately 330,000
ounces of possible gold on 100 acres at 30 feet in depth. Additional
drilling has been conducted but assay results have not been completed
as of this date.
In connection with the Peoria South Properties, the Company has
applied for a Small Miners 5 Acre exemption. This exemption will
allow the Company to commence pilot scale operations on five (5)
acres while a permit is processed to allow mining on a larger area.
A portion of the property has been drilled. The drill site
contained commercial grade gold ore. Therefore management staked
this group of claims.
<PAGE> 30
Copper Valley
The property to the west and south has been drilled and sampled.
The drill site contains commercial grade gold ore.
Coyote Peak
The Company will assay samples drilled from 60 holes to 100
feet. If an ore body is found the Company will seek a joint venture
partner or financing for an operating budget.
Drilling Reports
Hewlett Mineral Management of Ridgecrest, California, a
consulting firm, reports the following reserves from drilling and
assay of drill samples:
Grade
Name Tons oz/ton Troy oz
Peoria Seven 73,337,443 0.050 3,822,427 Proven
Approximately and probable
460 acres
Peoria South 6,666,666 0.053 353,333 Proven
100 acres
Coyote Peak 26,400,000 0.055 1,452,000 Possible
100 acres
___________
History.
There is no known recovery of precious metals from the Company's
claims. There are some abandoned mines in the mountains nearby to
all the claim blocks owned by the Company.
Geology.
The sites lie within the Basin and Range province of Southwest
Arizona and are accessible by all weather ranch roads. Each site is
in the flat lying, gently sloping and relatively uncut area between
and a long the adjacent mountains.
The sites are covered (or filled) by basin fill that is recent
to Pleistocene in age. The source areas for the basin fill are the
surrounding ranges of hills and mountains. The basin fill is
composed of unconsolidated gravel, sand, silt, clays, and possibly
some glacial till and debris. The silt and clays are water deposited
although there is evidence that some of the silty sand may be
air-borne and deposited. The gravel may or may not be water
worn-usually the top or upper layers of coarser material are angular
indicating that this material has not travelled far from its in-situ
location.
<PAGE> 31
Possible Future Acquisitions.
Management may enter into new mining ventures with joint
venturers, partners or other third parties. Such arrangements may be
multi-party ventures to which the Company will contribute stock, cash
and/or mineral interests. In such arrangements, the Company's
participation in revenues and profits, if any, will be reduced. At
this time, the Company has no agreement or understanding with any
third parties for the formation of a joint mining operation.
In determining the suitability of any property as a prospective
acquisition, factors to be considered by the Company will include,
but not be limited to, the following: (a) whether the asking price
is competitive and permits possible appreciation in value; (b)
condition of title; (c) whether the geological features of the
property indicate the probable likelihood of gold mineralization of a
commercial grade that is of sufficient quantity to justify further
exploration and development; (d) time and expenses which will be
involved in the exploration and development of the property; and, (e)
procedure for exploration and development (individually or joint
venture).
Management, together with such professional advisors which the
Company deems appropriate, will investigate prospective properties
through on-site examination, reviewing available geologic reports or
publications relating to the property, and a general field
reconnaissance to secure preliminary information regarding
characteristics of the property. If, from such preliminary reviews,
management deems it advisable to further investigate the property,
the Company may determine the condition of title and ownership by
using abstractors or title companies, and may obtain a preliminary
feasibility study by one or more geologists, mining engineers, or
accountants. If, after the foregoing preliminary investigation,
management determines that the property does not meet the Company's
acquisition criteria, efforts to acquire the property would be
abandoned, in which case costs incurred in conducting the
investigation would not be recoverable. In the event the property is
abandoned, the Company intends to reallocate the unexpended proceeds
for the acquisition and/or exploration of other prospects. At the
present time, the Company has no plans to acquire additional claims.
Exploration.
The Company expects to concentrate its main exploration efforts
during 1997-98 in the Peoria Seven Properties and the Peoria South
Properties, by developing existing ore bodies through geophysics then
by reverse circulation drilling.
Government Regulation and Environmental Controls.
The Company is committed to complying and, to its knowledge, is
in compliance with all governmental and environmental regulations.
The Company's activities are subject to extensive federal, state and
local laws and regulations controlling not only the mining of and
exploration for mineral properties, but also the possible effects of
<PAGE> 32
such activities upon the environment. Permits from a variety of
regulatory authorities are required for many aspects of mine
operation and reclamation. The Company cannot predict the extent to
which future legislation and regulation could cause additional
expense, capital expenditures, restrictions and delays in the
development of the Company's properties, including those with respect
to unpatented mining claims.
As used in this SB-2 Registration Statement, the term
"unpatented mining claim" refers to a mining claim on federal lands
which has not been converted into full fee ownership in the name of a
private person or entity. The process of converting ownership was
established under the United States General Mining Law of 1872, as
amended, (the "General Mining Law"), and requires that the U.S.
Government transfer ownership of the underlying property (held to
that point in the public trust) to the private person or entity by
granting fee simple and conveying full private ownership of the
subject mineral property, including mineral rights, surface,
subsurface and appurtenant rights, subject to any vested and accrued
water rights. The act of granting full fee ownership is accomplished
by a duly endorsed instrument referred to as a "patent." Until such
time as a mining claim on federal land may be "patented," the claim
is deemed as "unpatented mining claim" and ownership is held in the
public trust by the U.S. government subject to existing federal
mining laws and other applicable statutory or regulatory provisions
as may be implemented by the federal bureaucracy.
In 1992, the United States Congress passed a number of
amendments to the General Mining Law which governs mining claims and
related activities on federal lands. A holding fee of $100 and a
filing assessment of $35 per claim was imposed upon unpatented mining
claims located on federal lands. Since 1992, a variety of
legislation has been proposed to further amend the General Mining
Law. The proposed legislation would, among other things, impose
royalties and add requirements affecting reclamation, environmental
controls, and restoration. Although such legislative proposals are
not currently in effect, the likelihood or extent of subsequent
enactments is not presently known and the potential impact on the
Company as a result of future congressional action cannot be
predicted.
The Company's activities are not only subject to extensive
federal, state and local regulations controlling the mining of and
exploration for mineral properties, but also the possible effects of
such activities upon the environment. Future legislation and
regulations could cause additional expense, capital expenditures,
restrictions and delays in the development of the Company's
properties, the extend of which cannot be predicted. Also, as
discussed above, permits from a variety of regulatory authorities are
required for many aspects of mine operation and reclamation. In the
context of environmental permitting, including the approval of
reclamation plans, the Company must comply with known standards,
existing laws and regulations that may entail greater or lesser costs
and delays depending on the nature of the activity to be permitted
<PAGE> 33
and how stringently the regulations are implemented by the permitting
authority. While it is possible that the costs and delays associated
with the compliance of such laws, regulations, and permits could
become such that the Company would not proceed with the development
or operation of a mine, the Company is not presently aware of any
material environmental constraint affecting its properties that would
preclude the economic development or operation of any specific
property.
Mining and processing operations and exploration activities are
subject to various federal, state and local laws and regulations
relating to the protection of the environment. These laws mandate,
among other things, the maintenance of air and water quality
standards, and the preservation of certain archeological sites.
These laws also set forth limitations on the generation,
transportation, storage and disposal of solid and hazardous waste.
Compliance with statutory environmental quality requirements may
necessitate significant capital outlays; materially affect the
earning power of the Company; or may cause material changes in the
Company's intended activities. No assurance can be given that
environmental standards imposed by either federal or state
governments will not be changed or become more stringent, thereby
possibly materially adversely affecting the proposed activities of
the Company.
Competition and Markets.
Many of the Company competitors have greater financial resources
and more extensive operating histories that the Company. There is no
assurance the Company will be able to begin exploration work which
result in the discovery of commercially producible quantities of gold
or other precious metals. In addition, there is no assurance that
the Company's property interests can be economically maintained.
The exploration and development of mineral properties, and the
marketing of minerals, are affected by a number of facts which are
beyond the Company's control. These factors include fluctuations in
the market price of gold and precious minerals, availability of
adequate transportation, marketing of competitive minerals, prices of
fuels and fluctuating supply and demand for minerals.
Subsidiary Corporation.
The Company owns approximately 96% of the issued and outstanding
shares of Common Stock of Peoria Seven Mining, LLC, ("PSM") an
Arizona Limited Liability Corporation.
<PAGE> 34
Offices.
The Company's headquarters and executive offices are located at
528 Fon du Lac Drive, East Peoria, Illinois 61611 and the telephone
number is (309) 699-8725. The office space is leased from Dale L.
Runyon, the Company's Chairman of the Board of Directors and Chief
Executive Officer, on a month-to-month basis, pursuant to a written
lease. The monthly rental payments are $1,200 payable in advance on
the first day of each month, for a total annual lease payment of
$14,400.
The Company has signed a lease agreement for office space in
Scottsdale, Arizona at 15500 Greenway-Way Loop, Scottsdale, Arizona
85260. The office space is leased from Hewson/Breckner Airpark, LLC.
pursuant to a written lease agreement to commence on December 1, 1997
and continue for sixty months thereafter. The monthly rental
payments are $12,039 payable in advance on the first day of each
month to commence on December 1, 1997 for a total of $723,340. The
Company anticipates occupying the foregoing premises on or about
December 1, 1997.
Peoria Seven leases an office in Gila Bend, Arizona at 402
Papago, Gila Bend, Arizona 85337. The monthly rental is $350.00.
Employees.
In addition to the retention of its Officers, the Company
currently employs two full-time employees and no part-time employees.
The Company's wholly owned subsidiary corporation, Peoria Seven, in
addition to its officers and directors, employees five full-time
employees and no part-time employees. The Company anticipates
adding additional employees as needed in the future.
- ---------------------------------------------------------------------
MANAGEMENT
- ---------------------------------------------------------------------
The following table sets forth the name, age and position of
each Officer and Director of the Company:
Position
Name Age Since Position
Dale L. Runyon 70 1987 Chairman of the Board of
Directors and Chief Executive
Officer
Alan Hubbard 60 1995 President, Treasurer, Chief
Financial Officer and a
member of the Board of
Directors
Michael Runyon-Davis 46 1995 Vice President of Operations,
Secretary and a member of the
Board of Directors
<PAGE> 35
The authorized number of directors of the Company is presently
fixed at ten. Each director serves for a term of one year that
expires at the following annual shareholders' meeting. Each Officer
serves at the pleasure of the Board of Directors and until a
successor has been qualified and appointed. There are no family
relationships, or other arrangements or understandings between or
among any of the directors, executive officers or other person
pursuant to which such person was selected to serve as a director or
officer, other than as disclosed herein.
Officers and Directors of the Company:
Dale L. Runyon - Chairman of the Board of Directors and Chief
Executive Officer.
Mr. Runyon is a founder of the Company. Since 1987, he has been
the Company's Chairman of the Board of Directors and Chief Executive
Officer. Since March 1995, Mr. Runyon has been Secretary/Treasurer,
Chief Financial Officer and a member of the Board of Directors of
Turtleback Mountain Gold, Inc. Turtleback Mountain Gold is involved
in the business of mining. Since 1978, Mr. Runyon has been a
business consultant in the mining industry. As a consultant, he
assists companies with economic analysis of potential mining
properties and, in general, supervises "turnkey projects" from start
to finish. Since 1986, Mr. Runyon has been the Chairman of the Board
and Chief Executive Officer of Phoenix International Mining, Inc., a
Nevada corporation. Mr. Runyon received a B.A. from Knox College and
is a retired Colonel in the United States Army. Mr. Runyon is the
father-in-law of Michael Runyon-Davis.
Alan Hubbard - President, Treasurer, Chief Financial Officer and a
member of the Board of Directors of the Company.
Since August 1995, Mr. Hubbard has been the President,
Treasurer, Chief Financial Officer and a member of to the Board of
Directors of the Company. Since November 19, 1996, Mr. Hubbard has
been the President and a member of the Board of Directors of
Turtleback Mountain Gold Co., Inc. Since May 1988, Mr. Hubbard has
been the President and Chief Executive of Al Hubbard Associates,
Inc., a Texas corporation. Since August 1996, Mr. Hubbard has been
the President and a member of the Board of Directors of Phoenix
International Mining, Inc., a Nevada corporation. Phoenix
International Mining, Inc. is a natural resource company. Mr. Hubbard
received a B.A. from Bradley University.
Michael Runyon-Davis - Vice President of Operations, Secretary and a
member of the Board of Directors
Since December 1995, Mr. Runyon-Davis has been the Vice
President of Operations and a member of the Board of Directors of the
Company, and during September 1997, Mr. Runyon-Davis became the
Secretary. Since January 1996, Mr. Runyon-Davis has been the
assistant manager of Peoria Seven Mining, LLC. From June 1993 to
July 1996, Mr. Runyon-Davis did business as Lone Mountain
<PAGE> 36
Enterprises, Lone Mountain provided mining related contract services
to mining companies. From September 1990 to June 1993, Mr. Runyon-
Davis was a senior Army Instructor, at Rider High School, JROTC
program, Wichita Falls, Texas. Mr. Runyon-Davis is the son-in-law of
Dale Runyon.
Indemnification
The Company's Bylaws provide that the Company's directors and
officers will be indemnified to the fullest extent permitted by the
Utah Corporation Code, however, such indemnification shall not apply
to acts of intentional misconduct; a knowing violation of law; or,
any transaction where an officer or director personally received a
benefit in money, property, or services to which to the director was
not legally entitled.
The Company has been advised that in the opinion of the
Securities and Exchange Commission indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and
is, therefore, unenforceable.
- ---------------------------------------------------------------------
CERTAIN TRANSACTIONS
- ---------------------------------------------------------------------
Certain of the directors and/or officers of the Company also
serve as directors and/or officers of other companies involved in
natural resource exploration and development and, consequently, there
exists the possibility for such directors and officers to be in a
position of conflict. Any decision made by such directors and
officers involving the Company, as the case may be, will be made in
accordance with their duties and obligation to deal fairly and in
good faith with the Company and such other companies. In addition,
such directors and officers are required to declare and refrain from
voting on any matter in which such directors and officers may have a
conflict of interest.
The Company has engaged in transactions with its officers,
directors and principal shareholders, including the issuance of the
initial shares of the Company. Such transactions may be considered
as not having occurred at arm's length. The Company may be engaged
in transactions with management and others involving conflicts of
interest, including conflicts on salaries and other payments to such
parties, as well as business opportunities which may arise. In this
regard, the directors of the Company are involved in other companies
and may have conflicts of interest in allocating time between the
Company and other entities to which they are affiliated.
<PAGE> 37
Relationships and Transactions Pertaining to the Company.
On September 23, 1987, Phoenix International Mining, S.A. (a
Panamanian corporation) purchased 20,000,000 shares of the
outstanding common stock of Maxam International Corporation which
constituted 80% of the issued and outstanding common shares of the
Company in exchange for four mining claims. On October 2, 1987,
Phoenix International Mining, S.A. transferred approximately 53.2% of
these outstanding shares to related entities of Phoenix International
Mining, S.A. These mining properties have been recorded on the
books of the Company at the allocated cost basis of $9,520 as
originally recorded by Phoenix International Mining, S.A.
At the annual meeting of shareholders on July 14, 1993 approval
was granted for the acquisition of twelve 160 acre mining claims in
Southwest Arizona for 1,500,000 shares of the Company's Common Stock.
Six of the claims were owned by a Company shareholder while the
President (decease) and Chairman of the Board of the Company each
owned one claim. The remaining four claims were owned by a
corporation in which the Chairman of the Board of the Company was a
Director. In addition, the sellers of the mining claims are to
receive 5% of the net profit before taxes realized by the Company
from the minerals mined and sold on a consolidated pro rata basis.
The 1,500,000 shares were subsequently issued in 1995 at the
allocated cost basis of $4,800.
At the annual meeting of shareholders held on July 14, 1993, it
was approved that the officers and directors of the Company be
compensated for past services (October 1987 thru December 31, 1992)
in the amount of $150,000 and reimbursement of expenses of $17,991.
In lieu of cash they were to receive 3,359,820 shares of the
Company's common stock. Subsequently in 1994 these shares were
issued.
On August 31, 1993, the Company entered into an Agreement with
Quilotosa Wash, a Trust located in Peoria, Illinois, whereby the
Company assigned to Quilotosa Wash eight of the above mentioned
mining claims. Quilotosa Wash agreed to seek adequate financing to
mine and process one thousand tons of ore per day from the mining
claims. Quilotosa Wash will receive ten percent of the net profits
from the operation as a management fee. In addition, Quilotosa Wash
is authorized to pay a total of five percent of the net profits
before taxes earned by the Company from the operation to the three
former sellers of the mining properties. In the event Quilotosa Wash
does not obtain adequate financing by July 1, 1994, the Company has
the right to buy back the eight mining claims for ten dollars and
other good and valuable consideration. On July 1, 1994, the
Agreement was extended to November 1, 1994 and on October 24, 1994
was extended to June 30, 1996. Subsequently, on February 6, 1996,
the Agreement was again extended to June 30, 1997.
<PAGE> 38
On August 31, 1993, the Company entered into an Agreement with
Red Raven III, a Trust located in St. Louis, Missouri, whereby the
Company assigned to Red Raven III the remaining four mining claims.
The terms of this Agreement were substantially the same as those made
with Quilotosa Wash. On July 1, 1994, the Agreement was extended to
January 1, 1995 and on December 28, 1994 was extended to June 30,
1996. Subsequently on February 13, 1996, the Agreement was against
extended to June 30, 1997.
In April 1994, the Company entered into an option agreement with
The Hanover Group Inc. ("Hanover") and received $87,000 for a six
month option for Hanover to test and develop the above mining claims
and the eight claims held by Quilotosa Wash through October 31, 1994.
On August 30, 1994, the Agreement was extended to April 30, 1995 and
on March 30, 1995, was extended to April 30, 1996 for consideration
of a promissory note payable to the Company in the amount of $11,600
at an annual interest rate of 8%. The note has not been recorded as
an asset of the Company since the agreement was not extended after
April 30, 1996 and no collections have been received to dated.
On May 2, 1994, the Company entered into three agreements to
acquire six month options to test and develop mining claims from the
following related entities in which the Company's Chairman has
financial interests:
25 claims from Gila Mining, LLC. $ 17,500
68 claims from Sigma Refining Company
On behalf of:
48 claims from RFS Mining LLC 33,600
20 claims from Uranco - Marston
Mining LLC 14,000
--------
$ 65,100
========
On August 30, 1994, the Company received an advance from Hanover
of $11,600 for the purpose of paying maintenance fees to the Bureau
of Land Management for the mining claims under option to Hanover.
The Company subsequently repaid the $11,600 to Hanover. As
additional consideration the Company has agreed that in the event
Hanover does not exercise its option on the mining claims that the
Company will repay the $87,000 option income to Hanover. The $87,000
will be paid out from any production income the Company may receive
from any mining claims it owns. In the event there is no production
income the $87,000 will not be repaid.
<PAGE> 39
On October 25, 1994, the Company exercised its rights under the
option agreements to purchase the above claims by granting
irrevocable ownership pre-rated interests of all pre-tax net profits
realized by the Company from the sale of all metals extracted from
the claims as follows:
.00833 to Gila Mining LLC
.016 to RFS Mining LLC
.00734 to Uranco-Marston Mining LLC
Current notes receivable from related parties are as follows:
Turtleback Mountain Gold Co., Inc. $ 5,900
Interest rate of 12% per annum
Payable on demand
RFS Mining LLC $ 13,990
Interest rate of 12% per annum
Payable on demand
Phoenix International Mining, Inc. $ 11,920
Interest rate of 12% per annum
Payable on demand
At the annual meeting of shareholders held on March 13, 1995, it
was approved that the officers and directors of the Company be
compensated for past services of 1993 and 1994 in the amount of
$170,000 and reimbursement of expenses and loans of $9,495. In lieu
of cash they received 2,454,319 shares of the Company's common stock.
Other notes payable are due to the following related parties:
1996 1995
Individual shareholders and members $ 285,000 $ 5,000
Entities in which the Chairman
and Chief Executive Officer of
the Company are also an officer/director - 25,200
Phoenix International Mining, Inc. - 24,000
Chairman and Chief Executive
Officer of the Company - 5,600
Due to the Estate of the former
President of the Company who
repaid demand note payable to
Hanover Group, Inc. on behalf
of the Company in March 1995 - 11,600
--------- --------
$ 285,000 $ 71,400
========= ========
<PAGE> 40
All notes are due within one year with interest at 12% and 18%.
On December 11, 1995, the Company agreed to acquire $2,400,000
in International Precious Metals Corporation (IPM) convertible
debentures from Phoenix International Mining, Inc., a Nevada
corporation, for 9,600,000 shares of the Company's common stock. The
convertible debentures had been previously issued to Phoenix
International Mining, Inc. by IPM under the terms of a renegotiated
Joint Venture Agreement between the two entities. These debentures
are convertible into common shares on NASDAQ for the 20 trading days
prior the debenture's due date of $5.00 per share, subject to the
approval of all regulatory authorities. The debentures are comprised
of four amounts of $500,000 with due dates in 1996 of January 1,
April 1, July 1 and October 1, and one $400,000 with a due date of
January 1, 1997. Each debenture accrues interest beginning on its
due date at the prime rate of Bank One in Phoenix, Arizona, plus 2%.
In the event that IPM is not able to obtain regulatory approval to
effect the conversion of the debentures by September 1, 1996, the
debentures become payable on demand.
At the Annual Meeting of Shareholders on March 8, 1996, the
adoption of a non-qualified incentive stock option plan was approved.
Subsequently, at the Board of Directors meeting on March 14, 1997,
the 1996 Nonqualifying Stock Option Plan was accepted with Directors
and Officers to be offered 2,400,000 shares at an option price of
$0.32 per share. The remaining 2,600,000 shares will carry an option
price of $1.00 per share and distribution will be determined by the
compensation committee for 1997. To date no options have been
issued.
At a Special Board of Directors meeting held on April 2, 1996,
it was agreed to sell the January 1, 1996 ($500,000) and April 1,
1996 ($500,000) debentures to David Hannon et al of Lindfield,
Australia for $750,000. No decision was made regarding the July 1,
1996 debenture. The October 1, 1996, debenture was pledged as
collateral for interim financing loans on behalf of Peoria Seven
Mining LLC.
On July 1, 1996, the Company signed an office lease with the
Chairman and Chief Executive Officer of the Company for monthly
rental payments of $1,200 on a month-to-month basis.
The Company agreed to pay Phoenix International Mining, Inc.
$2,400 per annum for calendar years 1995 and 1994 for rent and
services. In prior years, the Company utilized the address of
Phoenix International Mining, Inc. at no charge to the Company.
On November 15, 1996, Red Raven III sold the four mining claims
to Turtleback Mountain Gold Co., Inc. ("Turtleback") in exchange for
80,000,000 shares of Turtleback common stock, plus 80,000,000 "A"
Warrants and 80,000,000 "B" Warrants. The Warrants are exercisable
at $0.01 and $0.02 per warrant, respectively, for five years.
Subsequently, Red Raven III distributed 76,000,000 of the shares as
well as the A and B Warrants to the Company. The 76,000,000 common
<PAGE> 41
shares and Warrants of Turtleback are valued at the original costs of
the mining claims sold in the amount of $1,600. The Chairman and
Chief Executive Officer of the Company is also the
Secretary/Treasurer, Chief Financial Officer and a member of the
Board of Directors of Turtleback.
Due to the financial condition of IPM, limited marketability of
the debentures and the uncertainty of the approval from the
regulatory authorities no valuation was assigned to the remaining
$1,400,000 Convertible Debentures as of December 31, 1995. However,
during 1996 the debenture due July 1, 1996 and October 1, 1996 or
$500,000 were collected in full including accrued interest income.
Subsequently, the $400,000 debenture due January 1, 1997 was
collected in full with accrued interest.
In March and May 1997, the Company acquired an additional 351
mining claims bringing the total holdings of the Company to 456
claims. Included in the additional claims are 63 which were acquired
from Uranco Mining LLC, a related entity in which one of the
principal interest holders is also the Chairman and the Chief
Executive Officer of the Company.
Further, the Company has entered an agreement to provide Uranco
Mining LLC with 630,000 shares of the Company's Common Stock and
warrants at $1.50 per share to be exercised within five years with a
maximum of 10,000,000 warrants. The number of warrants will be
determined as one warrant for each 10 ounces of proven and/or
probable gold, or gold equivalent from surface to 100 feet in
drilling depth. In addition, there will be a 1% royalty on net
smelter returns from all production from the 63 claims.
During the quarter ended June 30, 1997, the Company borrowed
$350,000 from Phoenix International Mining, Inc., pursuant to a line
of credit in which the Company may borrow up to $2,000,000 from May
9, 1997, payable on demand with interest at 12% per year, the full
amount of interest and principle outstanding due not later than five
years from the date of the agreement.
- ---------------------------------------------------------------------
MANAGEMENT REMUNERATION
- ---------------------------------------------------------------------
Summary Compensation.
The following table sets forth compensation information for each
officer and/or director during each of the last three fiscal years.
This information includes the dollar value of base salaries, bonus
awards and number of stock options granted, and certain other
compensation, if any.
<PAGE> 42
<TABLE> SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term
Compensation
Name and Annual Compensation Restricted ------------
Principal ----------------------- Stock Options All Other
Position Year Salary Bonus Award Granted Compensation
<S> <C> <C> <C> <C> <C> <C>
Dale Runyon 1995 -0- -0- 1,607,386 700,000 -0-
CEO, Vice 125,000
President &
Chairman
William
Marston [1] 1995 -0- -0- 707,695 -0- -0-
President & 125,000
Director
Billie J.
Allred [2] 1995 -0- -0- 139,238 -0- -0-
Secretary &
Director
Alan
Hubbard [3] 1995 -0- -0- -0- 100,000 -0-
Director
Michael Runyon-
Davis [4] 1995 -0- -0- -0- 100,000 -0-
Director
Dale Runyon 1996 $60,000 -0- -0- 700,000 $81,000 [5]
CEO &
Chairman
Alan
Hubbard 1996 $60,000 -0- -0- 350,000 $20,000 [6]
President &
Director
Michael Runyon-
Davis 1996 $30,000 -0- -0- 175,000 -0-
Director
Dale Runyon 1997 $90,000 -0- -0- -0- -0-
CEO &
Chairman
Alan
Hubbard 1997 $90,000 -0- -0- -0- -0-
President &
Director
Michael Runyon-
Davis [7] 1997 $45,000 -0- -0- -0- -0-
Secretary &
Director
</TABLE>
[1] Mr. Marston died in July 1995.
[2] Mr. Allred resigned in November 1995.
[3] Mr. Hubbard was appoint to the Board of Directors in August
1995.
[4] Mr. Runyon-Davis was appointed to the Board of Directors in
December 1995.
[5] Mr. Runyon was paid as a consultant until June 1996.
[6] Mr. Hubbard was paid as a consultant until June 1996.
[7] Mr. Runyon-Davis was appointed Secretary on September 1997.
<PAGE> 43
These amounts were approved by the Board in recognition of the
work and efforts. Further, the Board recognized the significant role
of these three individuals in managing the Company's principal office
in East Peoria, Illinois and in raising funds for the Company's
exploration and development activities. Finally, the Board of
Directors took into account the reasonableness of these salaries in
comparison with Executive salaries within the mining region. On the
basis of the above factors, the Board determined that these salaries
were proper and fitting. No other officers received a salary during
Fiscal 1996 nor during 1997.
The Board believes that executive compensation during Fiscal
1996 substantially reflects the Company's compensation policy.
Option Grants Table.
The following table sets forth information concerning stock
options granted to the Named Officers in 1995:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1995 and 1996
Percentage of
Options Granted
Number of Shares to Employees
Underlying During Exercise Price Expiration
Name Options Grant Fiscal Year Per Share Date
<S> <C> <C> <C> <C>
Dale Runyon 1,400,000 65.8% $0.32 March 14, 2007
Alan Hubbard 450,000 21.2% $0.32 March 14, 2007
Michael
Runyon-Davis 275,000 12.9% $0.32 March 14, 2007
Named Executive
Officers 2,125,000 99.9%
</TABLE>
Aggregated Option Exercises. No options were exercised by the
Named Officers during 1995, 1996 and first three quarters of 1997.
The following table sets forth certain information concerning the
number of shares covered by both exercisable and unexercisable stock
options as of September 30, 1997. Also reported are values of "in-
the-money" options that represent the positive spread between the
respective exercise prices of outstanding stock options and the fair
market value of the Company's Common Stock as of September 30, 1997.
The dollar values in columns (a) and (c) are calculated by
determining the difference between the fair market value of the
underlying stock and the exercise price or base price of the options
at exercise or through the third quarter of 1997, respectively. The
stock's fair market value on August 15, 1997 was $0.86 per share.
Even if there were, it is possible they might never be exercised.
Actual gains realized, if any, on stock option exercises and Common
Stock holdings are dependent on the future performance and value of
the Common Stock and overall stock market conditions. There can be
no assurance that projected gains and values would be realized.
<PAGE> 44
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
(a) (b) (c) (d)
Number of Shares Subject Value of in-the-money
To Unexercised Options Options at Fiscal
at Fiscal Year-End Year End [1]
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Dale Runyon 1,400,000 -0- $756,000 $ -0-
Alan Hubbard 450,000 -0- $243,000 $ -0-
Michael
Runyon-Davis 275,000 -0- $ 148,500 $ -0-
</TABLE>
[1] Based on estimated fair market value of $0.86 per share on
December 31 1996.
1996 Nonqualifying Stock Option Plan.
In March 1996, the Board of Directors adopted the 1996
Nonqualifying Stock Option Plan (the "Plan"). The Plan provides for
the award of stock options to the Company's key employees. The total
number of shares of Common Stock that may be issued under the Plan
will not exceed 5,000,000.
The Plan is administered by the Board of Directors, which has
the authority, subject to the terms of the Plan, to determined the
persons to whom options or rights may be granted, the exercise price
and number of shares subject to each option or right, the character
of the grant, the time or times at which all or a portion of each
option or right may be exercised and certain other provisions of each
option or right. The Board of Directors may also delegate authority
to administer the Plan to a committee of the Board of Directors or to
a senior officer of the Company, or both.
Long-Term Incentive Plan Awards.
The Company does not have any formalized long-term incentive
plan (excluding restricted stock, stock option and SAR plans) that
provides compensation intended to serve as incentive for performance
to occur over a period longer than one fiscal year, whether such
performance is measured by reference to financial performance of the
Company or an affiliate, the Company's stock price, or any other
measure other than the 1996 Non-Qualified Incentive Stock Option
Plan.
Compensation of Directors.
Directors receive no compensation for services as a result of
being a member of the Board of Directors. There are no contractual
arrangements with any member of the Board of Directors.
<PAGE> 45
- ---------------------------------------------------------------------
PRINCIPAL SHAREHOLDERS
- ---------------------------------------------------------------------
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of June 30, 1997, the
beneficial ownership of Common Stock with respect to: (1) All
persons known to the Company to be the beneficial owners of more than
five percent of the outstanding shares of Common Stock (the
"Principal Shareholders"); (2) Each director and director nominee of
the Company; (3) Each Named Executive Officer (as that term is
defined in the section entitled "Executive Compensation," below) who
is listed in the "Summary Compensation Table," below; and, (4) All
directors and executive officers as a group. At July 7, 1997, the
number of shares of common stock of the Company issued and
outstanding was 45,545,863.
<TABLE>
<CAPTION>
Percent
Common Stock Beneficially Owned No. of Shares of Class
1. Shareholders
<S> <C> <C>
Phoenix International Mining 18,790,090 41.26%
528 Fon du Lac Drive
East Peoria, Illinois 61611
2. Directors
Alan Hubbard 100,000 0.22%
528 Fon du Lac Drive
East Peoria, Illinois 61611
Dale Runyon 4,806,101 10.55%
528 Fon du Lac Drive
East Peoria, Illinois 61611
Michael Runyon-Davis 1,129,487 2.48%
528 Fon du Lac Drive
East Peoria, Illinois 61611
3. Named Executive Officers (Excluding
Any Director Named Above)
n/a
4. All Directors and Executive Officers
as a Group (3 Persons) 6,035,588 13.25%
</TABLE>
All shares are owned beneficially and of record, unless
otherwise noted.
<PAGE> 46
- ---------------------------------------------------------------------
DESCRIPTION OF THE SECURITIES
- ---------------------------------------------------------------------
The Company is presently authorized to issue up to 100,000,000
shares of its $0.00001 par value Common Stock. Presently 45,545,863
shares are issued and outstanding and 9,109,172 additional shares
will be issued if the maximum number of Warrants are exercised at
$1.00 per Warrant. The holders of the Company's Common Stock are
entitled to one vote per share on each matter submitted to a vote at
any meeting of shareholders.
Rights of Common Stock Shareholders
Shares of Common Stock do not carry cumulative voting rights
and, therefore, a majority of the outstanding Common Stock will be
able to elect the entire Board of Directors and, if they do so,
minority shareholders would not be able to elect any members to the
Board of Directors. See "Capitalization" and "Risk Factors -
Cumulative Voting, Preemptive Rights and Control."
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common
Stock is not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation of the Company, the
shares of Common Stock are entitled to share equally in corporate
assets after satisfaction of all liabilities. The shares of Common
Stock, when issued, will be fully paid and non-assessable.
There are no outstanding options, warrants or rights to
purchase shares of the Company's Common Stock, other than as
disclosed herein in this Prospectus.
Shares Eligible for Future Sale
Upon completion of this offering the Company will have
outstanding 50,100,449 shares of Common Stock if 50% of the Warrants
are exercised and 54,655,035 shares of Common Stock if the maximum
number of Warrants are exercised. The 9,109,172 shares, issued
pursuant to the exercise of the Warrants will be freely tradeable
without restriction or further registration under the Securities Act
of 1933, as amended (the "Act"). Of the remaining 45,545,863 shares
11,720,300 are freely tradeable without restriction and 33,825,563
are "restricted" securities as defined in Rule 144 of the Act. See
"Plan of Distribution."
In general, under Rule 144, a person (or persons whose shares
are aggregated) who has satisfied a one (1) year holding period may
sell in ordinary market transactions through a broker or with a
market maker, within any three (3) month period a number of shares
which does not exceed the greater of one percent (1%) of the number
of outstanding shares of Common Stock or the average of the weekly
trading volume of the Common Stock during the four calendar weeks
prior to such sale. Sales under Rule 144 require the filing of Form
144 with the Securities and Exchange Commission. If the shares of
Common Stock have been held for more than two (2) years by a person
<PAGE> 47
who is not an affiliate, there is no limitation on the manner of sale
or the volume of shares that may be sold and no Form 144 is required.
Sales under Rule 144 may have a depressive effect on the market price
of the Company's Common Stock.
Dividends
Holders of Common Stock are entitled to receive such dividends
as the Board of Directors may from time to time declare out of funds
legally available for the payment of dividends. The Company seeks
growth and expansion of its business through the reinvestment of
profits, if any, and does not anticipate that it will pay dividends
in the foreseeable future.
Description of Redeemable Warrants
The Redeemable Warrants will be issued under warrant
certificates (the "Warrant Certificate") to be dated as of the date
of this Prospectus, between the Company and Interwest Transfer
Company, as Warrant Agent (the "Warrant Agent"). A copy of the
Redeemable Warrant Certificate is filed as an exhibit to the
registration statement and also may be examined at the office of the
Company or of the Warrant Agent. The following summary of certain
provisions of the Warrant Certificate does not purport to be complete
and is qualified in its entirety by reference to the Warrant
Certificates.
Each Redeemable Warrant entitles the holder to purchase one
share of Common Stock at a price of $1.00 per share, until March 13,
1999. The Redeemable Warrants are callable by the Company upon
thirty (30) days written notice. At the time a Redeemable Warrant is
exercised, the exercise price for the Redeemable Warrant shall be
paid in full. Prior to expiration, the Redeemable Warrants may be
exchanged, transferred or exercised by the registered Warrant Holder
by presenting the Redeemable Warrants to the Warrant Agent. See
"Risk Factors - Redeemable Warrants."
The Redeemable Warrants do not confer on the holders thereof any
voting or other rights of a stockholder of the Company.
The Company will have authorized and reserved for sale the stock
purchasable upon exercise of the Redeemable Warrants. When
delivered, such shares of stock shall be fully paid and
non-assessable.
The Exercise Price and the number of shares issuable upon
exercise of the Redeemable Warrants are subject to adjustment upon
the occurrence of certain events, including the issuance of any
Common Stock as a dividend or any stock split or reverse split as a
dividend. Adjustments in the number of shares issuable or in the
Exercise Price or both shall also be made in the event of any merger
or other reorganization.
The Warrant Certificates will provide that the Company and the
Warrant Agent may, without the consent of the holders of the
Redeemable Warrants, make changes in the Warrant Certificates which
do not adversely effect, alter or change the rights, privileges or
immunities of the registered holders of the Redeemable Warrants.
<PAGE> 48
The Company may pay a solicitation fee of 10% of the exercise
price of the Warrants to any NASD registered representative who, if
after one year from the effective date of the registration statement
the Warrants are called, causes the exercise thereof prior to the
expiration as set forth in the Warrant Agreement, subject however, to
the provisions of the NASD Notice to Members 81-38 (September 22,
1981). NASD Notice to Member 81-38 provides that an NASD registered
representative may not receive compensation as a result of any of the
following transactions: (1) the exercise of Redeemable Warrants
where the market price of the underlying security is lower than the
exercise price; (2) the exercise of Redeemable Warrants held in any
discretionary account (3) the exercise of Redeemable Warrants where
disclosure of compensation arrangements has not been made in
documents provided to customers both as part of the original offering
and at the time of exercise; and, (4) the exercise of Redeemable
Warrants in unsolicited transactions.
Unless granted an exemption from Rule 10b-6 of the Securities
and Exchange Act of 1934, the Selling Agent and any soliciting
broker/dealers will be prohibited from engaging in any market making
activities with regards to the Company's securities for the period
from nine (9) business days prior to any solicitation of the exercise
of any Warrants until the later of the termination of the
solicitation activity or the termination (by waiver or otherwise) of
any right that the Selling Agent and soliciting broker/dealers may
have to receive a fee for the exercise of Warrants following such
solicitation. As a result, the Selling Agent and soliciting
broker/dealers may be unable to continue to provide a market for the
Company's securities during certain periods while the Warrants are
exercisable.
Transfer Agent
The Company's Transfer Agent is:
Interwest Tranfer Company
P. O. Box 17136
Salt Lake City, Utah 84117
The Company's common shares are traded on the Bulletin Board
operated by the National Association of Securities Dealers, Inc.
under the symbol "MXAM." The prices listed below were obtained from
the National Quotation Bureau, Inc., and are the highest and lowest
bids reported during each fiscal quarter for the period December 31,
1995, through June 30, 1997. The Company's Common Stock did not
begin to trade until the third quarter of 1996. These bid prices are
over-the-counter market quotations based on interdealer bid prices,
without markup, markdown, or commission and may not necessarily
represent actual transactions:
<PAGE> 49
<TABLE>
Fiscal Quarter Ended High Bid ($) Low Bid ($)
- -------------------- ------------ -----------
<S> <C> <C>
June 30, 1997 $ 1.0625 $ 0.625
March 31, 1997 $ 1.6875 $ 0.017
December 31, 1996 $ 0.16 $ 0.11
September 30, 1996 $ 0.17 $ 0.15
June 30, 1996 $ 0.00 $ 0.00
March 31, 1996 $ 0.00 $ 0.00
December 31, 1995 $ 0.00 $ 0.00
September 30, 1995 $ 0.00 $ 0.00
June 30, 1995 $ 0.00 $ 0.00
March 31, 1995 $ 0.00 $ 0.00
</TABLE>
On October 7, 1997, the average of the high bid and low ask
quotation for the Company's common shares as quoted on the OTC
Bulletin Board operated by the National Association of Securities
Dealers was $0.86.
The approximate number of holders of common stock of record on
October 7, 1997, was 365.
There is no market for the Warrants and none is expected to
develop. See "Risk Factors - No Market for the Warrants."
- ---------------------------------------------------------------------
PLAN OF DISTRIBUTION
- ---------------------------------------------------------------------
The Warrants will be distributed to shareholders of record as of
March 13, 1997, on the basis of one (1) Warrant for every five (5)
shares owned. Fractional warrants will not be issued. In the event a
shareholder does not own a number of shares evenly divisible by five
(5) the Company will round down.
The distribution of the Warrants and/or Common Stock offered by
the Company may be effected by one or more transactions that may take
place in the over-the-counter market, including ordinary brokers'
transactions, privately negotiated transactions, or through sales to
one or more dealers for resale of such securities as principals, at
market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices.
All proceeds from the exercise of the Warrants will be
immediately available for use by the Company. The Company will not
receive any proceeds from the sale of the Warrants or the sale of the
Common Stock.
SEC 15(g) of the Securities Exchange Act of 1934.
The Company's shares of Common Stock are covered by Section 15g
of the Securities Exchange Act of 1934, as amended, that imposes
additional sales practice requirements on broker/dealers who sell
such securities to persons other than established customers and
accredited investors (generally institutions with assets in excess of
$5,000,000 or individuals with net worth in excess of $1,000,000 or
<PAGE> 50
annual income exceeding $200,000 or $300,000 jointly with their
spouses). For transactions covered by the Rule, the broker/dealer
must make a special suitability determination for the purchase and
have received the purchaser's written agreement to the transaction
prior to the sale. Consequently, the Rule may affect the ability of
broker/dealers to sell the Company's securities and also may affect
the ability of purchasers in this offering to sell their shares in
the secondary market.
Section 15(g) also imposes additional sales practice
requirements on broker/dealers who sell penny securities. These
rules require a one page summary of certain essential items. The
items include the risk of investing in penny stocks in both public
offerings and secondary marketing; terms important to in
understanding of the function of the penny stock market, such as
"bid" and "offer" quotes, a dealers "spread" and broker/dealer
compensation; the broker/dealer compensation, the broker/dealers
duties to its customers, including the disclosures required by any
other penny stock disclosure rules; the customers rights and remedies
in causes of fraud in penny stock transactions; and, the NASD's toll
free telephone number and the central number of the North American
Administrators Association, for information on the disciplinary
history of broker/dealers and their associated persons.
- ---------------------------------------------------------------------
LITIGATION
- ---------------------------------------------------------------------
The Officers and Directors of the Company certify that to the
best of their knowledge, neither the Company nor any of its Officers
and Directors are parties to any legal proceeding or litigation.
Further, the Officers and Directors know of no threatened or
contemplated legal proceedings or litigation. None of the Officers
and Directors have been convicted of a felony or none have been
convicted of any criminal offense, felony and misdemeanor relating to
securities or performance in corporate office. To the best of the
knowledge of the Officers and Directors, no investigations of
felonies, misfeasance in office or securities investigations are
either pending or threatened at the present time.
- ---------------------------------------------------------------------
LEGAL MATTERS
- ---------------------------------------------------------------------
Legal matters in connection with the Warrants and underlying
Common Stock of the Company to be issued in connection with the
offering will be passed upon for the Company by Conrad C. Lysiak,
Attorney and Counselor at Law, West 601 First Avenue, Suite 503,
Spokane, Washington 99204.
<PAGE> 51
- ---------------------------------------------------------------------
EXPERTS
- ---------------------------------------------------------------------
The financial statements of the Company appearing in this
Prospectus and the Registration Statement have been examined by the
accounting firm of Morgenstern & Alexander, Certified Public
Accountants, 300 Broadway, Fourth Floor, New York, New York 10013, as
indicated in its report contained herein. Such financial statements
are included in this Prospectus in reliance upon the said report,
given upon such firm's authority as an expert in auditing and
accounting.
- ---------------------------------------------------------------------
ADDITIONAL INFORMATION
- ---------------------------------------------------------------------
The Company has filed with the Securities and Exchange
Commission, 450 Fifth Street, N.W. Washington D.C. 20549, a
registration statement under the Act, as amended with respect to the
securities offered hereby. This Prospectus does not contain all of
the information set forth in the registration statement, exhibits and
schedules thereto. For further information with respect to the
Company and the securities offered hereby, reference is made to the
registration statement, exhibits and schedules, copies of which may
be obtained from the Commission's principals officers in Washington,
D.C., upon payment of the fees prescribed by the Commission.
<PAGE> 52
MORGENSTERN & ALEXANDER
CERTIFIED PUBLIC ACCOUNTANTS
350 Broadway, 4th Floor
New York, New York 10013-3911
TEL: (212) 925-9490
FAX: (212) 226-9134
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and
Board of Directors
Maxam Gold Corporation
We have audited the accompanying consolidated balance sheets of Maxam
Gold Corporation and subsidiary as of December 31, 1996 and December
31, 1995, and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1996. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Maxam Gold Corporation and subsidiary as of December 31, 1996 and
December 31, 1995, and the consolidated results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Morgenstern & Alexander
Morgenstern & Alexander
Certified Public Accountants
May 20, 1997
F-1
<PAGE> 53 MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
ASSETS
<TABLE>
<CAPTION>
June 30, 1997
(Consolidated) 1996
(Unaudited) (Consolidated) 1995
<S> <C> <C> <C>
Current Assets:
Cash $ 230,025 $ 454,406 $ 141
Marketable security:
Trading security carried
at fair value - 400,000 750,000
Notes receivable 66,690 83,610 -
Prepaid expenses and
miscellaneous receivables 12,689 4,778 -
---------- ---------- ---------
Total Current Assets 309,404 942,794 750,141
---------- ---------- ---------
Fixed Assets:
Office equipment 10,140 8,563 -
Machinery & equipment 1,074,465 688,728 -
Transportation equipment 64,869 17,047 -
---------- ---------- ---------
1,149,474 714,338 -
Less accumulated depreciation 129,888 60,189 -
---------- ---------- ---------
Net Fixed Assets 1,019,586 654,149 -
---------- ---------- ---------
Other Assets:
Note receivable, less
current portion 6,983 11,581 -
Mining properties 77,820 77,820 79,420
Investment in affiliate 1,600 1,600 -
Other 225 255 -
---------- ---------- ---------
86,628 91,256 79,420
---------- ---------- ---------
Total Assets $1,415,618 $1,688,199 $ 829,561
========== ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Note payable to bank $ 58,885 $ 28,381 $ -
Other notes payable 585,000 285,000 71,400
Obligation under capital lease 116,746 220,518 -
Accounts payable and
accrued expenses 272,607 65,322 45,508
Due to officers
and shareholders 55,170 31,115 83,224
---------- ---------- ---------
Total Liabilities 1,088,408 630,336 200,132
---------- ---------- ---------
Shareholders' Equity:
Common stock, par value $.00001,
authorized 100,000,000 shares, issued
and outstanding 45,545,863 shares as
of December 31, 1996 and 45,336,963
as of December 31, 1995 455 455 453
Paid in capital 2,629,144 2,629,144 1,179,146
Retained earnings (Deficit) (2,302,389) (1,571,736) (550,170)
---------- ---------- ---------
Total Shareholders' Equity 327,210 1,057,863 629,429
Total Liabilities and ---------- ---------- ---------
Shareholders' Equity $1,415,618 $1,688,199 $ 829,561
========== ========== =========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 54
In order to transmit these documents to the SEC via EDGAR, Maxam Gold
Corporation and Subsidiary, Consolidated Statements of Income, has been
formatted to fit across two pages. This is page 1 of 2.
MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
For The Six For The Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
(Consolidated) (Consolidated) 1996
(Unaudited) (Unaudited) (Consolidated)
<S> <C> <C> <C>
Revenues:
Mining Options -0- -0- -0-
Interest income 11,014 -0- 21,398
---------- ---------- -----------
11,014 -0- 21,398
---------- ---------- -----------
Expenses:
Mining Expenses 297,050 331,864 541,578
General and
administrative 174,980 121,356 237,875
Officers' compensation 150,000 -0- 150,000
Depreciation and
amortization 69,729 12,090 60,234
Interest expense 51,348 12,535 55,627
---------- ---------- -----------
743,107 477,845 1,045,314
---------- ---------- -----------
Loss before minority
interest (732,093) (477,845) (1,023,916)
Minority interest
in loss of consolidated
subsidiary 1,440 1,600 2,350
---------- ---------- -----------
Net Loss $ (730,653) $ (476,245) $(1,021,566)
========== ========== ===========
Net Loss per
common share $ (.02) $ (.01) $ (.02)
========== ========= ===========
F-3
<PAGE> 55
In order to transmit these documents to the SEC via EDGAR, Maxam Gold
Corporation and Subsidiary, Consolidated Statements of Income, has been
formatted to fit across two pages. This is page 2 of 2.
1995 1994
<C> <C>
-0- 87,000
-0- -0-
---------- ----------
-0- 87,000
---------- ----------
15,980 10,850
55,842 42,694
79,525 170,000
-0- -0-
5,670 4,269
---------- ----------
157,017 227,813
---------- ----------
-0- -0-
-0- -0-
---------- ----------
$ (157,017) $ (140,813)
========== ==========
$ (Nil) $ (Nil)
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3a
<PAGE> 56
Page 1 of 2
MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Retained Total
# of Par Value Paid In Earnings Shareholders'
Shares $.00001 Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance at 12/31/93 25,000,000 $ 250 $ 62,270 $(252,340) $(189,820)
Issuance of 3,449,820
common shares in exchange
for $172,491 of amounts
due to officers and
stockholders 3,449,820 35 172,456 172,491
Issuance of 10,000 common
shares for cash 10,000 5,000 5,000
Issuance of 1,500,000 common
shares in exchange for
12 mining claims 1,500,000 15 4,785 4,800
Net loss for the year ended
December 31, 1994 (140,813) (140,813)
---------- -------- ------- --------- ---------
Balance at 12/31/94 29,959,820 300 244,511 (393,153) (148,342)
Issuance of 2,454,319
common shares in exchange
for $179,495 of amounts
due to officers 2,454,319 24 179,471 179,495
Issuance of 3,322,824
common shares re: Consulting
Agreement with Timberline
Consulting Inc. 3,322,824 33 5,260 5,293
Issuance of 9,600,000
common shares for
acquisition of
convertible
debentures 9,600,000 96 749,904 750,000
Net loss for the year ended
12/31/95 (157,017) (157,017)
---------- -------- --------- --------- ---------
Balance at
12/31/95 45,336,963 453 1,179,146 (550,170) 629,429
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 57
Page 2 of 2
MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE PERIOD JANUARY 1, 1994 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Retained Total
# of Par Value Paid In Earnings Shareholders'
Shares $.00001 Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Issuance of 200,000
common shares
for cash 200,000 2 49,998 50,000
Issuance of 8,900
common shares re
notes payable 8,900
To record balance
of convertible
debentures re 1995
issuance of 9,600,000
common shares 1,400,000 1,400,000
Net loss for the year ended
12/31/96 (1,021,566) (1,021,566)
--------- -------- --------- ----------- ----------
Balance at
12/31/96 45,545,863 $ 455 $2,629,144 $(1,571,736)$ 1,057,863
Net loss for the six month
period ended June 30, 1997
(Unaudited) (730,653) (730,653)
---------- -------- ---------- ----------- -----------
Balance at June 30, 1997
(Unaudited) 45,545,863 $ 455 $2,629,144 $(2,302,389) $ 327,210
========== ======== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 58
In order to transmit these documents to the SEC via EDGAR, Maxam Gold
Corporation and Subsidiary, Consolidated Statements of Cash Flows, has
been formatted to fit across two pages. This is page 1 of 2.
MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
For The Six For The Six
Months Ended Months Ended
June 30, 1997 June 30, 1996
(Consolidated) (Consolidated) 1996
(Unaudited) (Unaudited) (Consolidated)
<S> <C> <C> <C>
Cash Flows From (Used For) Operating Activities
Net Loss $(730,653) $(476,245) $(1,021,566)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 69,729 12,090 60,234
Consulting expense -
Change in assets and liabilities:
Decrease in marketable trading
security 400,000 312,500 350,000
(Increase) decrease in prepaid expenses
and miscellaneous receivables (7,911) (12,976) (4,778)
Increase in other assets - - (300)
Increase in accounts payable and
accrued expenses 207,285 50,219 19,814
--------- --------- -----------
Net cash used for operating
activities (61,550) (114,412) (596,596)
--------- --------- -----------
Cash Flows Used For Investing Activities
Purchase of mining options - - -
Purchase of equipment (435,136) (231,244) (403,018)
--------- --------- -----------
Net cash used for investing
activities (435,136) (231,244) (403,018)
--------- --------- -----------
Cash Flows From (Used For) Financing Activities
(Increase) decrease in notes
receivable 21,518 - (101,810)
Increase in note payable to bank 30,504 - 35,000
Increase in other notes payable 300,000 202,000 213,600
Principal payments under capital
lease obligation (103,772) - (90,802)
Increase (decrease) in amount due
to officers and stockholders 24,055 (53,700) (52,109)
Proceeds from issuance of
common stock - - 50,000
Increase in paid in capital re:
convertible debentures - 482,137 1,400,000
--------- --------- -----------
Net cash from financing activities 272,305 630,437 1,453,879
--------- --------- -----------
Net increase (decrease) in cash (224,381) 284,781 454,265
Cash at beginning of year 454,406 141 141
--------- --------- -----------
Cash at end of year $ 230,025 $ 284,922 $ 454,406
========= ========= ===========
Supplemental Disclosure of Cash Flow Information
Interest paid $ 51,348 $ 12,535 $ 55,627
========= ========== ===========
See notes to consolidated financial statements.
F-6
<PAGE> 59
In order to transmit these documents to the SEC via EDGAR, Maxam Gold
Corporation and Subsidiary, Consolidated Statements of Cash Flows, has
been formatted to fit across two pages. This is page 2 of 2.
1995 1994
<C> <C>
$ (157,017) $ (140,813)
- -
5,293 -
- -
- 1,000
- -
34,384 1,300
---------- ----------
(117,340) (138,513)
---------- ----------
- (65,100)
- -
---------- ----------
- (65,100)
---------- ----------
- -
- -
36,800 19,100
- -
80,554 178,695
- 5,000
- -
---------- ----------
117,354 202,795
---------- ----------
14 (818)
127 945
---------- ----------
$ 141 $ 127
========== ==========
$ 5,670 $ 4,269
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-6a
<PAGE> 60 Page 2 of 2.
MAXAM GOLD CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
Supplemental Schedule of Noncash Investing
And Financing Activities (Continued)
1994
- ----
(a) Issuance of 3,359,820 common shares
in exchange for $167,991 due to officers
for past services and reimbursement of expenses
of amounts due to officers and stockholders
which had been accrued as of December 31, 1993
(b) Issuance in 1994 of 30,000 common shares in lieu
of cash for accrued consulting fees of $1,500 and
60,000 common shares issued in 1994 for cash received
in 1993 of $3,000.
(c) Issuance of 1,500,000 common shares in
exchange for 12 mining claims.
1995
- ----
(d) Issuance of 2,454,319 common shares
in exchange for $179,495 of amounts due
to stockholders which had been accrued as
of December 31, 1994
(e) Issuance of 3,322,824 common shares re:
Consulting Agreement with Timberline
Consulting Inc.
(f) Issuance of 9,600,000 common shares for
acquisition of convertible debentures.
1996
- ----
(g) In 1996, four of the Company's claims were sold
in exchange for 76,000,000 common shares and
warrants of an affiliated Company valued at the
original cost of the mining claims of $1,600.
(h) In 1996, the Company entered into a lease purchase
agreement for used mining equipment with a down
payment of $100,000 and remaining principal
payments of $311,320.
(i) In 1996, the long term note receivable due from an
individual and the note payable to the bank were both
decreased by $6,619 due to the payments made to the
bank on behalf of the Company by the individual.
See notes to consolidated financial statements.
F-7
<PAGE> 61
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company was incorporated in the State of Utah as State Cycle on
August 7, 1974. Since that time, the following amendments have been
made to the Articles of Incorporation:
February 19, 1975 - name was changed to Universal AMC, Inc.
November 15, 1983 - name changed to Caption Industries, Inc. and
authorized capitalization changed from 150,000 common shares of
$1.00 par value to 50,000,000 common shares of $.001 par value.
February 7,1984 - name was changed to Madonna Mining Co., Ltd and
authorized capitalization changed from 50,000,000 common shares of
$.001 par value to 100,000,000 common shares of $.00001 par value.
June 12, 1985 - name changed to Maxam International Corporation.
December 26, 1995 - name changed to Maxam Gold Corporation.
The Company and its majority-owned subsidiary Peoria Seven Mining, LLC
(Peoria) (Note 2) is engaged in the business of mining and refining of
gold, other precious and non-precious metals. On October 2, 1987
shareholders donated mining claims to the Company (Note 3(a)). The
Company had been inactive since 1985.
BASIS OF CONSOLIDATION
The financial statements for 1996 have been consolidated and include
the accounts of the Company and its majority-owned subsidiary which was
organized in May 1996. All significant intercompany accounts and
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from
those estimates.
F-8
<PAGE> 62
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Mining Properties
Consist of mining claims located in Arizona which were donated to the
Company by shareholders and other related parties (Note 3(a)) or
obtained through the issuance of the Company's common stock to related
parties (Note 3(b)). The mining properties have been recorded at the
allocated cost basis as originally recorded by the related parties.
Mining options, which were exercised on October 25, 1994, have been
recorded at the cost basis at which they were acquired from related
entities (Note 3(c)).
All other mining costs have been expensed as incurred.
Fixed Assets
Fixed assets are carried at cost. Costs of major additions,
replacements and betterments are capitalized and maintenance and
repairs which do not extend the life of the respective assets are
expensed as incurred. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets which range from
five to ten years.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Income Taxes
The Company has net operating loss carryforwards for federal income tax
purposes of approximately $1,500,000 which are available to offset
future taxable income and will expire if not used in the period 2006-2011.
Environmental Expenditures
The operations of the Company have been, and may in the future be,
affected from time to time in varying degree by changes in
environmental regulations, including those for future removal and site
restoration costs. The Company's policy is to meet or, if possible,
surpass standards set by relevant legislation, by application of
technically proven and economically feasible measures. Environmental
expenditures that relate to ongoing environmental and reclamation
programs will be charged against earnings as incurred or capitalized
and depreciated depending on their future economic benefits.
F-9
<PAGE> 63
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 2 - ORGANIZATION OF SUBSIDIARY
In May, 1996 Peoria Seven Mining, LLC, (Peoria) a limited liability
Company, was organized under the laws of the State of Arizona. Under
the Articles of Organization Maxam Gold Corporation (Maxam) is a member
with 5,750,000 shares out of a total of 6,250,000 shares with the
manager of Peoria also being the Chairman and Chief Executive Officer
of Maxam. Maxam assigned mining rights on four claims that it owns and
authorized the loaning of funds at an interest rate of 10% to Peoria in
consideration for the 5,750,000 shares. The remaining 500,000 shares
were offered through units in which 1 unit was offered for $5,050 of
which $5,000 was for a twelve month loan at 12% and $50 was to purchase
5,000 shares in Peoria. As of December 31, 1996 proceeds of $237,350
had been collected of which $2,350 was for 235,000 shares. As of
December 31, 1996 Maxam owned 96.07% of Peoria.
NOTE 3 - RELATED PARTY TRANSACTIONS
(a) On September 23, 1987, Phoenix International Mining, S.A. (A
Panamanian Corporation) purchased 20,000,000 shares of the outstanding
common stock of Maxam International Corporation which constituted 80%
of the issued and outstanding common shares of the Company in exchange
for four mining claims. On October 2, 1987 Phoenix International
Mining, S.A. transferred approximately 53.2% of these outstanding
shares to related entities of Phoenix International Mining, S.A. These
mining properties have been recorded on the books of the Company at the
allocated cost basis of $9,520 as originally recorded by Phoenix
International Mining, S.A.
(b) At the annual meeting of shareholders on July 14, 1993 approval was
granted for the acquisition of twelve 160 acre mining claims in
Southwest Arizona for 1,500,000 shares of the Company's common stock.
Six of the claims were owned by a Corporate shareholder while the
President (deceased) and Chairman of the Board of the Company each
owned one claim. The remaining four claims were owned by a Corporation
in which the Chairman of the Board of the Company was a Director. In
addition, the Sellers of the mining claims are to receive 5% of the net
profit before taxes realized by the Company from the minerals mined and
sold on a consolidated pro rata basis. The 1,500,000 shares were
subsequently issued in 1995 at the allocated cost basis of $4,800.
F-10
<PAGE> 64
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
On August 31, 1993 the Company entered into an Agreement with Quilotosa
Wash, a Trust located in Peoria, Illinois, whereby the Company assigned
to Quilotosa Wash eight of the above mentioned mining claims. Quilotosa
Wash agreed to seek adequate financing to mine and process one thousand
tons of ore per day from the mining claims. Quilotosa Wash will receive
ten percent of the net profits from the operation as a management fee.
In addition, Quilotosa Wash is authorized to pay a total of five
percent of the net profits before taxes earned by the Company from the
operation to the three former sellers of the mining properties. In the
event Quilotosa Wash does not obtain adequate financing by July 1,
1994, the Company has the right to buy back the eight mining claims for
ten dollars and other good and valuable consideration. On July 1, 1994
the Agreement was extended to November 1, 1994 and on October 24, 1994
was extended to June 30, 1996. Subsequently, on February 6, 1996 the
Agreement was again extended to June 30, 1997.
On August 31, 1993 the Company entered into an Agreement with Red Raven
III, a Trust located in St. Louis, Missouri, whereby the Company
assigned to Red Raven III the remaining four mining claims. The terms
of this Agreement were substantially the same as those made with
Quilotosa Wash. On July 1, 1994 the Agreement was extended to January
1, 1995 and on December 28, 1994 was extended to June 30, 1996.
Subsequently, on February 13, 1996 the Agreement was again extended to
June 30, 1997.
On November 15, 1996 Red Raven III sold the four mining claims to
Turtleback Mountain Gold Co., Inc. (Turtleback) in exchange for
80,000,000 shares of Turtleback common stock plus 80,000.000 "A"
warrants and 80,000,000 "B" warrants. The warrants are exercisable at
$ .01 and $.02 per warrant, respectively, for five years. Subsequently,
Red Raven III distributed 76,000,000 of the shares as well as the A and
B warrants to the Company. The 76,000,000 common shares and warrants of
Turtleback are valued at the original cost of the mining claims sold in
the amount of $1,600. The Chairman and Chief Executive officer of the
Company is also the Secretary/Treasurer, Chief Financial officer and a
member of the Board of Directors of Turtleback.
F-11
<PAGE> 65
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
(c) On May 2, 1994 the Company entered into three agreements to acquire
six month options to test and develop mining claims from the following
related entities in which the Company's Chairman has financial
interests:
25 claims from Gila Mining LLC $ 17,500
68 claims from Sigma Refining Company
in behalf of:
48 claims from RFS Mining LLC 33,600
20 Claims from Uranco - Marston
Mining LLC 14,000
--------
$ 65,100
========
On October 25, 1994 the Company exercised its rights under the option
agreements to purchase the above claims by granting irrevocable
ownership pro-rated interests of all pre-tax net profits realized by
the Company from the sale of all metals extracted from the claims as
follows:
.00833 to Gila Mining LLC
.016 to RFS Mining LLC
.00734 to Uranco-Marston Mining LLC
In April 1994, the Company entered into an option agreement with The
Hanover Group, Inc. (Hanover) and received $87,000 for a six month
option for Hanover to test and develop the above mining claims and the
8 claims held by Quilotosa Wash (Note 3(b)) through October 31, 1994.
On August 30, 1994 the agreement was extended to April 30, 1995 and on
March 30, 1995, was extended to April 30, 1996 for consideration of a
promissory note payable to the Company in the amount of $11,600 at an
annual interest rate of 8%. The note has not been recorded as an asset
of the Company since the agreement was not extended after April 30,
1996 and no collections have been received to date.
F-12
<PAGE> 66
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
On August 30, 1994 Maxam received an advance from Hanover of $11,600
for the purpose of paying maintenance fees to the Bureau of Land
Management for the mining claims under option to Hanover. The Company
subsequently repaid the $11,600 to Hanover. As additional consideration
the Company has agreed that in the event Hanover does not exercise its
option on the mining claims that the Company will repay the $87,000
option income to Hanover. The $87,000 will be paid out from any
production income the Company may receive from any mining claims it
owns. In the event there is no production income the $87,000 will not
be repaid.
(d) Included in current notes receivable are the following notes
receivable from related parties:
Turtleback Mountain Gold Co., Inc. $ 5,900
Interest rate of 12% per annum
payable on demand
RFS Mining LLC $13,990
Interest rate of 12% per annum
payable on demand
Phoenix International Mining, Inc. $11,920
Interest rate of 18% per annum
payable on demand
(e) (1) At the annual meeting of shareholders held on March 13, 1995 it
was approved that the officers and directors of the Company be
compensated for past services of 1993 and 1994 in the amount of
$170,000 and reimbursement of expenses and loans of $9,495. In lieu of
cash they received 2,454,319 shares of the Company's Common stock.
(2) At the annual meeting of shareholders held on July 14, 1993 it
was approved that the officers and directors of the Company be
compensated for past services (October 1987 thru December 31, 1992) in
the amount of $150,000 and reimbursement of expenses of $17,991. In
lieu of cash they were to receive 3,359,820 shares of the Company's
common stock. Subsequently in 1994 these shares were issued.
F-13
<PAGE> 67 MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
(f) Other notes payable are due to the following related parties:
<TABLE>
1996 1995
<S> <C> <C>
(a) Individual shareholders and members $285,000 $ 5,000
(b) Entities in which the Chairman
and Chief Executive Officer of the
Company is also an officer/director - 25,200
(c) Phoenix International Mining, Inc. - 24,000
(d) Chairman and Chief Executive
Officer of the Company - 5,600
(e) Due to the Estate of the former
President of the Company who repaid
demand note payable to Hanover Group,
Inc. on behalf of the Company in
March 1995. - 11,600
-------- -------
$285,000 $71,400
======== =======
</TABLE>
All notes are due within one year with interest at 12% and 18%.
(g) On July 1, 1996 the Company signed an office lease with the
Chairman and Chief Executive Officer of the Company for monthly rental
payments of $1,200 on a month-to-month basis.
The Company agreed to pay Phoenix International Mining, Inc. $2,400 per
annum for calendar years 1995 and 1994 for rent and services. In prior
years, the Company utilized the home address of Phoenix International
Mining, Inc. at no charge to the Company.
(h) On December 11, 1995 the Company agreed to acquire $2,400,000 in
International Precious Metals Corporation (IPM) convertible debentures
from Phoenix International Mining, Inc. for 9,600,000 shares of the
Company's common stock. The convertible debentures had been previously
issued to Phoenix International Mining, Inc. by IPM under the terms of
a renegotiated Joint Venture Agreement between the two entities. These
debentures are convertible into common shares at the lesser of the
average bid price of the IPM's shares on NASDAQ for the 20 trading days
prior to the debenture's due date or $5.00 per share, subject to the
approval of all regulatory authorities. The debentures are comprised of
four amounts of $500,000 with due dates in 1996 of January 1, April 1,
July 1 and October 1, and one $400,000 with a due date of January 1,
1997. Each debenture accrues interest beginning on its due date at the
prime rate of Bank One in Phoenix, Arizona, plus 2%. In the event that
IPM is not able to obtain regulatory approval to effect the conversion
of the debentures by September 1, 1996, the debentures become payable
on demand.
F-14
<PAGE> 68 MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 3 - RELATED PARTY TRANSACTIONS (CONTINUED)
At a Special Board of Directors meeting held on April 2, 1996 it was
agreed to sell the January 1, 1996 ($500,000) and April 1, 1996
($500,000) debentures to David Hannon et al of Lindfield, Australia for
$750,000.00. No decision was made regarding the July 1, 1996 debenture.
The October 1, 1996 debenture was pledged as collateral for interim
financing loans on behalf of Peoria Seven Mining LLC.
Due to the financial condition of IPM, limited marketability of the
debentures and the uncertainty of the approval from the regulatory
authorities no valuation was assigned to the remaining $1,400,000
Convertible Debentures as of December 31, 1995. However, during 1996
the debentures due July 1, 1996 and October 1, 1996 of $500,000 were
collected in full including accrued interest income. Subsequently, the
$400,00 debenture due January 1, 1997 was collected in full with
accrued interest.
NOTE 4 - OBLIGATION UNDER CAPITAL LEASE
On April 24, 1996 the Company entered into a Lease Purchase Agreement
with an individual to acquire used mining equipment with a down payment
of $100,000 and eleven monthly payments of $33,000 and a final payment
of $33,000 at which time title to the mining equipment will pass to the
Company. The mining equipment was valued at $411,320.
In December 1996 the payment schedule was revised, for the six month
period December 1996 through May 1997, whereby the monthly payments
were decreased to $16,500 with an annualized interest charges of 20% on
the unpaid balance. Starting in June 1997 the original $33,000 monthly
payment will resume.
The individual with whom the Company entered into the Lease Purchase
Agreement also entered into a Consulting Agreement with the Company on
April 15, 1996 to perform consulting services regarding the production
of gold and other precious metals. Under the terms of the Agreement he
will be compensated at $1,500 per week plus reimbursed expenses and
various incentives based on production.
NOTE 5 - WARRANTS
At a Board of Directors meeting held on March 14, 1997 the Board of
Directors authorized the issuance of Warrants to the shareholders of
the Company under the following conditions:
(1) One Warrant will be issued for each five shares of the Company's
stock held as of the record date of March 13, 1997.
(2) Each Warrant entitles the holder to purchase one share of the
Company's common stock for $1.00 within a period of two years from
March 14, 1997.
F-15
<PAGE> 69
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 5 - WARRANTS (CONTINUED)
(3) The Company intends filing with the Securities and Exchange
Commission a registration statement, registering the warrants and the
underlying shares. The warrants may not be exercised unless a current
registration statement is effective with the Securities and Exchange
Commission. The Company may call the warrants upon 30 days
written notice.
NOTE 6 - STOCK OPTION PLAN
At the shareholders annual meeting on March 8, 1996 the adoption of a
non-qualified incentive stock option plan was approved. Subsequently,
at the Board of Directors meeting on March 14, 1997 the 1996
Nonqualifying Stock Option Plan was accepted with Directors and
Officers to be offered 2,400,000 shares at an option price of $.32 per
share. The remaining 2,600,000 shares will carry an option price of
$1.00 per share and distribution will be determined by the compensation
committee for 1997. To date no options have been issued.
NOTE 7 - LITIGATION
The Company signed a Consulting Agreement effective February 2, 1995
with Timberline Consulting Inc.(Consultant) under which the Consultant
promised to perform certain investor, brokerage, and public relations
services. In consideration of those services, the Company provided
certain remuneration and 1,667,000 shares of Company stock to be held
in escrow by the Consultants' attorney.
In addition, exclusive of the Consulting Agreement, the Company sent
307,690 shares to the Consultant for the purpose of the Consultant
raising capital from the sale of these Company shares.
The Company terminated the Consulting Agreement in October 1995
contending non-performance by the Consultant. The Company instituted
litigation proceedings with a lawsuit titled Maxam Gold Corporation v.
Timberline Consultants, Inc. et al in the United States District Court
for the District of Colorado. In January 1997 the lawsuit was settled
and dismissed under terms requiring the Consultant to return the
majority of the stock it received. To date, 911,000 shares of the
Company stock has been returned to the Companys' attorneys. The
attorneys are still awaiting the stock power from the Consultant in
transferring the shares.
F-16
<PAGE> 70
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 8 - SUBSEQUENT EVENTS
In March and May, 1997 the Company acquired an additional 351 mining
claims bringing the total holdings of the Company to 456 claims.
Included in the additional claims are 63 which were acquired from
Uranco Mining LLC, a related entity in which one of the principal
interest holders is also the Chairman and the Chief Executive Officer
of the Company.
The Company will provide Uranco Mining LLC with 630,000 shares of the
stock of the Company and warrants at $1.50 per share to be exercised
within five years with a maximum of 10,000,000 warrants. The number of
warrants will be determined as one warrant for each 10 ounces of proven
and/or probable gold, or gold equivalent from surface to 100 feet in
drilling depth. In addition there will be a 1% royalty on net smelter
returns from all production from the 63 claims.
F-17
<PAGE> 71
MAXAM GOLD CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 9 - RELATED PARTY TRANSACTIONS - OTHER NOTES PAYABLE
During the quarter ended June 30, 1997 the Company borrowed $350,000
from Phoenix International Mining, Inc. payable on demand with interest
at 12% per year.
F-18
<PAGE> 72
UNTIL __________, 1997, (NINETY DAYS AFTER THE EFFECTIVE DATE OF THIS
PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS.
TABLE OF CONTENTS
Prospectus Summary . . MAXAM GOLD CORPORATION
Risk Factors . . .
Capitalization . . . 9,109,172 Warrants to Purchase
Dilution . . . . 9,109,172 Shares of Common Stock
Selected Financial Data . and 9,109,172 Shares of Common
Management's Discussion Stock Underlying the Warrants
and Analysis of
Financial Condition and
Results of Operations .
Use of Proceeds . .
Dividend Policy . .
Glossary . . .
Business . . . . __________________________
Management . . . PROSPECTUS
Certain Transactions . __________________________
Management Remuneration .
Principal Shareholders . DATED: ___________________
Description of the Securities
Plan of Distribution . . MAXAM GOLD CORPORATION
Litigation . . . 528 Fon du Lac Drive
Legal Matters . . . East Peoria, Illinois 61611
Experts . . . .
Additional Information . (309) 699-8725
Financial Statements . F-1
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained
in this Prospectus in connection with the offer contained in this
Prospectus and, if given or made, such information must not be relied
upon as having been authorized by the Company. Neither the deliver nor
any sale made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company
since the date hereof. This Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy an security other than the
shares of Common Stock offered by this Prospectus, nor does it
constitute an offer to sell or a solicitation of an offer to buy the
shares of Common Stock by anyone in any jurisdiction in which such
offer or solicitation is not authorized or in which the person making
such offer or solicitation is not qualified to do so, to any person to
whom it is unlawful to make such offer or solicitation.
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 22. Indemnification of Directors and Officers.
The only statutes, charter provisions, bylaws or other
arrangements under which any controlling person, Director or Officer of
the Registrant is insured or indemnified in any manner against
liability which he may incur in his capacity as such are set forth
below.
The Utah Revised Statutes provides for indemnification where a
person who was or is a party or is threatened to be made a party to any
threatened, pending or contemplated action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than action by
or in right of a corporation), by reason of fact he is or was a
Director, Officer, employee or agent of a corporation or serving
another corporation at the request of the corporation, against expenses
(including attorneys' fees), judgments, fines, and amounts paid in
settlement, actually and reasonably incurred by him if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interest of the corporation and, with respect to criminal
action or proceeding, had no reasonable cause to believe his conduct
unlawful. Lack of good faith is not presumed from settlement or nolo
contendere plea. Indemnification of expenses (including attorneys'
fees) allowed in derivative actions except in the case of misconduct in
performance of duty to corporation unless the Court decides
indemnification is proper. To the extent any such person succeeds on
the merits or otherwise, he shall be indemnified against expenses
(including attorneys' fees). Determination that the person to be
indemnified met applicable standards of conduct, if not made by the
Court, is made by the Board of Directors by majority vote of quorum
consisting of the Directors not party to such action, suit or
proceeding or, if a quorum is not obtainable or a disinterested quorum
so directs, by independent legal counsel or by the stockholders.
Expenses may be paid in advance upon receipt of undertakings to repay
unless it shall ultimately be determined that he is entitled to be
indemnified by the corporation. The Corporation may purchase indemnity
insurance. In so far as indemnification for liability arising from the
Securities Act of 1933 may be permitted to Directors, Officers or
persons controlling the Company, it has been informed that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable.
<PAGE> 74
ITEM 23. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses in connection with the
issuance and distribution of the shares being registered. All the
amounts shown are estimates, except the registration fee.
[S] [C]
Registration Fee - SEC . . $ 2,760.36
Printing and Engraving . . 2,000.00
Legal Fees and Disbursements . 10,000.00
Accounting Fees . . . 2,000.00
Transfer Agent Fees . . . 1,000.00
Blue Sky Fees and Expenses . 2,239.64
TOTAL . . . . . $20,000.00
<PAGE> 75
ITEM 24. Recent Sales of Unregistered Securities.
The following table set forth information as to recent sales of
the Registrant's Common Stock since the formation of the Registrant,
all of which shares were not registered under the Securities Act of
1933, as amended:
<TABLE>
Amount of
Shares Consideration Date of
Name of Owner Acquired Cash/Other Sale
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Marilyn and
Lowell Rask 10,000 $ 5,000.00 11/3/94
P. O. Box 98
Victoria, IL 61485
Red Raven Corporation 500,000 Mining Claims 02/06/95
528 Fon Du Lac Drive $500.00
East Peoria, IL 61611
Peoria Seven, Inc. 750,000 Mining Claims 02/06/95
7 Martin Lane $750.00
Pekin, IL 61554
William T. Marston 125,000 Mining Claims 02/06/95
1204 Fieldhurst Drive $125.00
Ballwin, MO 63011
Dale L. Runyon 125,000 Mining Claims 02/06/95
528 Fon Du Lac Drive $125.00
East Peoria, IL 61611
William T. Marston 707,695 Services and 03/15/95
1204 Fieldhurst Drive Loans
Ballwin, MO 63011 $51,000.00
Dale L. Runyon 1,607,386 Services and 03/15/95
528 Fon Du Lac Drive Loans
East Peoria, IL 61611 $118,344.53
Billie J. Allred 139,238 Services 03/15/95
4633 S. 36th Place $10,300.00
Phoenix, AR 85040
Michael and Susan 846,151 Exchange 03/20/95
Ruynon-Davis Free trading
814 S. Pleasant Hill Rd. for restricted
East Peoria, IL 61611 shares
<PAGE> 76
Amount of
Shares Consideration Date of
Name of Owner Acquired Cash/Other Sale
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Merle H. Glick 166,667 Exchange 03/20/95
7 Martin Lane Free trading
Pekin, IL 61554 for restricted
shares
Louis L. and 166,667 Exchange 03/20/95
Paula Myers Free trading
595 Lime Drive for restricted
Petersburg, IL 62675 shares
H.W.W. Foundation 226,667 Exchange 03/20/95
1918 N. Missouri Free trading
Peoria, IL 61603 for restricted
shares
Patricia L. Runyon 333,334 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
Carol J. Runyon 416,667 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
Danial L. and 666,667 Exchange 03/20/95
Karan M. Runyon Free trading
1458 McClardy Rd. for restricted
Clarksville, TN 37042 shares
Alexandra M. Runyon 83,333 Exchange 03/20/95
1458 McClardy Rd. Free trading
Clarksville, TN 37042 for restricted
shares
Zechariah E. Runyon 83,334 Exchange 03/20/95
1458 McClardy Dr. Free trading
Clarksville, TN 37042 for restricted
Shares
Sarah Rose Runyon-Davis 83,334 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
Lydia Marie Runyon-Davis 83,334 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
<PAGE> 77
Amount of
Shares Consideration Date of
Name of Owner Acquired Cash/Other Sale
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Tabitha Jean
Runyon-Davis 83,334 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
Jessica Lynn
Runyon-Davis 83,334 Exchange 03/20/95
528 Fon Du Lac Dr. Free trading
East Peoria, IL 61611 for restricted
shares
Phoenix International
Mining, Inc. 9,600,000 $2,400,000 01/06/96
528 Fon Du Lac Dr. Debentures
East Peoria, IL 61611
Clark L. Rians 200,000 $50,000.00 04/23/96
4729 Crown Blvd.
Denver, CO 80239
Betty L. Paps 1,000 $10,000.00 12/06/96
1 Heatherwood Ct. Loan
Indian Head Park, IL 60525
Shirley A. Roemer 500 $5,000.00 12/06/96
R.R. #5, Box 78 Loan
Metamora, IL 61548
Roger D. Roemer 500 $5,000.00 12/06/96
R.R. #5, Box 78 Loan
Metamora, IL 61548
Richard D. Brenneman 1,000 $10,000.00 12/06/96
R.R. #1, Box 23 Loan
Metamora, IL 61548
Dale E. and 500 $5,000.00 12/06/96
Doris M. Brenneman Loan
1312 Chesapeake Ave.
#B-3
Naples, FL 33962
Bliss S. and Marilyn K. 300 $3,000.00 12/06/96
Phillips Loan
3417 West Capital Dr.
Peoria, IL 61614
J.W. Bruckman 1,100 $11,000.00 12/06/96
204 N. Main Loan
Washington, IL 61571
William M. Brown 4,000 $40,000.00 12/06/96
4010 N. Brandywine Rd. Loan
Peoria, IL 61614
</TABLE>
<PAGE> 78
ITEM 25. Exhibits.
The following documents are incorporated herein:
Number Document
- ---------------------------------------------------------------------
3.1 Article of Incorporation.
3.2 Article of Amendment.
3.3 Article of Amendment.
3.4 Article of Amendment.
3.5 Article of Amendment.
3.6 Article of Amendment.
3.7 Bylaws.
4.1 Form Stock Certificate (filed via Form SE).
5.1 Opinion of Conrad C. Lysiak
10.1 Stock Option Agreement.
10.2 Office Lease between Dale L. Runyon and Maxam Gold
Corporation.
10.3 Promissory Note between Phoenix International Mining and
Maxam Gold Corporation.
10.4 Promissory Note between Maxam Gold Corporation and Peoria
Seven Mining LLC.
10.5 Office lease between Hewson/Brechner Airpark and the Company.
24.1 Consent of Independent Auditor,
Morgenstern & Alexander.
24.2 Consent of Conrad C. Lysiak,
Attorney at Law.
27 Financial Data Schedule.
28.1 Warrant Agreement between the Company and Interwest Transfer
Co., Inc.
All other schedules and exhibits are omitted, as the required
information is not applicable or is not present in amount sufficient to
require submission of the schedule or because the information required
is included in the financial statements and notes thereto.
<PAGE> 79
ITEM 26. Undertakings.
A. The undersigned Registrant hereby undertakes: To provide to the
Underwriters, if any, at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such
names as required by the Underwriter to permit prompt delivery to each
purchaser.
B. The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post effective amendment to this registration statement:
(a) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and,
(c) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
C. Insofar as indemnification for liabilities arising under the
securities Act of 1933 may be permitted to Directors, Officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a Director, Officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by a Director, Officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public
policy as expressed in the Act and shall be governed by the final
adjudication of such issue.
<PAGE> 80
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing of this Form SB-2 Registration
Statement and has duly caused this Form SB-2 Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized,
in East Peoria, Illinois, on this 23rd day of October, 1997.
MAXAM GOLD CORPORATION
BY: /s/ Alan E. Hubbard
President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Alan E. Hubbard as true and
lawful attorney-in-fact and agent, with full power of substitution, for
his and in his name, place and stead, in any and all capacities, to
sign any and all amendment (including post-effective amendments) to
this registration statement, and to file the same, therewith, with the
Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in about the premises,
as fully to all intents and purposes as he might or could do in person,
hereby ratifying the confirming all that said attorney-in-fact and
agent, or any substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Form SB-2 Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
Signature Title Date
/s/ Dale L. Runyon Chief Executive Officer October 23, 1997
and Chairman of the Board
of Directors
/s/ Alan E. Hubbard President, Treasurer, October 23, 1997
Chief Financial Officer
and a member of the
Board of Directors
/s/ Michael W. Vice President, October 23, 1997
Runyon-Davis Secretary and a
member of the Board
of Directors
<PAGE> 81
EXHIBIT INDEX
The following documents are incorporated herein:
Number Document
- ---------------------------------------------------------------------
3.1 Article of Incorporation.
3.2 Article of Amendment.
3.3 Article of Amendment.
3.4 Article of Amendment.
3.5 Article of Amendment.
3.6 Article of Amendment.
3.7 Bylaws.
4.1 Form Stock Certificate (filed via Form SE).
5.1 Opinion of Conrad C. Lysiak.
10.1 Stock Option Agreement.
10.2 Office lease between Dale L. Runyon and Maxam Gold
Corporation.
10.3 Promissory Note between Phoenix International Mining and
Maxam Gold Corporation.
10.4 Promissory Note between Maxam Gold Corporation and Peoria
Seven Mining LLC.
10.5 Office lease between Hewson/Brechner Airpark and the Company.
24.1 Consent of Independent Auditor,
Morgenstern & Alexander.
24.2 Consent of Conrad C. Lysiak,
Attorney at Law.
27 Financial Data Schedule
28.1 Warrant Agreement between the Company and Interwest Transfer
Co., Inc.
All other schedules and exhibits are omitted, as the required
information is not applicable or is not present in amount sufficient to
require submission of the schedule or because the information required
is included in the financial statements and notes thereto.
<PAGE> 1
ARTICLES OF INCORPORATION
OF
STATE CYCLE
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, natural persons of the age of
twenty-one years or more, acting as incorporators of a
corporation under the Utah Business Corporation Act, adopt the
following Articles of Incorporation for such corporation
ARTICLE I
The name of the corporation is STATE CYCLE.
ARTICLE II
The period of its duration is perpetual.
ARTICLE III
The purpose for which the corporation is organized are:
(a) To engage in the sale and distribution, at
wholesale and retail, of motorcycles, motor bikes, recreational
vehicles and other mechanically propelled vehicles and automobile
parts and sundries; to vend and deal in motorcycles, motor bikes,
recreational vehicles, automobiles, motor cars, trucks and other
mechanically propelled vehicles and automobile parts and sundries
and other articles; to acquire and own patents, improvements and
franchises and to operate such other patents, improvements and
franchises.
(b) To buy, sell and manufacture all kinds of
automobile parts, machinery, accessories, oils, paints, greases
of every kind, nature and description, to operate chain stores
and general merchandising pertaining to motorcycles, motor bikes,
recreational vehicles, automobiles, automobile sales rooms,
supplies and generally deal in all kinds of merchandise,
fixtures, accessories and chattels relating to the sale and
manufacture of motorcycles, motor bikes, recreational vehicles
and automobiles; to manufacture, buy, sell and generally deal in
all kinds of general merchandise of every kind, nature and
description.
(c) To purchase, sell, lease, make repairs to and
store motorcycles, motor bikes, recreational vehicles,
automobiles, their parts and accessories, and to buy, sell, own,
lease and operate garages, service stations and repair shops and
to carry on all business incident thereto.
<PAGE> 2
(d) To own, lease, buy, sell, hypothecate and
otherwise deal in real property incident to the operation of a
new and used motorcycle agency.
(e) To generally deal in the sale, purchase, trading,
leasing and otherwise dealing in new and used motorcycles, motor
bikes, recreational vehicles, automobiles of all types, kinds and
makes, at wholesale and retail, and to otherwise operate a
motorcycle sales agency, lot, store and business.
(f) In general, to carry on any other lawful business
whatsoever, in connection with the foregoing or which is
calculated, directly or indirectly, to promote the interest of
the corporation or to enhance the value of its properties.
ARTICLE IV
The aggregate number of shares which the corporation
shall have authority to issue is 50,000 shares of common stock of
the par value of $1.00 per share, which stock shall be fully paid
up and is non assessable.
ARTICLE V
The corporation shall not commence business until at
least One Thousand Dollars ($1,000) has been received by it as
consideration for the issuance of shares.
ARTICLE VI
Upon any increased issue of stock, the stockholders
shall have the pro rata preferential pre-emptive right to
subscribe therefore at such price and on such terms as the Board
of Directors may in each instance fix.
ARTICLE VII
The Board of Directors shall consist of not less than
three (3) and not more than seven (7) persons elected by the
stockholders for a term of one year and no person shall be
eligible to the office of director of this corporation who is not
a stockholder of record. Said directors shall hold office until
their successors are elected and qualified.
ARTICLE VIII
The regular meeting of the stockholders for the
election of directors and for the transaction of other business
shall be held at the office of the corporation on the first
Monday of the month of August, 1975 and on the first Monday of
August every year thereafter.
<PAGE> 3
ARTICLE IX
The vote for the election of the directors shall be by
ballot and the election may be conducted in such a manner and
form as may be provided by the Bylaws. In all election for
directors, each stockholder shall be entitled to one vote for
each share of stock owned by him or her for each director.
ARTICLE X
The Board of Directors shall elected and appoint such
employees and agents as they deem advisable and define the
authority of each and prescribe their duties.
ARTICLE XI
The officers of this corporation shall be president,
vice president, secretary and treasurer, who shall each hold
office for a term of one year or until their successors are
elected and qualifies.
ARTICLE XII
The directors shall appoint the above-named officers at
the first meeting after the regular annual meeting of the
stockholders.
ARTICLE XIII
One person may be both secretary and treasurer or one
person may be secretary and another person treasurer, at the
option of the Board of Directors.
ARTICLE XIV
The Board of Directors, at their regular meeting of
said Board or at a special meeting called for that purpose, may
enlarge the number of directors from three to seven by appointing
additional directors to act on said Board until the regular
annual stockholders' meeting.
ARTICLE XV
Special meetings of the stockholders may be called by
the Board of Directors in the manner provided by law or by the
Bylaws of this corporation and must be called whenever the
owners, as shown by the Company's books, of twenty-five percent
(25%) or more of stock of the corporation, in writing, request
the Board to call a special meeting of the stockholders.
<PAGE> 4
ARTICLE XVI
Any officer of this corporation may resign on giving
five (5) days notice to the Board of Directors and the Board of
Directors shall fill the vacancy for the unexpired term of such
officer.
ARTICLE XVII
The number of directors constituting the initial Board
of Director is three (3) and the names and addresses of the
persons who are to serve as directors until their successors are
elected and qualify are:
Anthony R. Hernandes 5680 South State President and
Murray, Utah 84107 Director
Paul N. Cotro-Manes 430 Judge Building Vice President
Salt Lake City, Utah and Director
84111
Hugh Gardner 110 North Main Secretary
Springville, Utah Treasurer and
84663 and Director
ARTICLE XVIII
A majority of the Board of Directors shall be necessary
to form a quorum and to be authorized to transact the business
and exercise the corporate powers of this corporation.
ARTICLE XIX
The Board of Directors is expressly authorized, with
the assent of the vote of the stockholders, to make, alter, amend
or rescind the Bylaws of the corporation.
ARTICLE XX
The private property of the stockholders shall not be
liable for the corporate debts.
ARTICLE XXI
These Articles of Incorporation may be changed, altered
or amended at any annual regular stockholders' meeting by a vote
of the stockholders representing a majority of the stock issued
and outstanding or at any special meeting called for that
purpose.
<PAGE> 5
ARTICLE XXII
The address of the initial registered office of the
corporation is 430 Judge Building, Salt Lake City, Utah 84111 and
the name of its initial registered agent at such address is Paul
N. Cotro-Manes.
ARTICLE XXIII
The names and addresses of the incorporators are:
Name Address
Anthony R. Hernandes 5680 South State
Murray, Utah 84107
Paul N. Cotro-Manes 430 Judge Building
Salt Lake City, Utah 84111
Hugh Gardner 110 North Main
Springville, Utah 84663
Dated at Salt Lake City, this 31st day of July, 1974.
/s/ Anthony R. Hernandez
/s/ Paul N. Cotro-Manes
/s/ Hugh Gardner
STATE OF UTAH )
) ss.
County of Salt Lake )
On the 31st day of July, 1974, personally appeared
before me, the undersigned Notary Public, Anthony R. Hernandez,
Paul N. Cotro-Manes and Hugh Gardner, who being be me first duly
sworn, severally declared that he is the person who signed the
foregoing document as an incorporator and that the statements
therein . . . .
IN WITNESS WHEREOF, I have hereunto set my hand and
seal the day first above written.
/s/ Lynda J. Barken
Notary Public
Residing at Salt Lake City, Utah
My Commission Expires:
May 22, 1977.
<PAGE> 1
ARTICLES OF AMENDMENT
OF
STATE CYCLE
STATE OF UTAH :
: ss.
County of Salt Lake :
We, Anthony R. Hernandez and Hugh Gardner, President
and Secretary of State Cycle, a corporation created and organized
under the laws of the State of Utah, do hereby certify that at a
special meeting of the stockholders regularly held, pursuant to
notice given in accordance with the requirements of the laws of
the State of Utah, at the office of said corporation in Salt . .
. sen either in person or by proxy, said shares of stock
totalling the sum of 50,000 shares, and all of said shares having
votes for the following resolution amending the articles of
incorporation of the Company, to-wit:
BE IT RESOLVED, that the Article of Incorporation
of the Company be and the same are hereby changed and
amended, by amending Article I and Article IV of the
Articles of Incorporation, so that the amended articles
will read as follows:
ARTICLE I
The name of the corporation is Universal AMC, Inc.
ARTICLE IV
The aggregate number of shares which the
corporation shall have authority to issue is 150,000
shares of common stock of the par value of One Dollar
($1.00) per share, which stock shall be fully paid up;
and is non-assessable.
Given under our names, . . . on this 11th day of
February, 1975.
/s/ Anthony R. Hernandez
President of State Cycle
/s/ Hugh Gardner
Secretary of State Cycle
<PAGE> 2
STATE OF UTAH :
: ss.
County of Salt Lake :
On the 11th day of February, 1975, personally appeared
before me, the undersigned Notary Public, Anthony R. Hernandez
and Hugh Gardner, who being be me first duly sworn, severally
declared that he is the person who signed the foregoing document
as President and Secretary and that the statements therein
contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and
seal the day first above written.
/s/ Rita Perry
Notary Public
Residing at Salt Lake City, Utah
My Commission Expires:
September 9, 1997
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
UNIVERSAL AMC, INC.
Pursuant to the provisions of the Utah Business
Corporation Act, the undersigned Corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the Corporation is Universal AMC,
Inc.
SECOND: The following Amendment to the Articles of
Incorporation was duly adopted by the shareholders of the
corporation:
Article I of the Articles of Incorporation is
hereby Amended as follows:
The name of the corporation is Caption
Industries, Inc.
Article IV of the Articles of Incorporation is
hereby Amended as follows:
The Aggregated number of shares which
the corporation shall have authority to issue
is 50,000,000 shares of capital stock with a
par value of $0.001 per share, each of which
shall have equal voting rights.
THIRD: The foregoing Amendment to the Articles of
Incorporation was adopted by the shareholders of the corporation
on the 15th day of November, 1983, in the manner prescribed by
the laws of the State of Utah.
FOURTH: The number of shares outstanding on said date
was 50,000 shares and the number of shares entitled to vote was
50,000.
FIFTH: The number of shares voted for said Amendment
was 42,000 shares and the number of shares voted against such
amendment was none.
SIXTH: No class of shares was entitled to vote
thereon as a class.
SEVENTH: The manner in which any exchange
reclassification or cancellation of issued and outstanding shares
provided here shall be effected as follows:
<PAGE> 2
Name Change
Capitalization
/s/ K Pinkerton
President
/s/ Paul Hahn(sp)
STATE OF UTAH )
: ss.
County of Salt Lake )
On the 15th day of November, 1983, personally appeared
before me the above signed persons, known to me to be the
President and Secretary of Universal AMC, Inc., and upon being
duly sworn did state that the foregoing instrument was
voluntarily signed by them for the purposes above stated.
/s/ Lois Crowder
Notary Public
Residing at Salt Lake City, Utah
My Commission Expires:
March 4, 1985.
<PAGE> 1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
CAPTION INDUSTRIES, INC.
Pursuant to the provisions of the Utah Business
Corporation Act, the undersigned corporation hereby adopts the
following Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is: Caption
Industries, Inc.
SECOND: The following amendment to the Articles of
Incorporation was duly adopted by the shareholders of the
Corporation:
Article I of the Articles of Incorporation is
hereby Amended as follows:
The name of the Corporation is Madonna
Mining Co., Ltd.
Article IV of the Articles of Incorporation is
hereby amended as follows:
The aggregate number of shares which the
corporation shall have authority to issue is
100,000,000 shares of capital stock with par
value of $0.00001 per share, each of which
shall have equal voting rights.
THIRD: The foregoing Amendment to the Articles of
Incorporation was adopted by the shareholders of the corporation
on the 18th day of January, 1984 in the manner prescribed by the
laws of Utah.
FOURTH: The number of shares outstanding on said date
was 5,000,000 and the number of shares entitled to vote was
5,000,000.
FIFTH: The number of shares voted for said Amendment
was 3,940,000 and number of shares voted against such amendment.
SIXTH: No class of shares was entitled the vote
thereon as a class.
SEVENTH: The manner in which any exchange
reclassification or cancellation of issued and outstanding shares
provided for here shall be effected as follows:
<PAGE> 2
No change
/s/ Ted Saylor
President
/s/ Thomas M. Phillips
Secretary
STATE OF NEW YORK
COUNTY OF NEW YORK
On the 18th day of January, 1984, personally appeared
before me the above signed persons, known to me to the President
and Secretary, respectively, of Caption Industries, Inc., and
upon being duly sworn did state that the foregoing instrument was
voluntarily signed by them for the purpose above stated.
/s/ Benjamin Gedal Sprecher
Notary Public, State of New York
No. 41-4690211
Qualified in Queens County
Commission Expires
March 30, 1985
<PAGE> 1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
MADONNA MINING CO., LTD.
Pursuant to the provisions of the Utah Business Corporation
Act, the undersigned corporation hereby adopts the following
Articles of Amendment to its Articles of Incorporation:
FIRST: The name of the corporation is:
MADONNA MINING CO., LTD.
SECOND: The following amendment to the Articles of
Incorporation was duly adopted by the shareholders of
the corporation:
The name of the corporation is:
MAXAM INTERNATIONAL CORPORATION
THIRD: The foregoing Amendment to the Articles of
Incorporation was adopted by the shareholders of the
corporation on the 6th day of May, 1985, in the manner
prescribed by the laws of Utah.
FOURTH: The number of shares outstanding on said date was
25,000,000 and the number of shares entitled to vote
was 25,000,000.
FIFTH: The number of shares voted for said Amendment was
19,000,000 and the number of shares voted against said
Amendment was none.
SIXTH: No class of shares was entitled the vote thereon as a
class.
SEVENTH: The manner in which any exchange, reclassification or
cancellation of issued and outstanding shares provided
for here shall be effected as follows:
No change.
Seal
/s/ Bill R. Presley, President
/s/ Sean F. Deneny, Secretary
<PAGE> 2
STATE OF IDAHO :
: ss.
COUNTY OF ADA :
On the 6th day of June, 1985, before me, a Notary Public for
said state, personally appeared Bill R. Presley, know to me to be
the person whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed
by official seal, on the day and year in the certificate first
above written.
/s/ Peter Schemer
Notary Public for the State of
Idaho, residing at Boise, Idaho.
1-19-91
STATE OF NEW YORK :
: ss.
COUNTY OF NEW YORK :
On the 7th day of June, 1985, personally appeared before me,
the above signed person, know to me to be the Secretary of
Madonna Mining Co., Ltd., and upon being duly sworn did state
that the forgoing instrument was voluntarily signed by him for
the purposes above stated.
/s/ Peter Quaglia
Notary Public
Seal
STATE OF UTAH
DEPARTMENT OF COMMERCE
DIVISION OF CORPORATIONS AND COMMERCIAL CODE
SEAL
<PAGE> 1 SEAL
ARTICLES OF AMENDMENT
OF MAXAM INTERNATIONAL CORPORATION
STATE OF MISSOURI :
: ss.
COUNTY OF PLATTE :
WE, Allen E. Hubbard and Michael W. Runyon-Davis, President
and Assistant Secretary of Maxam International Corporation, a
corporation created and organized under the laws of the State of
Utah, do hereby certify that at a special meeting of the Board of
Directors, via teleconferencing, was conducted at the office of
said corporation in East Peoria, Illinois, without shareholder
approval and shareholder approval was not required, on the 11th
day of December, 1995, at which meeting the following resolution
amending the Articles of Incorporation of the company, to-wit:
BE IT RESOLVED that the Articles of Incorporation of
the company be and the same are hereby changed and
amended, by amending Article I of the Articles of
Incorporation, so that the amended article will read as
follows:
ARTICLE I
The name of the corporation is MAXAM GOLD CORPORATION.
Given under our hand and the seal of said corporation this
26th day of December, 1995.
/s/ Allen E. Hubbard
President of Maxam International
Corporation
/s/ Michael W. Runyon-Davis
Assistant Secretary of Maxam
International Corporation
STATE OF MISSOURI :
: ss.
COUNTY OF PLATTE :
On the 26th day of December, 1995, personally appeared
before me, the undersigned Notary Public, Allen E. Hubbard, who
being by me duly sworn, severally declared that he is the person
who signed the foregoing document as President and that the
statements therein contained are true.
<PAGE>
<PAGE> 2
IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day first above written.
/s/ Ann M. Miller
Notary Public
My Commission Expires:
Seal
STATE OF ILLINOIS :
: ss.
COUNTY OF TAZEWELL :
On the 29th day of December, 1995, personally appeared
before me, the undersigned Notary Public, Michael W. Runyon-
Davis, who being by me duly sworn, severally declared that he is
the person who signed the foregoing document as Assistant
Secretary and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal the
day first above written.
/s/ Janet Hoffman
Notary Public
My Commission Expires:
12-29-97
Seal
<PAGE> 1
BYLAWS
UNIVERSAL AMC, INC.
ARTICLE I - OFFICES
The office of the Corporation shall be located in the City and
State designated in the Articles of Incorporation. The
Corporation may also maintain offices at such other places within
or without the United States as the Board of Directors may, from
time to time, determine.
ARTICLE II - ANNUAL MEETING
The annual meeting of the shareholders of the Corporation shall
be held within five months after the close of the fiscal year of
the Corporation, for the purpose of electing directors, and
transacting such other business as may properly come before the
meeting.
Special meetings of the shareholders may be called at any time by
the Board of Directors or by the President, and shall be called
by the President or the Secretary at the written request of the
holders of ten percent (10%) of the shares then outstanding and
entitled to vote thereat, or as otherwise required under the
provisions of the Business Corporation Act.
All meetings of shareholders shall be held at the principal
office of the Corporation, or at such other places as shall be
designated in the notices or waivers of notice of such meetings.
Notice of Meetings:
(a) Written notice of each meeting of shareholders, whether
annual or special, stating the time, when and place where it is
to be held, shall be served either personally or by mail, not
less than ten or more than fifty days before the meeting, upon
each shareholders of record entitled to vote at such meeting, and
to any other shareholder to whom the giving of notice may be
required by law. Notice of a special meeting shall also state
the purpose or purposes for which the meeting is called, and
shall indicate that it is being issued by or at the direction of,
the person or persons calling the meeting.
If, at any meeting, action is proposed to be taken that would, if
taken, entitle shareholders to receive payment for their shares
pursuant to the Business Corporation Act, the notice of such
meeting shall include a statement of that purpose and to that
effect. If mailed, such notice shall be directed to each such
shareholder at his address, as it appears on the records of the
<PAGE> 2
shareholders of the Corporation, unless he shall have previously
filed with the Stock Transfer Agent a written request that
notices intended for him be mailed to some other address, in
which case, it shall be mailed to the address designated in such
request.
(b) Notice of any meeting need not be given to any person who may
become a shareholder of record after the mailings of such notice
and prior to the meeting, or to any shareholder who attends such
meeting, in person or by proxy, or to any shareholder who, in
person or by proxy, submits a signed wavier of notice either
before or after such meeting. Notice of any adjourned meeting of
shareholders need not be given, unless otherwise required by
statute.
Quorum:
(a) Except as otherwise provided herein, or by statute, or the
Articles of Incorporation (such Articles and any amendments
thereof being hereinafter collectively referred to as the
"Articles of Incorporation"), at all meetings of shareholders
holdings of record a majority of the total number of shares of
the Corporation, then issued and outstanding and entitled to
vote, shall be necessary and sufficient to constitute a quorum
for the transaction of any business. The withdrawal of any
shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been
established at such meeting.
(b) Despite the absence of a quorum at any annual or special
meeting of shareholders, the shareholders, by a majority of the
votes cast by the holders of shares entitled to vote thereon, may
adjourn the meeting. At any such adjourned meeting at which a
quorum is present, any business may be transacted which might
have been transacted at the meeting as originally called if a
quorum had been present.
Voting:
(a) Except as otherwise provided by statute or by the Articles of
Incorporation, any corporate action, other than the election of
directors to be taken by vote of the shareholders, shall be
authorized by a majority of votes cast at a meeting of
shareholders by the holders of shares entitled to vote thereon.
(b) Except as otherwise provided by statute or by the Articles of
Incorporation, at each meeting of shareholders, each holder of
record of shares of the corporation entitled to vote thereat,
shall be entitled to one vote for each share registered in his
name on the books of the Corporation.
<PAGE> 3
(c) Each shareholder entitled to vote or to express consent or
dissent without a meeting, may do so by proxy; provided, however,
that the instrument authorizing such proxy to act shall have been
executed in writing by the shareholder himself, or by his
attorney-in-fact thereunto duly authorized in writing. No proxy
shall be valid after the expiration of eleven months from the
date of its execution, unless the persons executing it shall have
specified therein the length of time it is to continue in force.
Such instrument shall be exhibited to the Secretary at the
meeting and shall be filed with the records of the Corporation.
(d) Any resolution in writing, signed by all of the shareholders
entitled to vote thereon, shall be and constitute action by such
shareholders to the effect therein expressed, with the same force
and effect as if the same had been duly passed by unanimous vote
at a duly called meeting of shareholders and such resolution so
signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
Number, Election and Term of Office:
(a) The number of the directors of the Corporation shall be three
(3), unless and until otherwise determined by vote of a majority
of the entire Board of Directors. The number of Directors shall
not be less than three, unless all of the outstanding shares are
owned beneficially and of record by less than three shareholders,
in which event the number of directors shall not be less then the
number of shareholders.
(b) Except as may otherwise be provided herein or in the Articles
of Incorporation, the members of the Board of Directors of the
Corporation, who need not be shareholders, shall be elected by a
majority of the votes cast at a meeting of shareholders, by the
holders of shares entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of
the shareholders next succeeding his election, and until his
successor is elected and qualified, or until his prior death,
resignation or removal.
Duties and Powers:
The Board of Directors shall be responsible for the control and
management of the affairs, property and interests of the
Corporation, and may exercise all powers of the Corporation,
except as are in the Articles of Incorporation or by statute
expressly conferred upon or reserved to the shareholders.
<PAGE> 4
Annual and Regular Meetings; Notices:
(a) A regular annual meeting of the Board of Directors shall be
held immediately following the annual meeting of shareholders.
(b) The Board of Directors, from time to time, may provide by
resolution for the holding of other regular meetings of the Board
of Directors, and may fix the time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall
not be required to be given and, if given, need not specify the
purpose of the meeting; provided, however, that in case the Board
of Directors shall fix or change the time or place of any regular
meeting, notice of such action shall be given to each director
who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set
forth in paragraph (b) of the Special Meetings; Notices of the
Article III, with respect to special meetings, unless such notice
shall be waived in the manner set forth in paragraph (c) of
Special Meetings; Notices.
Special Meetings; Notice:
(a) Special Meetings of the Board of Directors shall be held
whenever called by the President or by one of the Directors, at
such time and place as may be specified in the respective notices
or waivers of notice thereof.
(b) Notice of special meetings shall be mailed directly to each
director, addressed to him at his residence or usual place of
business, at least two (2) days before the day on which the
meeting is to be held, or shall be sent to him at such place by
telegram, radio or cable, or shall be delivered to him personally
or given to him orally, not later than the day before the day on
which the meeting is to be held. A notice or wavier of notice,
except as required by vacancies of this Article III, need not
specify the purpose of the meetings.
(c) Notice of any special meeting shall not be required to be
given to any director who shall attend such meeting without
protesting prior thereto or at is commencement, the lack of
notice to him, or who submits a signed waiver of notice, whether
before or after the meeting. Notice of any adjourned meetings
shall not be required to be given.
Chairman:
At all meetings of the Board of Directors, the Chairman of the
Board, if any and if present, shall preside. If there shall be
no Chairman, or he shall be absent, then the President shall
preside, and in his absence, a chairman chosen by the Directors
shall preside.
<PAGE> 5
Quorum and Adjournments:
(a) At all meetings of the Board of Directors, the presence of a
majority of the entire Board shall be necessary and sufficient to
constitute a quorum for the transaction of business, except as
otherwise provided by laws, by the Articles of Incorporation, or
by these By-laws.
(b) A majority of the directors present at the time and place of
any regular or special meeting, although less then a quorum, may
adjourn the same from time to time without notice, until a quorum
shall be present.
Manner of Acting:
(a) At all meetings of the Board of Directors, each director
present shall have one vote, irrespective of the number of shares
of stock, if any, which he may hold.
(b) Except as otherwise provided by statute, by the Articles of
Incorporation or by these By-laws, the action of a majority of
the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. Any action
authorized, in writing, by all of the directors entitled to vote
thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect
as if the same had been passed by unanimous vote at a duly called
meeting of the Board.
Vacancies:
Any vacancy in the Board of Directors occurring by reason of
increase in the number of directors, or by reason of the death,
resignation, disqualification, removal (unless a vacancy created
by the removal of a director by the shareholders shall be filled
by the shareholders at the meeting at which the removal was
effected) or inability to act of any director, or otherwise shall
be filled for the unexpired portion of the term by a majority
vote of the remaining directors, though less than a quorum, at
any regular meeting or special meeting of the Board of Directors
called for that purpose.
Resignation:
Any director may resign at any time by giving written notice to
the Board of Directors, the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice,
such resignation shall take effect upon receipt thereof by the
Board of Directors or such office, and the acceptance of such
resignation shall not be necessary to make it effective.
<PAGE> 6
Removal:
Any director may be removed with or without cause at any time by
the shareholders, at a special meeting of the shareholders called
for that purpose, and may be removed for cause by action by the
Board.
Salary:
No stated salary shall be paid to directors, as such, for their
service, but by resolution of the Board of Directors a fixed sum
and expenses of attendance, if any, may be allowed for attendance
at each regular or special meeting of the Board; provided,
however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
Contracts:
(a) No contract or other transaction between this Corporation and
any other corporation shall be impaired, affected or invalidated,
nor shall nay director be liable in any way by reason of the fact
that any one or more of the directors of this Corporation is or
are interested in, or is a director or officer, or are director
or officers of such other Corporation, provided that such facts
are disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to
or may be interested in any contract or transaction of this
Corporation, and no director shall b e liable in any way by
reason of such interest, provided that the fact of such interest
be disclosed or made known to the Board of Directors, and
provided that the Board of Directors shall authorize, approve or
ratify such contract or transaction by the vote ( not counting
the vote of any such director) of a majority of a quorum,
notwithstanding the presence of any such director at the meeting
at which such action is taken. Such director or directors may be
counted in determining the presence of a quorum at such meeting.
This Section shall not be construed to impair or invalidate or in
any way affect any contract or other transaction which would
otherwise be valid under the law (common, statutory or otherwise)
applicable thereto.
Committees:
The Board of Directors, by resolution adopted by a majority of
the entire Board, may from time to time designate from among its
members an executive committee and such other committees, and
alternate members thereof, as they deem desirable, each
consisting of one or more members, with such powers and authority
(to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of
the Board.
<PAGE> 7
ARTICLE IV - OFFICERS
Number, Qualifications, Election and Term of Office:
(a) The officers of the Corporation shall consist of a President,
a Secretary, a Treasurer, and such other officers, including one
or more Vice Presidents, as the Board of Directors may from time
to time deem advisable. Any officer may be, nut is not required
to be, a director of the Corporation. Any two or more offices
may be held by the sam person, except the office of the
President.
(b) The officers of the Corporation shall be elected by the
stockholders of the Corporation at the annual meting of the
stockholders.
(c) Each officer shall hold office until the annual meeting of
the shareholders next succeeding his election, and until his
successor shall have been elected and qualified by the Board of
Directors, or until his death, resignation or removal.
Resignation:
Any officer may be removed, wither with or without cause, and a
successor elected by the Board of Directors.
Vacancies:
A vacancy in any office by reason of death, resignation,
inability to act, disqualification, or any other case, may at any
time be filled for the unexpired portion of the term by the Board
of Directors.
Duties of Officers:
Officers of the Corporation shall, unless otherwise provide
by the Board of Directors, each have such powers and duties as
generally pertain to their respective offices as well as such
powers and duties as may be set forth in these By-laws, or may
from time to time be specifically conferred or imposed by the
Board of Directors. The President shall be the chief executive
officer of the Corporation.
Sureties & Bonds:
In case the Board of Directors shall so require, any officer,
employee or agent of the Corporation shall execute to the
Corporation a bond in such sum, and with such surety or sureties
as the Board of Directors may direct, conditioned upon the
faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all
property, funds or securities of the Corporation which may come
into his hands.
<PAGE> 8
Shares of Other Corporations:
Whenever the Corporation is the holder of shares of any other
corporation, any right or power of the Corporation as such
shareholder (including the attendance, action and voting at
shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the
Corporation by the President, any Vice President, or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
(a) The certificates representing shares of the Corporation shall
be in such form as shall be adopted by the Board of Directors,
and shall be numbered and registered in the order issued. They
shall bear the holder's name and the number of shares, and shall
either be signed by the President, a Vice President, the
Secretary, or any Assistant Secretary, or a facsimile signature
of any two of the above listed officers of the Corporation. The
stock certificates will require the signature of the stock
transfer agent, and may bear the Corporate seal.
(b) No certificate representing shares shall be issued until the
full amount of consideration therefor has been paid, except as
otherwise permitted by law.
(c) The Board of Directors may authorized the issuance of
certificates for fractions of a share which shall entitle the
holder to exercise voting rights, receive dividends and
participate in liquidating distributions in proportion to the
fractional holdings; or it may authorize the payment in cash of
the fair value of fractions of a share as of the time when those
entitled to receive such fractions are determined; or it may
authorized the issuance, subject to such conditions as may be
permitted by law, of script in registered or bearer from over the
signature of an officer or agent of the Corporation, exchangeable
as therein provided for full shares, but such scrip shall not
entitle the holder to any rights of a shareholder except as
therein provided.
Lost or Destroyed Certificates:
The holder of any certificate representing shares of the
Corporation shall immediately notify the Corporation of any loss
or destruction of the certificates representing the same. The
Corporation may issue a new certificate in the place of any
certificate thereto fore issued by it, alleged to have been lost
or destroyed. On production of such evidence of loss or
destruction as the Board of Directors in its discretion, require
the owner of the lost or destroyed certificate, or his legal
representative, to give the corporation a bon in such sum as the
Board may direct, and with such surety or sureties as may be
satisfactory to the Board, to indemnify the Corporation against
any claims, loss, liability or damage it may suffer on account of
the issuance of the new certificate. A new certificate may be
issued without requiring any such evidence or bond when, in the
judgement of the Board of Directors, it is proper so to do.
Transfer of Shares:
(a) Transfer of shares of the Corporation shall be made on the
share records of the Corporation only by the holder of record
thereof, in person or by his duly authorized attorney, upon
surrender for cancellation of the certificate or certificates
representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith duly executed, with such
proof of the authenticity of the signature and of authority to
transfer and of payment of transfer fees and taxes as the
Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of
record of any share or shares as the absolute owner thereof or
all purposes and, accordingly, shall not be bound to recognize
any legal, equitable or other claim to, or interest in, such
share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as
otherwise expressly provided by law.
Record Date:
In lieu of closing the share records of the Corporation, the
Board of Directors may fix, in advance, a date not exceeding
fifty days, nor less than ten days, as the record date for the
determination of shareholders entitled to receive notice of, or
to vote at, any meeting of shareholders, or to consent to any
proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividends, or
allotment of any rights, or for the purpose of any other action.
If no record date is fixed, the record date for the determination
of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if no notice is
given, the day on which the meeting is held. The record date for
determining shareholders for any other purpose shall be at the
close of business on the day on which the resolution of the
directors relating thereto is adopted. When a determination of
shareholders of record entitled to notice of or to vote at any
meeting of shareholders has been made as provided for herein,
such determination shall apply to any adjournment thereof, unless
the directors fix a new record date for the adjourned meeting.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out
of any funds available therefor, as often, in such amounts, and
at such time as the Board of Directors may determine.
<PAGE> 10
The fiscal year of the Corporation shall be fixed by the Board of
Directors from time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal, if any, shall be in such form as shall be
approved from time to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
By Shareholders:
All By-laws of the Corporation shall be subject to alteration or
repeal, and new By-laws may be made, by a majority vote of the
shareholders at the time entitled to vote in the election of
directors.
By Directors:
The Board of Directors shall have power to make, adopt, alter,
amend and repeal, from time to time, By-laws of the Corporation;
provided, however, that the shareholders entitled to vote with
respect thereto as in this Article IX above-provided may alter,
amend or repeal By-laws made by the Board of Directors, except
that the Board of Directors shall have no power to change the
quorum form meetings of shareholders or of the Board of
Directors, or to change any provisions of the Bylaws with respect
to the removal of directors or the filling of vacancies in the
Board of Directors resulting from the removal by the
shareholders. If any Bylaws regulating an impending election of
directors is adopted, amended or repealed by the Board of
Directors, there shall be set forth in the notice of the next
meeting of shareholders for the election of directors, the By-
laws so adopted, amended or repealed, together with a concise
statement of the change.
The undersigned certify the foregoing By-laws have been adopted
as the first By-laws of the Corporation in accordance with the
requirements of the Business Corporation Act.
Dated: November 1, 1975
/s/ illegible signature
/s/ illegible signature
/s/ illegible signature
<PAGE> 1
CONRAD C. LYSIAK
Attorney and Counselor at Law
601 West First Avenue
Suite 503
Spokane, Washington 99204
(509) 624-1478
FAX (509) 747-1770
October 23, 1997
Securities and Exchange Commission
450 Fifth Avenue N.W.
Washington, D. C. 20549
RE: Maxam Gold Corporation
Gentlemen:
Please be advised that, I have reached the following
conclusions regarding the above offering:
1. Maxam Gold Corporation (the "Company") is a duly and
legally organized and exiting Utah state corporation, with its
registered office located in Salt Lake City, Utah and its
principal place of business located in East Peoria, Illinois.
The Articles of Incorporation and corporate registration fees
were submitted to the Utah Secretary of State's office and filed
with the office on August 7, 1974. The Company's existence and
form is valid and legal pursuant to the representation above.
2. The Company is a fully and duly incorporated Utah
corporate entity. The Company has one class of Common Stock at
this time. Neither the Articles of Incorporation, Bylaws, and
amendments thereto, nor subsequent resolutions change the
non-assessable characteristics of the Company's common shares of
stock. The Common Stock previously issued by the Company is in
legal form and in compliance with the laws of the state of Utah,
and when such stock was issued it was fully paid for and
non-assessable. The warrants and/or common stock to be sold
under this Form SB-2 Registration Statement are likewise legal
under the laws of the state of Utah, and the common stock to be
issued upon the exercise of the warrants common stock, when
exercised, will be legally issued, fully paid for and
non-assessable.
<PAGE> 2
Securities and Exchange Commission
RE: Maxam Gold Corporation
October 23, 1997
3. To my knowledge, the Company is not a party to any legal
proceedings nor are there any judgments against the Company, nor
are there any actions or suits filed or threatened against it or
its officers and directors, in their capacities as such, other
than as set forth in the registration statement. I know of no
disputes involving the Company and the Company has no claims,
actions or inquires from any federal, state or other governmental
agency, other than as set forth in the registration statement. I
know of no claims against the Company or any reputed claims
against it at this time, other than as set forth in the
registration statement.
4. The Company's outstanding shares are all common shares.
There are no liquidation preference rights held by any of the
shareholders upon voluntary or involuntary liquidation of the
Company.
5. The directors and officers of the Company are
indemnified against all costs, expenses, judgments and
liabilities, including attorney's fees, reasonably incurred by or
imposed upon them or any of them in connection with or resulting
from any action, suit or proceedings, civil or general, in which
the officer or director is or may be made a party by reason of
his being or having been such a director or officer. This
indemnification is not exclusive of other rights to which such
director or officer may be entitled as a matter of law.
6. All tax benefits to be derived from the Company's
operations shall inure to the benefit of the Company.
Shareholders will receive no tax benefits from their stock
ownership, however, this must be reviewed in light of the Tax
Reform Act of 1986.
7. By director's resolution, the Company is authorized
the issuance of up to 9,109,172 Warrants to purchase 9,109,172
shares of Common Stock and 9,109,172 shares of Common Stock.
The Company's Articles of Incorporation presently provide
the authority to the Company to issue 100,000,000 shares of
Common Stock, $0.00001 par value. Therefore, a Board of
Directors' Resolution which authorized the issuance for sale of
up to 9,109,172 Warrants to purchase 9,109,172 shares of Common
Stock thereunder, would be within the authority of the Company's
directors and would result in the legal issuance of said shares.
Yours truly,
/s/ Conrad C. Lysiak
<PAGE> 1
MAXAM GOLD CORPORATION
1996 NONQUALIFYING STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
This 1996 NONQUALIFYING STOCK OPTION PLAN (the "Plan")
of MAXAM GOLD CORPORATION (the "Company") for persons employed or
associated with the Company, including without limitation any
employee, director, general partner, officer, attorney,
accountant, consultant or advisor, is intended to advance the
best interests of the Company by providing additional incentive
to those persons who have a substantial responsibility for its
management, affairs, and growth by increasing their proprietary
interest in the success of the Company, thereby encouraging them
to maintain their relationships with the Company. Further, the
availability and offering of Stock Options under the Plan
supports and increases the Company's ability to attract, engage
and retain individuals of exceptional talent upon whom, in large
measure, the sustained progress growth and profitability of the
Company for the shareholders depends.
ARTICLE II
Definitions
For Plan purposes, except where the context might
clearly indicate otherwise, the following terms shall have the
meanings set forth below:
"Board" shall mean the Board of Directors of the
Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Committee" shall mean the Compensation Committee, or
such other committee appointed by the Board, which shall be
designated by the Board to administer the Plan. The Committee
shall be composed of two or more persons as from time to time are
appointed to serve by the Board and may be members of the Board.
"Common Shares" shall mean the Company's Common Shares
$0.001 par value per share, or, in the event that the outstanding
Common Shares are hereafter changed into or exchanged for
different shares or securities of the Company, such other shares
or securities.
"Company" shall mean MAXAM GOLD CORPORATION, a Utah
corporation, and any parent or subsidiary corporation of MAXAM
GOLD CORPORATION, as such terms are defined in Section 425(e) and
425(f), respectively of the Code.
<PAGE> 2
"Optionee" shall mean any person employed or associated
with the affairs of the Company who has been granted one or more
Stock Options under the Plan.
"Stock Option" or "NQSO" shall mean a stock option
granted pursuant to the terms of the Plan.
"Stock Option Agreement" shall mean the agreement
between the Company and the Optionee under which the Optionee may
purchase Common Shares hereunder.
ARTICLE III
Administration of the Plan
1. The Committee shall administer the plan and
accordingly, it shall have full power to grant Stock Options,
construe and interpret the Plan, establish rules and regulations
and perform all other acts, including the delegation of
administrative responsibilities, it believes reasonable and
proper.
2. The determination of those eligible to receive
Stock Options, and the amount, price, type and timing of each
Stock Option and the terms and conditions of the respective stock
option agreements shall rest in the sole discretion of the
Committee, subject to the provisions of the Plan.
3. The Committee may cancel any Stock Options awarded
under the Plan if an Optionee conducts himself in a manner which
the Committee determines to be inimical to the best interest of
the Company and its shareholders as set forth more fully in
paragraph 8 of Article X of the Plan.
4. The Board, or the Committee, may correct any
defect, supply any omission or reconcile any inconsistency in the
Plan or in any granted Stock Option, in the manner and to the
extent it shall deem necessary to carry it into effect.
5. Any decision made, or action taken, by the
Committee or the Board arising out of or in connection with the
interpretation and administration of the Plan shall be final and
conclusive.
6. Meetings of the Committee shall be held at such
times and places as shall be determined by the Committee. A
majority of the members of the Committee shall constitute a
quorum for the transaction of business, and the vote of a
majority of those members present at any meeting shall decide any
question brought before that meeting. In addition, the Committee
may take any action otherwise proper under the Plan by the
affirmative vote, taken without a meeting, of a majority of its
members.
<PAGE> 3
7. No member of the Committee shall be liable for any
act or omission of any other member of the Committee or for any
act or omission on his own part, including, but not limited to,
the exercise of any power or discretion given to him under the
Plan except those resulting form his own gross negligence or
willful misconduct.
8. The Company, through its management, shall supply
full and timely information to the Committee on all matters
relating to the eligibility of Optionees, their duties and
performance, and current information on any Optionee's death,
retirement, disability or other termination of association with
the Company, and such other pertinent information as the
Committee may require. The Company shall furnish the Committee
with such clerical and other assistance as is necessary in the
performance of its duties hereunder.
ARTICLE IV
Shares Subject to the Plan
1. The total number of shares of the Company
available for grants of Stock Options under the Plan shall be
5,000,000 Common Shares, subject to adjustment as herein
provided, which shares may be either authorized but unissued or
reacquired Common Shares of the Company.
2. If a Stock Option or portion thereof shall expire
or terminate for any reason without having been exercised in
full, the unpurchased shares covered by such NQSO shall be
available for future grants of Stock Options.
ARTICLE V
Stock Option Terms and Conditions
1. Consistent with the Plan's purpose, Stock Options
may be granted to any person who is performing or who has been
engaged to perform services of special importance to management
in the operation, development and growth of the Company.
2. Determination of the option price per share for
any stock option issues hereunder shall rest in the sole and
unfettered discretion of the Committee.
3. All Stock Options granted under the Plan shall be
evidenced by agreements which shall be subject to applicable
provisions of the Plan, and such other provisions as the
Committee may adopt, including the provisions set forth in
paragraphs 2 through 11 of this Article V.
4. All Stock Options granted hereunder must be
granted within ten years from the date this Plan is adopted.
<PAGE> 4
5. No Stock Option granted hereunder shall be
exercisable after the expiration of ten years from the date such
NQSO is granted. The Committee, in its discretion, may provide
that an option shall be exercisable during such ten year period
or during any lesser period of time. The Committee may establish
installment exercise terms for a Stock Option such that the NQSO
becomes fully exercisable in a series of cumulating portions. If
an Optionee shall not, in any given installment period, purchase
all the Common Shares which such Optionee is entitled to purchase
within such installment period, such Optionee's right to purchase
any Common Shares not purchased in such installment period shall
continue until the expiration or sooner termination of such NQSO.
The Committee may also accelerate the exercise of any NQSO.
6. A Stock Option, or portion thereof, shall be
exercised by delivery of (i) a written notice of exercise to the
Company specifying the number of Common Shares to be purchased,
and (ii) payment of the full price of such Common Shares, as
fully set forth in paragraph 7 of this Article V.
No NQSO or installment thereof shall be reusable
except with respect to whole shares, and fractional share
interests shall be disregarded. Not less than 100 Common Shares
may be purchased at one time unless the number purchased is the
total number at the time available for purchase under the NQSO.
Until the Common Shares represented by an exercised NQSO are
issued to an Optionee, he shall have none of the rights of a
shareholder.
7. The exercise price of a Stock Option, or portion
thereof, may be paid:
A. In United States dollars, in cash or by
cashier's check, certified check, bank draft or money
order, payable to the order of the Company in an amount
equal to the option price; or,
B. At the discretion of the Committee, through
the delivery of fully paid and nonassessable Common
Shares, with an aggregate fair market value (determined
as the average of the highest and lowest reported sales
prices on the Common Shares as of the date of exercise
of the NQSO, as reported by such responsible reporting
service as the Committee may select, or if there were
not transactions in the Common Shares on such day, then
the last preceding day on which transactions took
place), as of the date of the NQSO exercise equal to
the option price, provided such tendered shares, or any
derivative security resulting in the issuance of Common
Shares, have been owned by he Optionee for at least 30
days prior to such exercise; or,
<PAGE> 5
C. By a combination of both A and B above.
The Committee shall determine acceptable methods
for tendering Common Shares as payment upon exercise of a Stock
Option and may impose such limitations and prohibitions on the
use of Common Shares to exercise an NQSO as it deems appropriate.
8. With the Optionee's consent, the Committee may
cancel any Stock Option issued under this Plan and issue a new
NQSO to such Optionee.
9. Except by will, the laws of descent and
distribution, or with the written consent of the Committee, no
right or interest in any Stock Option granted under the Plan
shall be assignable or transferable, and no right or interest of
any Optionee shall be liable for, or subject to, any lien,
obligation or liability of the Optionee. Upon petition to, and
thereafter with the written consent of the Committee, an Optionee
may assign or transfer all or a portion of the Optionee's rights
and interest in any stock option granted hereunder. Stock
Options shall be exercisable during the Optionee's lifetime only
by the Optionee or assignees, or the duly appointed legal
representative of an incompetent Optionee, including following an
assignment consented to by the Committee herein.
10. No NQSO shall be exercisable while there is
outstanding any other NQSO which was granted to the Optionee
before the grant of such option under the Plan or any other plan
which gives the right to the Optionee to purchase stock in the
Company or in a corporation which is a parent corporation (as
defined in Section 425(e) of the Code) of the Company, or any
predecessor corporation of any of such corporations at the time
of the grant. An NQSO shall be treated as outstanding until it
is either exercised in full or expires by reason of lapse of
time.
11. Any Optionee who disposes of Common Shares
acquired on the exercise of a NQSO by sale or exchange either (i)
within two years after the date of the grant of the NQSO under
which the stock was acquired, or (ii) within one year after the
acquisition of such Shares, shall notify the Company of such
disposition and of the amount realized upon such disposition.
The transfer of Common Shares may also be restricted by
applicable provisions of the Securities Act of 1933, as amended.
<PAGE> 6
ARTICLE VI
Adjustments or Changes in Capitalization
1. In the event that the outstanding Common Shares of
the Company are hereafter changed into or exchanged for a
different number of kinds of shares or other securities of the
Company by reason of merger, consolidation, other reorganization,
recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:
A. Prompt, proportionate, equitable, lawful and
adequate adjustment shall be made of the aggregate
number and kind of shares subject to Stock Options
which may be granted under the Plan, such that the
Optionee shall have the right to purchase such Common
Shares as may be issued in exchange for the Common
Shares purchasable on exercise of the NQSO had such
merger, consolidation, other reorganization,
recapitalization, reclassification, combination of
shares, stock split-up or stock dividend not taken
place;
B. Rights under unexercised Stock Options or
portions thereof granted prior to any such change, both
as to the number or kind of shares and the exercise
price per share, shall be adjusted appropriately,
provided that such adjustments shall be made without
change in the total exercise price applicable to the
unexercised portion of such NQSO's but by an adjustment
in the price for each share covered by such NQSO's; or,
C. Upon any dissolution or liquidation of the
Company or any merger or combination in which the
Company is not a surviving corporation, each
outstanding Stock Option granted hereunder shall
terminate, but the Optionee shall have the right,
immediately prior to such dissolution, liquidation,
merger or combination, to exercise his NQSO in whole or
in part, to the extent that it shall not have been
exercised, without regard to any installment exercise
provisions in such NQSO.
2. The foregoing adjustment and the manner of
application of the foregoing provisions shall be determined
solely by the Committee, whose determination as to what
adjustments shall be made and the extent thereof, shall be final,
binding and conclusive. No fractional Shares shall be issued
under the Plan on account of any such adjustments.
<PAGE> 7
ARTICLE VII
Merger, Consolidation or Tender Offer
1. If the Company shall be a party to a binding
agreement to any merger, consolidation or reorganization or sale
of substantially all the assets of the Company, each outstanding
Stock Option shall pertain and apply to the securities and/or
property which a shareholder of the number of Common Shares of
the Company subject to the NQSO would be entitled to receive
pursuant to such merger, consolidation or reorganization or sale
of assets.
2. In the event that:
A. Any person other than the Company shall
acquire more than 20% of the Common Shares of the
Company through a tender offer, exchange offer or
otherwise;
B. A change in the "control" of the Company
occurs, as such term is defined in Rule 405 under the
Securities Act of 1933;
C. There shall be a sale of all or substantially
all of the assets of the Company;
any then outstanding Stock Option held by an Optionee, who is
deemed by the Committee to be a statutory officer ("insider") for
purposes of Section 16 of the Securities Exchange Act of 1934
shall be entitled to receive, subject to any action by the
Committee revoking such an entitlement as provided for below, in
lieu of exercise of such Stock Option, to the extent that it is
then exercisable, a cash payment in an amount equal to the
difference between the aggregate exercise price of such NQSO, or
portion thereof, and, (i) in the event of an offer or similar
event, the final offer price per share paid for Common Shares, or
such lower price as the Committee may determine to conform an
option to preserve its Stock Option status, times the number of
Common Shares covered by the NQSO or portion thereof, or (ii) in
the case of an event covered by B or C above, the aggregate fair
market value of the Common Shares covered by the Stock Option, as
determined by the Committee at such time.
3. Any payment which the Company is required to make
pursuant to paragraph 2 of this Article VII, shall be made within
15 business days, following the event which results in the
Optionee's right to such payment. In the event of a tender offer
in which fewer than all the shares which are validity tendered in
compliance with such offer are purchased or exchanged, then only
that portion of the shares covered by an NQSO as results from
multiplying such shares by a fraction, the numerator of which is
the number of Common Shares acquired purchase to the offer and
<PAGE> 8
the denominator of which is the number of Common Shares tendered
in compliance with such offer, shall be used to determine the
payment thereupon. To the extent that all or any portion of a
Stock Option shall be affected by this provision, all or such
portion of the NQSO shall be terminated.
4. Notwithstanding paragraphs 1 and 3 of this Article
VII, the Company may, by unanimous vote and resolution,
unilaterally revoke the benefits of the above provisions;
provided, however, that such vote is taken no later than ten
business days following public announcement of the intent of an
offer of the change of control, whichever occurs earlier.
ARTICLE VIII
Amendment and Termination of Plan
1. The Board may at any time, and from time to time,
suspend or terminate the Plan in whole or in part or amend it
from time to time in such respects as the Board may deem
appropriate and in the best interest of the Company.
2. No amendment, suspension or termination of this
Plan shall, without the Optionee's consent, alter or impair any
of the rights or obligations under any Stock Option theretofore
granted to him under the Plan.
3. The Board may amend the Plan, subject to the
limitations cited above, in such manner as it deems necessary to
permit the granting of Stock Options meeting the requirements of
future amendments or issued regulations, if any, to the Code.
4. No NQSO may be granted during any suspension of
the Plan or after termination of the Plan.
ARTICLE IX
Government and Other Regulations
The obligation of the Company to issue, transfer and
deliver Common Shares for Stock Options exercised under the Plan
shall be subject to all applicable laws, regulations, rules, orders
and approval which shall then be in effect and required by the
relevant stock exchanges on which the Common Shares are traded and
by government entities as set forth below or as the Committee in its
sole discretion shall deem necessary or advisable. Specifically, in
connection with the Securities Act of 1933, as amended, upon
exercise of any Stock Option, the Company shall not be required to
issue Common Shares unless the Committee has received evidence
satisfactory to it to the effect that the Optionee will not transfer
such shares except pursuant to a registration statement in effect
under such Act or unless an opinion of counsel satisfactory to the
Company has been received by the Company to the effect that such
registration is not required. Any determination in this connection
<PAGE> 9
by the Committee shall be final, binding and conclusive. The
Company may, but shall in no event be obligated to take any other
affirmative action in order to cause the exercise of a Stock Option
or the issuance of Common Shares purchase thereto to comply with any
law or regulation of any government authority.
ARTICLE X
Miscellaneous Provisions
1. No person shall have any claim or right to be granted
a Stock Option under the Plan, and the grant of an NQSO under the
Plan shall not be construed as giving an Optionee the right to be
retained by the Company. Furthermore, the Company expressly
reserves the right at any time to terminate its relationship with an
Optionee with or without cause, free from any liability, or any
claim under the Plan, except as provided herein, in an option
agreement, or in any agreement between the Company and the Optionee.
2. Any expenses of administering this Plan shall be
borne by the Company.
3. The payment received from Optionee from the exercise
of Stock Options under the Plan shall be used for the general
corporate purposes of the Company.
4. The place of administration of the Plan shall be in
the State of Utah and the validity, contraction, interpretation,
administration and effect of the Plan and its rules and regulations,
and rights relating to the Plan, shall be determined solely in
accordance with the laws of the State of Utah.
5. Without amending the Plan, grants may be made to
persons who are foreign nationals or employed outside the United
States, or both, on such terms and conditions, consistent with the
Plan's purpose, different from those specified in the Plan as may,
in the judgment of the Committee, be necessary or desirable to
create equitable opportunities given differences in tax laws in
other countries.
6. In addition to such other rights of indemnification
as they may have as members of the Board or Committee, the members
of the Committee shall be indemnified by the Company against all
costs and expenses reasonably incurred by them in connection with
any action, suit or proceeding to which they or any of them may be
party by reason of any action taken or failure to act under or in
connection with the Plan or any Stock Option granted thereunder, and
against all amount paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such
action, suit or proceeding, except a judgment based upon a finding
of bad faith; provided that upon the institution of any such action,
suit or proceeding a Committee member shall in writing, give the
<PAGE> 10
Company notice thereof and an opportunity, at its own expense, to
handle and defend the same before such Committee member undertakes
to handle and defend it on his own behalf.
7. Stock Options may be granted under this Plan from
time to time, in substitution for stock options held by employees of
other corporations who are about to become employees of the Company
as the result of a merger or consolidation of the employing
corporation with the Company or the acquisition by the Company of
the assets of the employing corporation or the acquisition by the
Company of stock of the employing corporation as a result of which
it become a subsidiary of the Company. The terms and conditions of
such substitute stock options so granted my vary from the terms and
conditions set forth in this Plan to such extent as the Board of
Director of the Company at the time of grant may deem appropriate to
conform, in whole or in part, to the provisions of the stock options
in substitution for which they are granted, but no such variations
shall be such as to affect the status of any such substitute stock
options as a stock option under Section 422A of the Code.
8. Notwithstanding anything to the contrary in the Plan,
if the Committee finds by a majority vote, after full consideration
of the facts presented on behalf of both the Company the Optionee,
that the Optionee has been engaged in fraud, embezzlement, theft,
commission of a felony or proven dishonesty in the course of his
association with the Company or any subsidiary corporation which
damaged the Company or any subsidiary corporation, or for disclosing
trade secrets of the Company or any subsidiary corporation, the
Optionee shall forfeit all unexercised Stock Options and all
exercised NQSO's under which the Company has not yet delivered the
certificates and which have been earlier granted the Optionee by the
Committee. The decision of the Committee as to the case of an
Optionee's discharge and the damage done to the Company shall be
final. No decision of the Committee, however, shall affect the
finality of the discharge of such Optionee by the Company or any
subsidiary corporation in any manner. Further, if Optionee
voluntarily terminates employment with the Company, the Optionee
shall forfeit all unexercised stock options.
ARTICLE XI
Written Agreement
Each Stock Option granted hereunder shall be embodied in a
written Stock Option Agreement which shall be subject to the terms
and conditions prescribed above and shall be signed by the Optionee
and by the President or any Vice President of the Company, for and
in the name and on behalf of the Company. Such Stock Option
Agreement shall contain such other provisions as the Committee, in
its discretion shall deem advisable.
<PAGE> 11
ARTICLE XII
Effective Date
This Plan shall become unconditionally effective as of the
effective date of approval of the Plan by the Board of Directors of
the Company. No Stock Option may be granted later than ten (10)
years from the effective date of the Plan; provided, however, that
the Plan and all outstanding Stock Options shall remain in effect
until such NQSO's have expired or until such options are cancelled.
Number of Shares: Date of Grant:
<PAGE> 12
NON QUALIFYING STOCK OPTION AGREEMENT
AGREEMENT made this _____ day of _______________, 19__, between
______________________________ (the "Optionee"), and MAXAM GOLD
CORPORATION, a Utah corporation (the "Company").
1. Grant of Option. The Company, pursuant to the
provisions of the MAXAM GOLD CORPORATION 1996 Nonqualifying Stock
Option Plan (the "1996 Plan"), set forth as Attachment A hereto,
hereby grants to the Optionee, subject to the terms and conditions
set forth or incorporated herein, an Option and Purchase from the
Company all or any part of an aggregate of ______________ Common
Shares, as such Common Shares are now constituted, at the purchase
price of $________ per share. The provisions of the 1996 Plan
governing the terms and conditions of the Option granted hereby are
incorporated in full herein by reference.
2. Exercise. The Option evidenced hereby shall be
exercisable in whole or in part (but only in multiples of 100 Shares
unless such exercise is as to the remaining balance of this Option)
on or after ______________ and on or before ______________, provided
that the cumulative number of Common Shares as to which this Option
may be exercised (except as provided in paragraph 1 of Article VI of
this 1996 Plan) shall not exceed the following amounts:
Cumulative Number Prior to Date
of Shares (Not Inclusive of)
The Option evidenced hereby shall be exercisable by the deliver to
and receipt by the Company of (i) a written notice of election to
exercise, in the form set forth in Attachment B hereto, specifying
the number of shares to be purchased; (ii) accompanied by payment of
the full purchase price thereof in case or certified check payable
to the order of the Company, or by fully-paid and nonassessable
Common Shares of the Company properly endorsed over to the Company,
or by a combination thereof; and, (iii) by return of this Stock
Option Agreement for endorsement of exercise by the Company on
Schedule I hereof. In the event fully paid and nonassessable Common
Shares are submitted as whole or partial payment for Shares to be
purchased hereunder, such Common Shares will be valued at their Fair
Market Value (as defined in the 1996 Plan) on the date such Shares
are received by the Company and applied to payment of the exercise
price.
<PAGE> 13
3. Transferability. The Option evidenced hereby is NOT
assignable or transferable by the Optionee other than by the
Optionee's will, by the laws of descent and distribution, as
provided in paragraph 9 of Article V of the 1996 Plan. The Option
shall be exercisable only by the Optionee during his lifetime.
MAXAM GOLD CORPORATION
BY: __________________________________
Alan Hubbard, President
ATTEST:
________________________________
Secretary
Optionee hereby acknowledges receipt of a copy of the 1996
Plan, attached hereto and accepts this Option subject to each and
every term and provision of such Plan. Optionee hereby agrees to
accept as binding, conclusive and final, all decisions or
interpretations of the Compensation Committee of the Board of
Directors administering the 1996 Plan on any questions arising under
such Plan. Optionee recognizes that if Optionee's employment with
the Company or any subsidiary thereof shall be terminated with
cause, or by the Optionee, all of the Optionee's rights hereunder
shall thereupon terminate; and that, pursuant to paragraph 10 of
Article V of the 1996 Plan, this Option may not be exercised while
there is outstanding to Optionee any unexercised Stock Option,
granted to Optionee before the date of grant of this Option, to
purchase Common Shares of the Company or any parent or subsidiary
thereof.
Dated:
_____________________________
Optionee
______________________________________
Type or Print Name
______________________________________
Address
______________________________________
______________________________________
Social Security No.
<PAGE> 14
ATTACHMENT B
(Suggested form of letter to be used for notification of election to
exercise.)
Date:
Secretary,
MAXAM GOLD CORPORATION
528 Fon du Lac Drive
East Peoria, Illinois 61611
Dear Sir:
In accordance with paragraph 2 of the Nonqualifying Stock
Option Agreement evidencing the Option granted to me on
___________________________ under the MAXAM GOLD CORPORATION 1996
Nonqualifying Stock Option Plan, I hereby elect to exercise this
Option to the extent of _______________ Common Shares.
Enclosed are (i) Certificate(s) No.(s) __________ representing
fully-paid Common Shares of MAXAM GOLD CORPORATION endorsed to the
Company with signature guaranteed, and/or a certified check payable
to the order of MAXAM GOLD CORPORATION in the amount of $__________
as the balance of the purchase price of $______________ for the
Shares which I have elected to purchase and (ii) the original Stock
Option Agreement for endorsement by the Company as to exercise on
Schedule I thereof. I acknowledge that the Common Shares (if any)
submitted as part payment for the exercise price due hereunder will
be valued by the Company at their Fair Market Value (as defined in
the 1996 Plan) on the date this Option exercise is effected by the
Company. In the event I hereafter sell any Common Shares issued
pursuant to this option exercise within one year from the date of
exercise or within two years after the date of grant of this Option,
I agree to notify the Company promptly of the amount of taxable
compensation realized by me by reason of such sale for federal
income tax purposes.
When the certificate for Common Shares which I have elected to
purchase has been issued, please deliver it to me, along with my
endorsed Stock Option Agreement in the event there remains an
unexercised balance of Shares under the Option, at the following
address:
_________________________________________
_________________________________________
________________________________________
_____________________________________
Signature of Optionee
_____________________________________
Type or Print Name
<PAGE> 15
Optionee ___________________________________________________________
Date of Grant ______________________________________________________
SCHEDULE I
- --------------------------------------------------------------------
Unexercised Issuing
Shares Payment Shares Officer
Date Purchased Received Remaining Initials
- --------------------------------------------------------------------
<PAGE> 1
OFFICE LEASE
This Lease Agreement (this "Lease") is made effective
as of July 1, 1996, by and between Dale L. Runyon, ("Landlord"),
and Maxam Gold Corporation ("Tenant").
The parties agree as follows:
PREMISES. Landlord, in consideration of the lease
payment sprovided in this Lease, leases to Tenant office
facilities (the "Premises") located at 528 Fon du Lac Drive, East
Peoria, Illinois 61611.
TERM. The lease term will begin on July 1, 1996 and
will continue on a monht-to-month basis.
LEASE PAYMENT. Tenant shall pay to Landlord monthly
payment of $1,200.00 per month, payable in advance on the first
day of each month, for a toral annual lease payment of
$14,400.00. Lease payments shall be made to the Landlord at 528
Fon du Lac Drive, East Peoria, Illinois 61611, as may be changed
from time to time by Landlord.
POSSESSION. Tenant shall be entitled to possession on
the first day of the term of this Lease, and shall yield
possession to Landlord on the last day of the term of this Lease,
unless otherwise agreed by both parites in writing.
USE OF PREMISES. Tenant may use the Premises only for
the transaction of official business. The Premises may be used
for any other pupose only with the prior written consent of
Landlord, which shall not be unreasonably withheld. Tenant shall
notify Landlord of any anticipated extended absence from the
Premises not later thant he first day fo the extended absence.
PROOPERTY INSURANCE. Landlord and Tenent shall be
responsible to maintain appropriate insurance for their
respective interests in the Premises and property located on the
Premises.
DEFAULTS. Tenant shall be in default of this Lease, if
Tenant fails to fulfill any lease obligation or term by which
Tenant is bound. Subject to any governing provisions of law to
the contrary, if Tenant fails to cure any financial obligation
within 30 days after written notice of such default is provided
by Landlord to Tenant, Landlord may take possession of the
Premises without further notice (to the extent permitted by law),
and wihtout prejudicing Landlord's rights to damages. In the
alternative, Landlord may elect to cure any default and the costs
of such action shall be added to Tenant's financial obligations
under this Lease. Tenant shall pay all costs, damages, and
expenses (including reaonsable attorney fees and expenses)
<PAGE> 2
suffered by Landlord by reason of Tenant's defaults. All sums of
money or charges required to be paid by Tenant under this Lease
shall be additional rent, whether or not such sums of charges are
designated as "additional rent."
NOTICE. Notices under this Lease shall not be deemed
valid unless given or served in writing and forwarded by mail,
postage prepaid, addressed as follows:
LANDLORD: Dale L. Runyon
205 Alice
East Peoria, Illinois 61611
TENANT: Maxam Gold Corporation
528 Fon dur Lac Drive
East Peoria, Illinois 61611
Such addresses may be changed from time to time by either party
by providing notice as set forth above.
ENTIRE AGREEMETN/AMENDMENT. This Lease Agreement
contains the entire agreemetn of the parites and there are no
other promises or conditions in any other agreement whether oral
or written. This Lease may be modified or amended in writing, if
the writing is signed by the party obligated under the amendment.
SEVERABILITY. If any portion of this Lease shall be
hadl to be invalid or unenforceable for any reason, the remaining
provisions shall continue to be valid and enforceable. If a court
finds that any provision of this Lease is invalid or
unenforceable, but that by limiting such provision, it woudl
become vaild and enforceable, then such provision shall be deemed
to be written, construed, and enforced as so limited.
WAIVER. The failure of either party to enforce any
provisions of this Lease shall not be construed as a waiver or
limitatino of that party's right ot subsequently enforece and
comple strict compliance with every provision of this Lease.
CUMULATIVE RIGHTS. The rights of the parties under
this Lease are cumulative, and shall not be construed as
exclusive unelss otherwise required by law.
GOVERNING LAW. This Lease shall be construed in
accordance with the laws of the State of Illinois.
LANDLORD TENANT
MAXAM GOLD CORPORATION
/s/ Dale L. Runyon BY: /s/ Alan E. Hubbard
President
<PAGE> 1
PROMISSORY NOTE
OF
MAXAM GOLD CORPORATION
A Utah Corporation
MAXAM GOLD CORPORATION (MAXAM), a Utah corporation, hereby
establishes a line of credit with PHOENIX INTERNATIONAL MINING,
INC. (PHOENIX), a Nevada corporation, in which MAXAM may borrow,
from time to time in varying amounts, up to the sum of Two
Million Dollars ($2,000,000.00), within two years from the date
of this document with interest thereon at the rate of one (1)
percent per month, or as mutually agreed upon at the time, on the
outstanding balance.
Said note will be paid at the discretion of MAXAM with
payments first being applied to accrued interest and then to
principle, (or as agreed upon in writing between the parties),
with the full amount of interest and principle outstanding due
not later than five years from the date of this document.
IN WITNESS WHEREOF, MAXAM GOLD CORPORATION, a Utah
corporation, has caused this notices to be executed by its duly
authorized Officer.
May 9, 1997
MAXAM GOLD CORPORATION
BY: /s/ Dale L. Runyon, CEO
(SEAL) - no seal
(Acknowledgement) - no acknowledgement
<PAGE> 1
PROMISSORY NOTE
OF
PEORIA SEVEN MINING, LLC
An Arizona Corporation
PEORIA SEVEN MINING, LLC (PEORIA 7), an Arizona corporation,
hereby establishes a line of credit with MAXAM GOLD CORPORATION
(MAXAM), a Utah corporation, in which Peoria 7 may borrow, from
time to time in varying amounts, up to the sum of Three Million
Dollars ($3,000,000.00), within three years from the date of this
document with interest thereon at the rate of one (1) percent per
month, or as mutually agreed upon at the time, on the outstanding
balance.
Said note will be paid at the discretion of Peoria 7 with
payments first being applied to accrued interest and then to
principle, (or as agreed upon in writing between the parties),
with the full amount of interest and principle outstanding due
not later than five years from the date of this document.
IN WITNESS WHEREOF, PEORIA SEVEN MINING, LLC, an Arizona
Limited Liability Company, has caused this notices to be executed
by its duly authorized Officer.
April 15, 1996
PEORIA SEVEN MINING, LLC
BY: /s/ Dale L. Runyon, Manager
(SEAL) - no seal
(Acknowledgement) - no acknowledgement
<PAGE> 1
STANDARD FORM
MULTI-TENANCY INDUSTRIAL LEASE
(TRIPLE NET)
Landlord HEWSON/BRECKNER AIRPARK, L.L.C., an Arizona limited
liability company
Tenant MAXAM GOLD CORPORATION, a Utah corporation
Dated as of October 8, 1997
TABLE OF CONTENTS
1. Defined Terms . . . . . . . . . 1
2. Leased Premises . . . . . . . . 2
(a) Property to be Leased . . . . . . 2
(b) Common Areas . . . . . . . . 2
(c) Reserved Rights of Landlord . . . . . 2
3. Completion of Premises . . . . . . . 3
(a) Plans . . . . . . . . . 3
(b) Scheduled Commencement Date . . . . . 3
(c) Remedy . . . . . . . . . 3
(d) Changes . . . . . . . . . 3
(e) Ready for Occupancy . . . . . . . 3
(f) Construction Representative . . . . . 4
(g) Early Entry . . . . . . . . 4
(h) Quality of Construction . . . . . . 4
4. Term . . . . . . . . . . . 4
5. Rent . . . . . . . . . . . 4
(a) Fixed Rent . . . . . . . . 4
(b) Adjustments . . . . . . . . 4
(c) Pro Rata Rent . . . . . . . . 5
(d) Net Lease . . . . . . . . . 5
(e) Reimbursable Expenses . . . . . . 5
6. Security . . . . . . . . . . 6
(a) Security Deposit . . . . . . . 6
(b) Lien and Security Interest . . . . . 7
7. Use . . . . . . . . . . . 7
(a) General . . . . . . . . . 7
(b) Compliance with Law . . . . . . . 7
(c) Existing Title and Condition of Premises . . 7
(d) Signs . . . . . . . . . 7
(e) Governmental Regulation . . . . . . 8
(f) Security Devices . . . . . . . 8
8. Maintenance and Repairs . . . . . . . 8
(a) Operating Expenses . . . . . . . 8
(b) Tenant's Maintenance . . . . . . 8
(c) Landlord's Obligations to Repair . . . . 9
(d) Surrender . . . . . . . . . 9
(e) Cleaning Deposit . . . . . . . 9
9. Utilities . . . . . . . . . . 9
<PAGE> 2
10. Alterations and Additions . . . . . . 10
(a) Limitation . . . . . . . . 10
(b) Liens . . . . . . . . . 10
(c) Removal . . . . . . . . . 10
(i) Tenant Improvement Allowance . . . . 4(a)
(j) Sunshade . . . . . . . . 4(b)
11. Insurance . . . . . . . . . . 10
(a) General Liability . . . . . . . 10
(b) Extended Coverage . . . . . . . 10
(c) Policies . . . . . . . . . 11
(d) Waiver of Subrogation . . . . . . 11
(e) Tenant's Contents . . . . . . . 11
(f) Workmen's Compensation . . . . . . 11
12. Indemnity; Exemption of Landlord from Liability . . 12
(a) General . . . . . . . . . 12
(b) Tenant's Business . . . . . . . 12
13. Damage or Destruction; Obligation to Rebuild . . . 12
(a) Landlord's Obligation to Rebuild . . . . 12
(b) Abatement of Rent . . . . . . . 12
(c) Option to Terminate . . . . . . . 12
(d) Uninsured Casualties . . . . . . 13
(e) Tenant's Waiver . . . . . . . 13
14. Taxes . . . . . . . . . . 13
(a) Tenant's Share of Property Taxes . . . . 13
(b) Tenant's Personal Property . . . . . 13
(c) Rent Tax . . . . . . . . . 13
15. Condemnation . . . . . . . . . 14
(a) Rent Reduction or Lease Termination . . . 14
(b) Award . . . . . . . . . 14
(c) Temporary Condemnation . . . . . . 14
16. Assignment and Subletting . . . . . . 14
(a) Consent . . . . . . . . . 14
(b) Tenant's Continuing Liability . . . . . 15
(c) Information . . . . . . . . 15
(d) Excess Sublease Rental . . . . . . 15
(e) Release . . . . . . . . . 15
(f) Controlled Entity . . . . . . . 16
(g) Attorneys' Fees . . . . . . . 16
17. Defaults; Remedies . . . . . . . . 16
(a) Defaults . . . . . . . . . 16
(b) Remedies . . . . . . . . . 17
(c) Late Charges . . . . . . . . 19
(d) Payment or Performance by Landlord . . . . 19
18. Miscellaneous . . . . . . . . . 19
(a) Estoppel Certificate . . . . . . 19
(b) Landlord's Liability . . . . . . 20
(c) Construction . . . . . . . . 20
(d) Interest on Past-Due Obligations . . . . 20
(e) Time of Essence . . . . . . . 20
(f) Counterparts . . . . . . . . 20
(g) Incorporation of Prior Agreements; Amendments . 20
(h) Notices . . . . . . . . . 20
<PAGE> 3
(i) Waivers . . . . . . . . . 20
(j) Recording . . . . . . . . . 21
(k) Holding Over . . . . . . . . 21
(l) Covenants and Conditions . . . . . . 21
(m) Binding Effect . . . . . . . . 21
(n) Subordination . . . . . . . . 21
(o) Attorneys' Fee . . . . . . . . 21
(p) Landlord's Access . . . . . . . 21
(q) Auctions . . . . . . . . . 22
(r) Merger . . . . . . . . . 22
(s) Joint and Several Liability . . . . . 22
(t) Individual Liability . . . . . . 22
(u) Attornment . . . . . . . . 22
(v) Lenders Right to Cure . . . . . . 22
(w) Revisions to Lease . . . . . . . 22
(x) Administrative Charge . . . . . . 22
(y) Substituted Premises . . . . . . 23
19. Toxic Materials . . . . . . . . 23
(a) Definitions . . . . . . . . 23
(b) Prohibition on Hazardous Materials . . . . 23
(c) Exception to Prohibition . . . . . . 24
(d) Compliance with Environmental Laws . . . . 24
(e) Environmental Notices . . . . . . 24
(f) Environmental Indemnity . . . . . . 24
(g) Remedial Work . . . . . . . . 25
(h) Landlord's Option . . . . . . . 25
(I) Injunctive Relief . . . . . . . 25
(j) Self-Help . . . . . . . . . 25
(k) Other Tenants . . . . . . . . 25
(l) Environmental Inspection . . . . . . 25
(m) Surrender of Premises
Environmental Considerations . . . . . 26
20. Additional Security . . . . . . . 26(a)
Exhibit A The Premises
Exhibit B Preliminary Plans
Exhibit C Tenant Improvements
Exhibit D Hazardous Materials
Exhibit E Letter of Credit Requirements
1. Defined Terms. Each reference in this Lease to any of
the following terms shall incorporate the data stated for that
term. Other terms are as defined in the Lease.
(a) Landlord and Landlord's Hewson/Breckner Airpark, L.L.C.
Address (subparagraph c/o Hewson Properties, Inc.
18(h)): 4636 East University Drive
Suite 265
Phoenix, Arizona 85034
(b) Tenant and Tenant's Maxam Gold Corporation
Address for Notices 528 Fon du Lac Drive
(subparagraph 18(h)): East Peoria, Illinois 61611
<PAGE> 4
(c) Street Address of Pre- 15500 Greenway-Hayden Loop
mises (paragraph 2): Scottsdale, Arizona 85260
(d) Approximate Square 12,039 square feet
Footage of Premises
(paragraph 2):
(e) Project in which Pre- N/A
mises are located
(paragraph 2):
(f) Landlord's Construction Mr. Steven Schwarz
Representative (subpara-
graph 3(f)):
(g) Tenant's Construction Mr. Dale Runyon and Michael
Representative (subpara- Runyon-Davis
graph 3(f)):
(h) Term (paragraph 4): Sixty (60) months
(i) Scheduled Commencement 12:01 a.m. on December 1, 1997
Date (paragraph 4): (Initialed by parties)
(j) Fixed Rent (subpara- $12,039 per month, plus applicable
graph 5(a)): sales tax per month
(k) Rental Period (sub- A calendar month during the lease
paragraph 5(a)): Term
(l) Security Deposit (sub- $12,500
paragraph 6(a)):
(m) Permitted Uses (para- General office; the storage of
graph 7): vehicles, equipment, ore sample,
and other material associated with
mining of precious metals or
minerals; and a laboratory used
solely for the testing of precious
metals and minerals
(n) Cleaning Deposit (sub- -0-
paragraph 8(e)):
(o) Tenant's Share of 27.64%; provided, however, if any
Operating Expenses such Expenses or Taxes are not
(paragraph 8), In- specifically identifiable as attri-
surance Expense (para- butable solely to the Building and
graph 11) and Property the real property immediately
Taxes (paragraph 14); adjacent to the Building but are
attributable to the Project,
Tenant's Share of such Expenses and
Taxes shall be N/A %
<PAGE>
(p) Liability Insurance $2,000,000
(subparagraph 11(a)):
2. Leased Premises. (a) Property to be Leased. Landlord
hereby leases to Tenant, and Tenant hereby leases from Landlord,
subject to the terms and conditions contained herein certain
floor space (the "Premises") located in the building (the
"Building") located (or to be constructed) on that certain real
property located at the street address set forth in paragraph 1
hereof (the "Property"). The Building is located in Landlord's
Project set forth in paragraph 1 above. The Premises, which are
more particularly described on Exhibit A attached hereto and
incorporated herein by this reference, shall be deemed to extend
from the top surface of subfloor to the bottom surface of
ceilings above but shall not include the common stairways,
stairwells, hallways, accessways, and pipes, ducts, conduits,
wires and appurtenant fixtures serving exclusively or in common
other parts of the Building, and (if the Premises include less
than the entire rentable area of any floor) shall not include the
remainder of the Floor Common Area (as defined below). The
Approximate Square Footage of the Premises is set forth in
paragraph 1 above.
(b) Common Areas. Tenant shall have, as appurtenant to the
Premises, rights to use in common, subject to reasonable rules
from time to time made by Landlord of which Tenant is given
notice:
(i) The common stairways and accessways, loading docks
and platforms and any passageways thereto, and the common
pipes, ducts, conduits, wires and appurtenant equipment
serving the Premises;
(ii) If the Premises include less than the entire
rentable area of any floor, the common lobbies, hallways,
toilets and other common facilities (the "Floor Common
Area"); and
(iii) Common walkways, sidewalks, and driveways
necessary for access to the Building; greenbelt areas; and,
except for parking spaces which may be reserved for persons
other than Tenant, parking spaces or area from time to time
maintained on the Project for use by tenants in and visitors
to the Building and, to the extent from time to time
arranged by Landlord, maintained on adjacent real property
for such use. Twenty (20) parking spaces shall be available
for Tenant and Tenant's employees and visitors free of
charge throughout the Term of this Lease. Nine (9) of such
spaces shall be covered and reserved for the Tenant and
eleven (11) of such spaces shall be uncovered and
unreserved.
<PAGE> 6
(c) Reserved Rights of Landlord. Notwithstanding the
foregoing, Landlord reserves the right from time to time, without
unreasonable interference with Tenant's use:
(i) To install, use, maintain, repair and replace
pipes, ducts, conduits, wires and appurtenant meters and
equipment for service to other parts of the Building above
the ceiling surfaces, below the floor surfaces, within the
walls and in the central core areas, and to replace any
pipes, ducts, conduits, wires and appurtenant meters and
equipment included in the Premises which are so located or
located elsewhere outside the Premises;
(ii) To alter or relocate any other common facility;
provided, however, that substitutions are substantially
equivalent or better in quality; and
(iii) To alter the boundaries of the Property, grant
easements on the Property and dedicate for public use
portions thereof without Tenant's consent, provided that no
such grant or dedication shall unreasonably interfere with
Tenant's use of the Premises or otherwise cause Tenant to
incur cost or expense.
3. Completion of Premises. (a) Plans. Landlord and
Tenant have approved the preliminary plans and outline
specifications (the "Preliminary Plans") identified in Exhibit B
for the construction of improvements in and to the Premises, the
("Tenant Improvements"), which Tenant Improvements are listed on
Exhibit C attached hereto and by this reference made a part
hereof. If necessary, Landlord shall cause to be prepared final
plans and specifications (the "Final Plans") substantially in
conformity with the Preliminary Plans, which need not include
working detail drawings. The term "Plans" shall hereinafter mean
the Preliminary Plans and, if and when prepared, the Final Plans.
The Final Plans, if necessary, shall be delivered to Tenant as
soon as reasonably possible from the date hereof, subject to any
period of delay encountered by Landlord in such preparation as a
result of requests by Tenant for changes in the Final Plans
subsequent to the date hereof. Within ten (10) days after
delivery of the Final Plans, Tenant shall set forth in writing,
with particularity and precision, any corrections or changes
necessary to bring the Final Plans into substantial conformity
with the Preliminary Plans, except that Tenant may not object to
any logical development or refinement of the Preliminary Plans.
Failure to deliver to Landlord written notice of any such
corrections or changes within said ten (10) day period shall
constitute approval of the Final Plans by Tenant. Following such
approval of the Final Plans, both parties shall endorse approval
for filing purposes thereon, in duplicate, and thereafter changes
may be made only in accordance with subparagraph (d) below.
<PAGE> 7
(b) Scheduled Commencement Date. Landlord, at its sole
expense, shall proceed diligently with construction and
completion of the Premises substantially in accordance with the
Plans. Landlord shall complete the Premises and they shall be
Ready for Occupancy (as defined below) by Tenant not later than
the Scheduled Commencement Date set forth in paragraph 1 above;
provided, however, that such Scheduled Commencement Date shall be
extended for a period of time equal to the period of any delay or
delays encountered by Landlord affecting construction because of
fire, earthquake, inclement weather, or other acts of God, acts
of the public enemy, riot, insurrection, governmental regulations
of the sales of materials or supplies or the transportation
thereof, strikes or boycotts, shortages of material or labor,
Tenant's early entry under the provisions of subparagraph (g)
below, changes in the Plans pursuant to subparagraph (d) below,
or any other cause beyond the control of Landlord.
(c) Remedy. If the Premises are not completed on or before
the Scheduled Commencement Date as extended pursuant to
subparagraph (b) above, the sole remedy of either party shall be
the option to terminate this Lease by the delivery to the other
party of written notice within ten (10) days after the day three
(3) months following the Scheduled Commencement Date, as
extended.
(d) Changes. Tenant shall have the right to request
changes in the Plans, which request shall not be unreasonably
denied, provided, however, that: (i) such right shall not be
exercised unreasonably, (ii) no such request shall affect any
structural change in the Premises, (iii) Tenant shall pay any
additional cost or economic detriment incurred by Landlord
required to implement or incurred as a result of such request or
change, including without limitation loss of rents, architecture
fees, increase in construction costs and any other charges
payable hereunder caused by delay, with all said costs, and
detriments, to be paid immediately upon demand by Landlord, and
(iv) such requests shall constitute an agreement on the part of
Tenant to accept any delay in completion caused by reviewing,
processing and implementing any such changes.
(e) Ready for Occupancy. The Premises shall be deemed to
be ready for occupancy ("Ready for Occupancy") when the architect
or engineer in charge of the work of construction certifies: (i)
that the work of construction has been substantially completed in
accordance with the Plans; and (ii) the date of such completion.
Landlord shall diligently complete, as soon as reasonably
possible, any items of work and adjustment not completed when the
Premises are Ready for Occupancy.
<PAGE> 8
(f) Construction Representative. In connection with the
original construction of the Premises each party shall be bound
by its Construction Representative set forth in paragraph 1
above. A party may designate a substitute Construction
Representative by giving written notice to the other party.
(g) Early Entry. With the prior written consent of
Landlord, Tenant may, at any time prior to the commencement of
the Term, at its sole risk, enter upon and install such trade
fixtures and equipment in the Premises as it may elect; provided,
however, that (i) Tenant's early entry shall not interfere with
Landlord's work of construction or cause labor difficulties; (ii)
Tenant shall execute an indemnity agreement in favor of Landlord
in form and substance satisfactory to Landlord; (iii) Tenant
shall pay for and provide evidence of insurance satisfactory to
Landlord; and (iv) Tenant shall pay utility charges reasonably
allocated to Tenant by Landlord. Tenant shall not use the
Premises for the storage of inventory or otherwise commence the
operation of business prior to the commencement of the Term
without the express prior written consent of Landlord.
(h) Quality of Construction. All work shall be done in a
good and workmanlike manner and in compliance with all applicable
laws and lawful ordinances, bylaws, regulations and orders of
governmental authority and of the insurers of the Improvements.
Landlord assumes no liability for special, consequential or
incidental damages of any kind. There are no representations,
warranties or guaranties, express or implied, including
warranties of merchantability or use of the Premises, except as
are expressly set forth herein. Tenant hereby waives the benefit
of any rule that disclaimers of warranty shall be construed
against Landlord.
(i) Tenant Improvement Allowance. The cost of constructing
the Tenant Improvements shall be paid by Landlord; provided,
however, if the amount charged to the Landlord by Landlord's
general contractor (the "Contractor") for acquisition,
construction and installation of the Tenant Improvements, plus
architectural fees and permits relating to such construction and
installation, is more than $216,702, Tenant hereby agrees to pay
for all costs incurred in connection with the Tenant Improvements
except for $216,702, which is the Landlord's entire monetary
obligation for the Tenant Improvements ("Landlord's Portion").
In the event that the initial contract amount charged by the
Contractor, plus architectural fees and permits, indicates that
the total cost of the Tenant Improvements will be greater than
Landlord's Portion, Tenant shall be obligated to make the first
payments for the Tenant Improvements up to an amount equal to the
difference between the initial contract amount, plus
architectural fees and permits, and the Landlord's Portion
("Tenant's Initial Payment"). Tenant shall make Tenant's Initial
Payment based upon requisitions setting forth in reasonable
<PAGE> 9
detail the work performed and containing invoices, together with
any other information reasonably requested by Tenant, and shall
be paid by Tenant within ten (10) business days of receipt of
each such requisition and other information. After Tenant has
met its initial obligation by paying all of the Tenant's Initial
Payment, the Landlord shall be obligated to pay the Landlord's
Portion. In the event that change orders or other events cause
the final cost of the Tenant Improvements to be less than the sum
of the Landlord's Portion and Tenant's Initial Payment, then
Landlord shall reimburse Tenant such excess up to the amount of
Tenant's Initial Payment. In the event that change orders or
other events cause the final cost of the Tenant Improvements to
be more than the sum of the Landlord's Portion and Tenant's
Initial Payment, then Tenant shall pay each such increase as soon
as any such increase is determined in accordance with the same
procedures as for the payment of Tenant's Initial Payment.
Except as otherwise provided above, Tenant shall have complete
responsibility for the cost of the Tenant Improvements and for
the construction of any other improvements and alterations to the
Premises in connection with Tenant's occupancy thereof, Tenant
agreeing to accept the same "AS IS", subject only to the
construction of the Tenant Improvements.
It is contemplated that the Contractor will be Bjerk
Builders, Inc. ("Bjerk"). Landlord shall furnish Tenant with
estimates of the costs of the various Tenant Improvements
promptly after receipt thereof from Bjerk and of Bjerk's total
bid price for the construction of the Tenant Improvements. If
Tenant is dissatisfied with such estimates or bid, Tenant may
exercise its rights under subparagraph 3(d) above to request a
change in the Plans. In addition, if Tenant believes that lower
costs may be obtainable for the Tenant Improvements, Tenant may,
by a written request received by Landlord within five (5)
business days after the furnishing to Tenant any such estimate or
bid (and prior to commencement of the Tenant Improvements)
request that Landlord seek bids for the construction of the
Tenant Improvements from other general contractors. Upon receipt
of such request for rebidding and after consultation with Tenant,
Landlord shall request bids from not less than two (2)
alternative general contractors for the construction of the
Tenant Improvements and Landlord will consider the results of
such bids in determining, along with the Tenant, the general
contractor who will construct the Tenant Improvements; provided,
however, Landlord (1) may consider reasonable factors other than
price in determining the general contractor to be selected,
including but not limited to the willingness of the general
contractor to execute the standard construction contract used by
Landlord and its affiliates, and (2) may also permit Bjerk to
reduce its bid. Tenant also agrees to accept any delays, costs
and charges resulting from the requesting of such additional bids
and use of any substituted general contractor or Bjerk, if
applicable, with the same force and effect as if Tenant had
<PAGE> 10
requested a change in the Plans as provided in subparagraph 3(d)
above. Landlord shall execute a construction contract with Bjerk
or other bidder, as applicable, to be the Contractor, with the
Contract Sum to be based on the bid made by the selected general
contractor.
(j) Sunshade. In addition to the Tenant Improvements
Landlord shall also cause to be installed a sunshade for the
glass curtain wall constructed by Landlord as a part of the
Building (the "Sunshade"). The Sunshade shall be selected by
Tenant, subject to Landlord's approval, which approval shall not
be unreasonably withheld, and installed by the Contractor. The
cost of acquiring, installing, and constructing the Sunshade
shall be paid by Landlord; provided, however, if the amount
charged to the Landlord by the Contractor for acquisition,
construction and installation of the Sunshade is more than
$7,000, Tenant hereby agrees to pay for all costs incurred in
connection with the Sunshade except for $7,000 which is the
Landlord's entire monetary obligation for the Sunshade. In the
event that the amount charged by the Contractor is or will be
greater than $7,000, Tenant shall be obligated to pay to Landlord
the amount equal to the difference between the cost thereof and
$7,000. Tenant shall make such payment(s) based upon
requisitions setting forth in reasonable detail the cost of the
Sunshade and any other information reasonably requested by Tenant
and shall be paid by Tenant within ten (10) business days of
receipt of each such requisition and other information. For all
purposes of this Lease except paragraph 3 the Sunshade shall be
considered as a Tenant Improvement installed by Landlord.
4. Term. The Term of this Lease, which shall be for the
period set forth in paragraph 1 above, shall commence on the
first to occur of the following dates (the "Commencement Date")
(it being agreed that if the Term of this Lease shall not
commence within one (1) year of the Scheduled Commencement Date
this Lease shall terminate and be of no further force and
effect):
(a) The Scheduled Commencement Date set forth in paragraph
1 above (as it may be extended pursuant to the terms of paragraph
3 above);
(b) The date on which the Premises are Ready for Occupancy;
or
(c) The date upon which Tenant actually commences to do
business in the Premises.
5. Rent. (a) Fixed Rent. Tenant shall pay Landlord as
fixed rent for the Premises a sum equal to the Fixed Rent set
forth in paragraph 1 on or before the first day of each and every
calendar month during the Term of this Lease, except that Fixed
<PAGE> 11
Rent for the first full calendar month of the Term shall be
payable simultaneously with the execution of this Lease by
Tenant.
(b) Adjustments. Commencing on the thirty-first (31st)
Rental Period of the Term of this Lease and continuing thereafter
through the sixtieth (60th) Rental Period of the Term of this
Lease (the "Adjustment Period"), in addition to the Fixed Rent
due pursuant to subparagraph (a) above, Tenant shall pay as
additional rent an additional amount (the "Adjustment") to be
determined in accordance with the variations, if any, in the
costs of living as shown by the Consumer Price Index for all
Urban Consumers (average of all cities), as published by the
Bureau of Labor Statistics, United States Department of Labor, or
any successor agency (the "CPI"). Except as hereinafter
provided, the Adjustment for each Rental Period of the Adjustment
Period shall be an amount equal to (i) the product obtained by
multiplying the Fixed Rent by a fraction, the numerator of which
shall equal the CPI reported for the calendar month occurring
three (3) months prior to the first day of such Adjustment Period
(e.g., if the first day of the Adjustment Period shall be June 1,
the CPI used shall be that of the immediately preceding month of
March) and the denominator of which shall equal the CPI reported
for the calendar month occurring three (3) months prior to the
first day of the month in which the Commencement Date shall occur
less (ii) the Fixed Rent; provided, however, the Adjustment shall
not be less than the amount determined by accruing interest on
the Fixed Rent at a rate of three percent (3%) per annum,
compounded annually, during the period from the Commencement Date
until the first day of the Adjustment Period and not more than
the amount determined by accruing interest on the Fixed Rent at a
rate of six percent (6%) per annum, compounded annually, during
the period from the Commencement Date until the first day of the
Adjustment Period.
(c) Pro Rata Rent. Rent for any period during the Term
which is for less than one month shall be a pro rata portion of
the Rental Period installment. Rent shall be payable, without
deduction or offset, in lawful money of the United States to
Landlord at the address stated herein or to such other persons or
at such other places as Landlord may designate in writing.
(d) Net Lease. This Lease is what is commonly called a
"net lease", it being understood that Landlord shall receive the
Rent set forth in this paragraph free and clear of any and all
impositions, taxes, liens, charges or expenses of any nature
whatsoever in connection with its ownership and leasing of the
Premises. In addition to the Rent provided in this paragraph,
Tenant shall pay all impositions, taxes, insurance premiums,
operating charges, costs and expenses which arise or may be
contemplated under any provisions of this Lease during the Term.
All of such charges, costs and expenses shall constitute
additional rent, and upon the failure of Tenant to pay any of
such costs, charges or expenses, Landlord shall have the same
rights and remedies as otherwise provided in this Lease for the
failure of Tenant to pay Rent. It is the intention of the
parties hereto that Tenant shall in no event be entitled to any
abatement of or reduction in Rent or additional rent payable
hereunder, except as expressly provided herein. Any present or
future law to the contrary shall not alter this agreement of the
parties.
(e) Reimbursable Expenses. The sums payable by Tenant for
Operating Expenses, Insurance Expenses and Property Taxes
(hereinafter sometimes cumulatively referred to as the
"Reimbursable Expenses") under subparagraphs 8(a), 11(b) and
14(a) of this Lease shall be paid in accordance with the
following procedures:
(i) Landlord shall prepare an annual statement (the
"Annual Statement") setting forth the sum of the
Reimbursable Expenses for the calendar year ending on the
prior December 31 and Tenant's Share thereof and setting
forth the estimated Reimbursable Expenses that will be
incurred by Landlord during the current calendar year ending
on the next following December 31 and Tenant's Share
thereof.
(ii) Landlord shall endeavor to give to Tenant such
Annual Statement on or before March 1 of each calendar year
throughout the Term of the Lease, but Landlord's failure to
provide Tenant with an Annual Statement by said date shall
not constitute a waiver by Landlord of its right to require
payment by Tenant of Tenant's Share of estimated
Reimbursable Expenses or actual Reimbursable Expenses.
(iii) Tenant's Share of estimated Reimbursable
Expenses for the calendar year in which the Annual Statement
is received shall be divided by twelve (12) and one such
installment shall be paid concurrently with each rental
payment thereafter until receipt by Tenant of the next
Annual Statement. In addition, Tenant shall pay in full
concurrently with the first monthly rent payment due
following receipt of the Annual Statement an amount equal to
the excess of the monthly installment required to be paid
under the most current Annual Statement over the monthly
installment made under the preceding Annual Statement (or
the amount specified in subparagraph (v) below, as
applicable) multiplied by the number of months from January
through the month in which the Annual Statement is received
by Tenant.
(iv) If Tenant's Share of actual Reimbursable Expenses
for the past calendar year as shown on the Annual Statement
is greater than the payments made by Tenant for that
calendar year, then concurrently with the first monthly rent
<PAGE> 13
payment due following receipt by Tenant of the Annual
Statement, Tenant shall pay in full an amount equal to such
excess. If Tenant's Share of actual Reimbursable Expenses
for the past calendar year as shown on the Annual Statement
is less than the payments made by Tenant for that calendar
year, the amount of such overpayment shall be credited
against the next monthly rent payment(s) falling due.
(v) An Annual Statement need not be given during the
period from the Commencement Date (or implementation of this
monthly payment program) until December 31 of the year in
which the Commencement Date (or implementation of this
monthly payment program) occurs and estimated payments of
Reimbursable Expenses during such period and until the first
Annual Statement is issued to Tenant in the next calendar
year shall be in the amount specified by Landlord.
(vi) Even though the Term has expired and the Tenant
has vacated the Premises when the final determination is
made of Tenant's Share for the calendar year in which the
Lease expires, Tenant shall immediately pay the excess of
Tenant's Share for the portion of such year in which Tenant
was in occupancy over the estimated payments made by Tenant
for that calendar year and, conversely, any overpayment made
shall be immediately rebated by Landlord to Tenant.
(vii) An administrative charge equal to five percent
(5%) of the Reimbursable Expenses shall be added to each
installment payment due under this subparagraph (e)
(including the estimated payments and any reconciliation
payment), which administrative charge shall be reflected in
the Annual Statement, shall be payable in addition to the
Reimbursable Expenses and shall be intended to compensate
Landlord for supervision, administrative and clerical costs.
(viii) Each Annual Statement shall be prepared in
accordance with generally recognized and established
accounting practices and each determination and Annual
Statement, certified by Landlord, shall be final and
conclusive on both parties, including any determination made
by Landlord of the appropriate estimated payment during the
period prior to issuance of the first Annual Statement to
Tenant.
6. Security. (a) Security Deposit. Tenant shall deposit
with Landlord upon execution hereof the Security Deposit set
forth in paragraph 1 above as security for Tenant's faithful
performance of Tenant's obligations hereunder. If Tenant fails
to pay Rent or any other charges payable by Tenant hereunder, or
otherwise defaults with respect to any provision of this Lease,
Landlord may at its option use, apply or retain all or any
portion of the Security Deposit (i) to remedy Tenant's defaults
<PAGE>
in the payment of Rent or any other sums payable by Tenant
pursuant to the terms hereof, (ii) to repair any damage to the
Premises, (iii) to clean and otherwise maintain the Premises, or
(iv) to compensate Landlord for any other loss or damage which
Landlord may suffer thereby. If Landlord so uses or applies all
or any portion of the Security Deposit, Tenant shall, within ten
(10) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the Security Deposit
to the full amount hereinabove stated and Tenant's failure to do
so shall be a breach of and a default under this Lease. Landlord
shall not be required to keep the Security Deposit separate from
its general accounts. If Tenant performs all of Tenant's
obligations hereunder, the Security Deposit, or so much thereof
as has not theretofore been applied by Landlord, shall be
returned, without payment of interest or other increment for its
use, to Tenant (or, at Landlord's option, to the last assignee,
if any, of Tenant's interest hereunder) at the expiration of the
Term hereof, after Tenant has vacated the Premises.
(b) Lien and Security Interest. Tenant hereby grants to
Landlord a lien and security interest upon all property of Tenant
now or hereafter placed in or about the Premises to secure
payment of all rents and other sums payable to Landlord hereunder
and the payment of any damages or losses suffered by Landlord by
reason of Tenant's breach of this Lease. Landlord, as secured
party, shall be entitled to all rights and remedies afforded a
secured party under the Arizona Uniform Commercial Code, such
rights and remedies to be in addition to and cumulative of any
landlord's lien granted by law or elsewhere in this Lease.
Tenant shall execute appropriate UCC forms upon request by
Landlord.
7. Use. (a) General. The Premises shall be used and
occupied only for the Permitted Uses set forth in paragraph 1
above and for no other purpose.
(b) Compliance with Law. Tenant shall, at Tenant's sole
cost and expense, comply with all present and future laws,
ordinances, orders, declarations of covenants and restrictions,
rules, regulations and requirements of all federal, state and
municipal governments, courts, departments, commissions, boards
and officers, and any national or local Board of Fire
Underwriters, or any other body exercising functions similar to
those of any of the foregoing, foreseen or unforeseen, ordinary
as well as extraordinary, which may be applicable to the
Premises, the Building, and the Property or to the use or manner
of use of the Premises. Tenant shall obtain any required
certificate of occupancy with respect to its use of the Premises,
the Building and the Property within thirty (30) days from the
Commencement Date and shall deliver a copy thereof to Landlord
within such thirty (30) day period; provided, however, Landlord
shall obtain any certificate of occupancy required for the shell
<PAGE> 15
of the Building and any improvements to the Premises to be made
by Landlord pursuant to paragraph 3 above. Tenant shall not use
or permit the use of the Premises in any manner that will tend to
create waste or a nuisance.
(c) Existing Title and Condition of Premises. Tenant
hereby accepts the Premises in their condition existing as of the
Commencement Date and also accepts the Premises and this Lease
subject to all applicable zoning, municipal, county and state
laws, ordinances and regulations governing and regulating the use
of the Premises, subject to all covenants, conditions and
restrictions affecting the Property, Project or Premises and
subject to all liens, claims and encumbrances currently existing
against the Premises or any part thereof, including all matters
disclosed by any of the foregoing or by any exhibits attached
hereto; provided, however, Tenant shall be deemed to have
consented to private covenants, conditions and restrictions in
favor of third parties and private liens, claims or encumbrances
asserted by third parties only if copies thereof have been
furnished to Tenant or such items are referred to in a title
insurance commitment or title report furnished by Landlord to
Tenant; Landlord, in accordance with (and except as otherwise
provided in) subparagraph 8(c) below, shall be responsible for
causing the roof and bearing walls of the Premises to be in good
condition and repair at the Commencement Date and shall also
cause the heating, ventilating and air conditioning system, the
plumbing system and the electrical system to be in operating
condition as of the Commencement Date. All such systems shall be
deemed in the condition required at the Commencement Date unless
Tenant gives Landlord written notice of any defects in such
systems on or before ten (10) days after the Commencement Date.
Except for any representation or warranty which may be
specifically set forth in this Lease, Tenant acknowledges that
neither Landlord nor Landlord's agents have made any
representations or warranties as to the Premises, including
without limitation, any representation or warranty as to
condition or fitness of the Building or the suitability of the
Building for the conduct of Tenant's business.
(d) Signs. Tenant shall not erect or install on any
exterior or interior window, any door, or any exterior wall any
signs, advertising media, placards, trademarks, drapes, screens,
tinting materials, shades, blinds or similar items, without first
securing Landlord's written permission. It is contemplated,
however, that Landlord will consent to the installation of
exterior building signs, flag poles and monument signs which
otherwise comply with the covenants, conditions and restrictions
of record and with the requirements of this subparagraph (d) and,
with respect to all signage on the Building, are of a size which
does not exceed (on a cumulative basis) that percentage of all
signage on the Building which is equal to the percentage which
the Premises is of all of the leasable space in the Building.
Landlord will also not permit other lessees of space in the
<PAGE> 16
Building to have exterior signage which would, under applicable
governmental restrictions, prevent Tenant from having signage
area on the Building which is a percentage of all of the signage
area on the Building that is less than the percentage which the
Premises is of all leasable space in the Building. All signs
shall comply with all applicable governmental requirements, shall
conform to the design, motif and decor of the Property and shall
be in good taste, as determined in Landlord's reasonable
discretion. Landlord may also establish such sign criteria as
Landlord deems appropriate for the Property and Tenant shall
cause all signs which are located on the Premises and are visible
from outside the Premises to conform to such sign criteria.
Tenant shall properly maintain all approved signs. Upon
expiration of the Lease, Tenant promptly shall remove all signs
placed in and around the Premises by Tenant and shall repair any
damage to the Premises, Building or other portions of the Project
caused by the removal of such signs. Landlord may also require
Tenant to erect an exterior identifying sign in form and
substance satisfactory to Landlord, which sign shall also be
subject to all of the other provisions of this subparagraph (d).
(e) Governmental Regulation. In addition to the general
obligation of Tenant to comply with laws and without limitation
thereof, Landlord shall not be liable to Tenant nor shall this
Lease be affected if any parking privileges appurtenant to the
Premises, the Building and the Property are impaired by reason of
any moratorium, initiative, referendum, statute, regulation, or
other governmental decree or action which could in any manner
prevent or limit the parking rights of Tenant hereunder. Any
governmental charges or surcharges or other monetary obligations
imposed relative to parking rights with respect to the Premises,
the Building and the Property shall be considered as Property
Taxes and shall be payable by Tenant under the provisions of
paragraph 14 hereof.
(f) Security Devices. Tenant may not install any alarm
boxes, foil protection tape or other security equipment on the
Premises without Landlord's prior written consent, which consent
shall not be unreasonably withheld with respect to a commercial
security system of a type in typical use in the Phoenix
metropolitan area but may be conditioned upon compliance with
reasonable requirements set forth for the protection of the
Building and adjoining property.
8. Maintenance and Repairs. (a) Operating Expenses. As
additional rent during the Term, Tenant shall pay to Landlord an
amount equal to the product obtained by multiplying (i) Tenant's
Share of Operating Expenses (as set forth in paragraph 1 above)
by (ii) the amount which Landlord expends for Operating Expenses
for the Term hereof. "Operating Expenses" shall include all
reasonable and necessary expenses actually incurred by Landlord
for the operation, cleaning, maintenance (including but not
<PAGE> 17
limited to preventive maintenance), repair and property
management of the Building and the Property and, if applicable,
the Project, including, without limitation, the roof and walls
(other than for the structural repair of such roof and walls),
utility systems and related equipment serving all of the Building
or the Project and all walks, driveways, parking areas, loading
areas, lawns and landscaping. Among the items included in
Operating Expenses under the foregoing definition are expenses
for utilities furnished to the common areas of the Building and
Property and fees and charges paid to the property manager for
the Building; provided, however, the amount of the property
manager's fee included in Operating Expenses of the Building for
any calendar year shall not exceed an amount equal to five
percent (5%) of the gross receipts received by Landlord from the
Building for such calendar year. If Landlord determines that a
utility system and related equipment or portion thereof serves
one or more tenant suites in addition to the Premises but less
than all of the tenant suites in the Building or the Project, the
system and equipment or portion thereof, as applicable, which
serves the Premises and such additional suites, to the extent the
operation, cleaning, maintenance, repair and/or replacement
thereof is not the responsibility of the applicable utility
company, shall be deemed a part of the Building and the Project
for the purposes of this subparagraph 8(a), except that the
amount of the reimbursement by Tenant to Landlord for such items
shall be separately stated and shall be determined by multiplying
the reasonable and necessary expenses incurred by Landlord for
such items by the percentage which the Premises is of the total
space leased or available for lease which is served by such
systems and equipment or portion thereof instead of by the
Tenant's Share of Operating Expenses as set forth in paragraph 1.
Sums payable by Tenant pursuant to this subparagraph shall be
paid in accordance with the provisions of subparagraph 5(e)
above. Landlord may enter upon the Premises to the extent
necessary or appropriate to do any work described in this
subparagraph 8(a), Landlord shall not be liable for any
inconvenience, annoyance, disturbance, loss of business or other
damage of Tenant by reason of performing any such work or on
account of bringing materials, tools, supplies or equipment into
or through the Premises during the course thereof, and the
obligations of Tenant under this Lease shall not be affected
thereby.
(b) Tenant's Maintenance. Tenant shall, at Tenant's sole
cost and expense, keep and maintain the Premises, subfloors and
floor coverings in good repair and in a clean and safe condition,
casualties covered by insurance coverage excepted to the extent
of proceeds received by Landlord. Tenant's obligations shall
include the cleaning, operation, maintenance, repair and
replacement of all utility systems and related equipment and
portions thereof located within the Premises except to the extent
Landlord performs such cleaning, operation, maintenance, repair
<PAGE> 18
and/or replacement under subparagraph 8(a) above because all or
portions of the system and equipment serve more than one tenant
suite. Tenant shall, at Tenant's own expense, immediately
replace all interior, exterior or other glass in or about the
Premises that may be broken during the Term with glass at least
equal to the specification and quality of the glass so replaced.
If Tenant fails to perform Tenant's obligations under this
subparagraph, Landlord may at its option enter upon the Premises
after ten (10) days prior written notice to Tenant and put the
same in good order, condition and repair, and the cost thereof
together with interest thereon at the rate of fifteen percent
(15%) per annum shall become due and payable as additional rental
to Landlord together with Tenant's next monthly Rent payment.
Nothing herein shall imply any duty upon the part of Landlord to
do any such work and the performance thereof by Landlord shall
not constitute a waiver of Tenant's default in failing to perform
the same. Landlord may, during the progress of any such work in
or on the Premises, keep and store therein all necessary
materials, tools, supplies and equipment. Landlord shall not be
liable for the inconvenience, annoyance, disturbance, loss of
business or other damage of Tenant by reason of making such
repairs or the performance of any such work, or on account of
bringing materials, tools, supplies or equipment into or through
the Premises during the course thereof, and the obligations of
Tenant under this Lease shall not be affected thereby.
(c) Landlord's Obligations to Repair. Landlord shall, at
its expense, after written notice from Tenant, repair in a prompt
and diligent manner any damage to structural portions of the roof
and bearing walls of the Premises; provided, however, that if
such damage is caused by an act or omission of Tenant or Tenant's
agents, invitees, employees or contractors, then such repairs
shall be at Tenant's expense, payable to Landlord pursuant to
this paragraph. There shall be no abatement of Rent during the
performance of such work. Landlord shall not be liable to Tenant
for injury or damage that may result from any defect in the
construction or conditions of the Premises and Tenant shall seek
recovery for such injury or damage solely from Tenant's insurance
and/or any other persons or entities which may be liable to
Tenant. Tenant waives any right to make repairs at the expense
of Landlord under any law, statute or ordinance now or hereafter
in effect unless Tenant has given Landlord written notice of the
need for such repairs, such repairs are the obligation of
Landlord under this Lease and Landlord has failed to make the
needed repairs within a reasonable period of time after the
receipt of such notice.
(d) Surrender. On the last day of the Term, or on any
sooner termination of this Lease, Tenant shall surrender the
Premises to Landlord in the same condition as when received,
broom clean, ordinary wear and tear alone excepted. Tenant shall
repair any damage to the Premises, the Building and the Project
<PAGE> 19
occasioned by the removal of Tenant's alterations and
improvements (including, without limitation, its trade fixtures,
furnishings and equipment), which repair shall include, without
limitation, the patching and filling of holes and repair of
structural damage.
(e) Cleaning Deposit. Tenant shall deposit with Landlord
upon execution hereof the Cleaning Deposit set forth in paragraph
1 above, which Cleaning Deposit shall be nonrefundable and may be
used by Landlord for general cleaning and restoration of the
Premises after termination of this Lease. Such Cleaning Deposit
shall not affect the obligation of Tenant to surrender the
Premises to Landlord upon termination of this Lease in the
condition required by subparagraph 8(d) above and shall not be
deemed a part of, or in lieu of, the Security Deposit.
9. Utilities. Tenant shall pay for water, gas, heat,
light, power, telephone and other utilities and services supplied
to the Premises, together with any taxes thereon. If any such
services are not separately metered to Tenant, when the Tenant
Improvements have been completed, Tenant shall pay a reasonable
proportion to be determined by Landlord of all charges jointly
metered with other premises, and Landlord's determination
thereof, in good faith, shall be conclusive; provided, however,
if feasible Tenant may, after commencement of the Term and with
Landlord's approval, which approval shall not be unreasonably
withheld, install separate meters for the furnishing to Tenant of
any such jointly metered services in accordance with the
provisions of paragraph 10 below; Landlord reserves the right to
grant easements on the Premises, and to dedicate for public use
portions thereof, without Tenant's consent provided that no such
grant or dedication shall interfere with Tenant's use of the
Premises or otherwise cause Tenant to incur cost or expense.
From time to time upon Landlord's demand, Tenant shall execute,
acknowledge and deliver to Landlord, in accordance with
Landlord's instructions, any and all documents or instruments
necessary to effect Tenant's covenants herein.
10. Alterations and Additions. (a) Limitation. Tenant
shall not, without Landlord's prior written consent, make any
alterations, improvements, additions, or utility installations
(which term "utility installations" shall include ducting, power
panels, fluorescent fixtures, space heaters, conduits and wiring)
in, on or about the Premises, except for interior nonstructural
alterations to the Premises costing less than Ten Thousand
Dollars ($10,000) in the aggregate over any one (1) year period.
As a condition to giving such consent, Landlord may require that
Tenant agree to (i) remove any such alterations, improvements,
additions or utility installations at the expiration of the Term
and restore the Premises to their prior condition or, in the
alternative, (ii) require that such alterations, improvements,
additions or utility installations shall become the property of
<PAGE> 20
Landlord and shall be left by Tenant upon the expiration of the
Term. As a further condition to giving such consent, Landlord
may require Tenant to provide Landlord, at Tenant's sole cost and
expense, lien and completion bonds in an amount equal to one
hundred five percent (105%) of the estimated cost of such
improvements to insure Landlord against any liability for
mechanics' and materialmen's liens and to insure completion of
the work.
(b) Liens. Tenant shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to
or for Tenant at or for use on or in connection with the
Premises, which claims are or may be secured by any mechanics' or
materialmens' lien against the Premises or any interest therein.
Tenant shall give Landlord not less than ten (10) days notice
prior to the commencement of any work on the Premises, and
Landlord shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.
(c) Removal. Unless Landlord requires their removal as set
forth in subparagraph (a) above or otherwise consents to such
removal, all alterations, improvements, additions and utility
installations which may be made on or to the Premises shall
become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the Term.
Notwithstanding the provisions of this subparagraph (c), Tenant's
machinery and equipment, other than that which is affixed to the
Premises so that it cannot be removed without material damage to
the Premises, shall remain the property of Tenant and may be
removed by Tenant subject to the provisions of paragraph 8(d)
above.
11. Insurance. (a) General Liability. Tenant at its sole
cost and expense shall maintain commercial general liability
insurance ("Liability Insurance") on an "occurrence basis"
against claims for "personal injury," including without
limitation, bodily injury, death or property damage, occurring
upon, in or about the Premises, the Building and the Property,
such insurance to afford immediate minimum protection, at the
time of the inception of this Lease, and at all times during the
Term, to a limit of not less than Two Million Dollars
($2,000,000) with respect to personal injury or death to any one
or more persons or to damage to property. Such insurance shall
designate, and be for the benefit of, Tenant as the named insured
and Landlord as an additional insured. Such insurance shall also
include coverage against liability for bodily injury or property
damage arising out of the use, by or on behalf of Tenant, or any
other person or organization, of any owned, non-owned, leased or
hired automotive equipment in the conduct of any and all
operations called for under this Lease. The limits of said
insurance shall not, however, limit the liability of Tenant
hereunder.
<PAGE> 21
(b) Extended Coverage. During the Term, Landlord shall
procure and maintain in full force and effect with respect to the
Building, a policy or policies of fire insurance with extended
coverage endorsement attached, including vandalism and malicious
mischief coverage, and any other endorsements (such as earthquake
coverage) which Landlord may elect to obtain or which may be
required by the holder of any fee or leasehold mortgage, which
insurance coverage may be in an amount up to one hundred percent
(100%) of the full insurance replacement value (replacement cost
new, including debris removal and demolition) thereof. Landlord
shall further obtain rental abatement insurance against abatement
or loss of Rent in case of fire or other casualty, in an amount
at least equal to the amount of the Rent payable by Tenant during
one (1) year next ensuing as reasonably determined by Landlord.
Tenant shall pay to Landlord, in accordance with the provisions
of subparagraph 5(e) above, an amount equal to Tenant's Share of
Insurance Expenses multiplied by the premium or premiums on
insurance maintained by Landlord pursuant to this subparagraph
("Insurance Expenses"), with appropriate proration at the
beginning and end of the Term.
(c) Policies. Insurance required hereunder shall be by
companies rated AX or better in "Best's Insurance Guide" licensed
to do business in the state in which the Premises are located and
acceptable to Landlord and the holder of any mortgage or deed of
trust on the Premises or any part or portion thereof. Tenant
shall deliver to Landlord copies of policies of such insurance or
certificates evidencing the existence and amounts of such
insurance with loss payable clauses satisfactory to Landlord. No
such policy shall be cancelable or subject to reduction of
coverage or other modification except after thirty (30) days
written notice to Landlord. Tenant shall, within ten (10) days
of the expiration of such policies, furnished Landlord with
renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant, which amount
shall be payable by Tenant upon demand. Each such policy or
certificate therefor issued by the insurer shall to the extent
obtainable contain (i) a provision that no act or omission of
Tenant which would otherwise result in forfeiture or reduction of
the insurance therein provided shall affect or limit the
obligation of the insurance company to pay the amount of any loss
sustained and (ii) an agreement by the insurer that such policy
shall not be canceled without at least thirty (30) days prior
written notice by registered mail to Landlord. Tenant shall not
do or permit to be done anything which shall invalidate the
insurance policies referred to herein. If Tenant shall fail to
procure and maintain any insurance required to be maintained by
it by virtue of any provision of this paragraph, Landlord may,
but shall not be required to, procure and maintain the same, but
at the expense of Tenant.
<PAGE> 22
(d) Waiver of Subrogation. Landlord and Tenant each hereby
waive any and all rights of recovery against the other, or
against the partners, officers, employees, agents and
representatives of the other, for loss of or damage to such
waiving party or its property or the property of the other under
its control to the extent that such loss or damage is insured
against under any insurance policy in force at the time of such
loss or damage. Tenant shall, upon obtaining the policies of
insurance required hereunder, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.
(e) Tenant's Contents. Tenant shall assume the risk of
damage to any fixtures, goods, inventory, merchandise, equipment,
furniture and leasehold improvements which remain the property of
Tenant or as to which Tenant retains the right of removal from
the Premises, and Landlord shall not be liable for injury to
Tenant's business or any loss of income therefrom relative to
such damage. Tenant shall maintain the following insurance
coverage with respect to such items during the Term:
(i) Against fire, extended coverage, and vandalism and
malicious mischief perils in an amount not less than ninety
percent (90%) of the full replacement cost thereof;
(ii) Broad form boiler and machinery insurance on a
blanket repair and replacement basis with limits per
accident not less than the replacement cost of all leasehold
improvements and of all boilers, pressure vessels, air
conditioning equipment, miscellaneous electrical apparatus
and all other insurable objects owned or operated by the
Tenant or by others (other than Landlord) on behalf of
Tenant in the Premises, or relating to or serving the
Premises; and;
(iii) Business interruption insurance in such an
amount as will reimburse Tenant for direct or indirect loss
of earnings attributable to all such perils insured against
in subparagraphs 11(e)(i) and (ii) hereinabove.
(f) Workmen's Compensation. Tenant shall, at its own cost
and expense, keep and maintain in full force and effect during
the Term, a policy or policies of workmen's compensation
insurance covering all Tenant's employees working in the
Premises, and shall furnish Landlord with certificates thereof.
12. Indemnity; Exemption of Landlord from Liability. (a)
General. In addition to any other obligations of Tenant
hereunder, including the obligations of Tenant to provide
insurance, Tenant shall indemnify and hold Landlord harmless for,
from and against any and all claims arising from Tenant's use of
the Premises, or from the conduct of Tenant's business or from
<PAGE> 23
any activity, work or things done, permitted or suffered by
Tenant in or about the Premises or elsewhere and shall further
indemnify and hold Landlord harmless for, 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 negligence of
Tenant, or any of Tenant's agents, contractors, or employees, and
for, from and against all costs, attorneys' fees, expenses and
liabilities incurred in the defense of any such claim or any
action or proceeding brought thereon; and in case any action or
proceeding be brought against Landlord by reason of any such
claim, Tenant upon notice from Landlord shall defend the same at
Tenant's expense by counsel satisfactory to Landlord; provided,
however, the foregoing indemnity shall not apply to claims made
as a result of the sole negligence or intentional misconduct of
Landlord. Tenant, as a material part of the consideration to
Landlord for Landlord's execution of this Lease, also hereby
assumes all risk of damage to property or injury to persons in,
upon or about the Premises arising from any cause whatsoever;
hereby waives all claims in respect thereof against Landlord; and
agrees that all claims with respect thereto shall be made solely
against any insurance carried by Tenant and/or against any other
persons or entities which may be liable for such claims.
(b) Tenant's Business. In addition to any other obligation
of Tenant hereunder, including any obligation of Tenant to
provide insurance, Tenant hereby agrees that Landlord shall not
be liable for injury to Tenant's business or any loss of income
therefrom or for damage to the goods, wares, merchandise or other
property of Tenant, Tenant's employees, invitees, customers, or
any other person in or about the Premises, nor shall Landlord be
liable for injury to the person of Tenant or Tenant's employees,
agents or contractors, whether such damage or injury is caused by
or results from fire, steam, electricity, gas, water or rain, or
from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning
or lighting fixtures, or from any other cause whatsoever,
resulting from conditions arising upon the Premises, or from
other sources or places, and regardless of whether the cause of
such damage or injury or the means of repairing the same is
inaccessible to Tenant. Instead, Tenant shall seek recovery for
any such injury, loss or damage solely from any insurance carried
by Tenant and/or from any other persons or entities which may be
liable to Tenant for such injury, loss or damage.
13. Damage or Destruction; Obligation to Rebuild. (a)
Landlord's Obligation to Rebuild. If the Premises are damaged or
destroyed during the Term, Landlord shall, except as hereinafter
provided, diligently repair or rebuild them to substantially the
condition in which they existed immediately prior to such damage
or destruction; provided that any damage which is estimated in
good faith by Landlord to be under Two Thousand Five Hundred
<PAGE> 24
Dollars ($2,500.00) shall be repaired by Tenant, and Landlord
shall reimburse Tenant upon demand for expenses incurred in such
repair work to the extent of any proceeds received by Landlord
from extended coverage insurance maintained pursuant to paragraph
11 above.
(b) Abatement of Rent. Rent due and payable hereunder
shall be abated, but only to the extent of any proceeds received
by Landlord from rental abatement insurance maintained pursuant
to paragraph 11 above, during the period commencing with such
damage or destruction and ending with a substantial completion by
Landlord of the work of repair or reconstruction which Landlord
is obligated or undertakes to do.
(c) Option to Terminate. If the Building or the Premises
are damaged or destroyed to the extent that Landlord determines
that the same cannot, with reasonable diligence, be fully
repaired or restored by Landlord within one hundred eighty (180)
days after the date of the damage or destruction, the sole right
of both Landlord and Tenant shall be the option to terminate this
Lease as hereinafter provided; provided, however, Tenant shall
not have the right to terminate this Lease unless Landlord
determines that the Premises cannot be so repaired or restored
within such one hundred eighty (180) day period of time.
Landlord shall determine whether the Building and, if applicable,
the Premises can be fully repaired or restored within the one
hundred eighty (180) day period, and Landlord's determination
shall be conclusive on Tenant. Landlord shall notify Tenant of
its determination, in writing, within thirty (30) days after the
date of the damage or destruction. If Landlord determines that
the Building, including the Premises, can be fully repaired or
restored within the one hundred eighty (180) day period, or if it
is determined that such repair or restoration cannot be made
within said period but no party having the right to do so elects
to terminate within thirty (30) days from the date of said
determination, this Lease shall remain in full force and effect
and Landlord shall diligently repair and restore the damage as
soon as reasonably possible.
(d) Uninsured Casualties. Notwithstanding anything
contained herein to the contrary, in the event of damage to or
destruction of all or any portion of the Building which is not
fully covered (except for deductible amounts) by the insurance
proceeds received by Landlord under the insurance policies
required to be maintained pursuant to paragraph 10 above, or in
the event that any portion of such insurance proceeds must be
paid over to or are retained by the holder of any mortgage or
deed of trust on the Property or Premises, Landlord may terminate
this Lease by written notice to Tenant, given within thirty (30)
days after the date of notice to Landlord that said damage or
destruction is not so covered or that the proceeds are not
available for repair of the damage or destruction. If Landlord
<PAGE> 25
does not elect to terminate this Lease, the Lease shall remain in
full force and effect and the Building shall be repaired and
rebuilt in accordance with the provisions for repair set forth in
this paragraph 13.
(e) Tenant's Waiver. With respect to any destruction which
Landlord is obligated to repair or may elect to repair under the
terms of this paragraph, Tenant hereby waives all right to
terminate this Lease pursuant to rights otherwise presently or
hereafter accorded by the provisions of Arizona Revised Statutes
Section 33-343 or other applicable laws to tenants, except as
expressly otherwise provided herein.
14. Taxes. (a) Tenant's Share of Property Taxes. Tenant
shall pay to Landlord Tenant's Share of Property Taxes (as set
forth in paragraph 1 hereof) multiplied by the sum of the
following: all real estate taxes and all other taxes relating to
the Premises, the Building and the Property, all other taxes
which may be levied in lieu of real estate taxes, assessments,
and other governmental charges, or levies, general and special,
ordinary and extraordinary, unforeseen as well as foreseen, of
any kind and nature for public improvements, services or benefits
(collectively, "Property Taxes"), which are assessed, levied,
confirmed, imposed or become a lien upon the Premises, the
Building or the Property, or become payable during the Term;
provided, however that:
(i) any Property Taxes shall be prorated between
Landlord and Tenant so that Tenant shall pay only that
proportion thereof which the part of such period within the
Term bears to the entire period; and
(ii) any such sum payable by Tenant, which would not
otherwise be due until after the date of the termination of
this Lease, shall be paid by Tenant to Landlord upon such
termination.
Any sum payable by Tenant pursuant to this subparagraph for any
period during the Term shall be paid by Tenant in accordance with
the provisions of subparagraph 5(e) above.
(b) Tenant's Personal Property. Tenant shall pay prior to
delinquency all taxes assessed against and levied upon trade
fixtures, furnishings, equipment and all other personal property
of Tenant contained on the Premises or elsewhere. Tenant shall
cause such trade fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the
Premises, the Building and the Property.
(c) Rent Tax. Tenant shall pay to Landlord a sum equal to
the amount which Landlord is required to pay or collect by reason
of any privilege tax, sales tax, gross proceeds tax, rent tax, or
<PAGE> 26
like tax levied, assessed or imposed by any governmental
authority or subdivision thereof, upon or measured by any Rent,
Reimbursable Expense, or other charges or sums required to be
paid or improvements to be made by Tenant under this Lease. Such
sum shall be paid simultaneously with the payment by Tenant to
Landlord of the Fixed Rent or other charge to which such tax is
attributable or, in the case of a tax not attributable to Fixed
Rent or other charges, at such time as Landlord shall demand
payment thereof. Nothing contained in this Lease shall require
Tenant to pay any franchise, corporate, estate, inheritance,
succession, or transfer tax of Landlord or any tax upon the net
income of Landlord.
15. Condemnation. (a) Rent Reduction or Lease Termination.
If the Premises or any portion thereof is taken under the power
of eminent domain, or sold under the threat of the exercise of
said power (all of which are herein called "condemnation"), this
Lease shall terminate as to the part so taken as of the date the
condemning authority takes title or possession, whichever first
occurs (the "Condemnation Date") and the Rent shall be reduced
(as of the Condemnation Date) as provided below. If (i) more
than ten percent (10%) of the Premises is taken by condemnation
and (ii) if the balance of the Premises remaining after such
condemnation is not reasonably suitable for the use to which the
Premises were being put immediately prior to the condemnation,
Landlord or Tenant may, at either's option, to be exercised in
writing only within ten (10) days after Landlord shall have given
Tenant written notice of such taking (or in the absence of such
notice, within ten (10) days of the Condemnation Date) terminate
this Lease as of the Condemnation Date. If neither Landlord nor
Tenant terminates this Lease in accordance with the foregoing, or
in the event that that portion of the Premises taken by
condemnation is not sufficiently large so as to give rise to the
right to terminate this Lease as above provided, this Lease shall
remain in full force and effect as to the portion of the Premises
remaining, except that the Fixed Rent shall be reduced (as of the
Condemnation Date) in the proportion that the area taken by
condemnation bears to the total area of the Premises.
(b) Award. Any award for the taking of all or any part of
the Premises under the power of eminent domain or any payment
made under threat of the exercise of such power shall be the
property of Landlord, whether such award shall be made as
compensation for diminution in value of the leasehold or for the
taking of the fee, or as severance damages; provided, however,
that Tenant shall be entitled to any award specifically
attributed by the condemning authority to loss or damage to
Tenant's trade fixtures and removable personal property or to
Tenant's relocation costs. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall, to the
extent of severance damages received by Landlord in connection
with such condemnation and not paid to or retained by the holder
<PAGE> 27
of any mortgage or deed of trust on the Property or the Premises,
repair any damage to the Premises caused by such condemnation
except to the extent that Tenant has been reimbursed therefor by
the condemning authority (in which event such reimbursement to
Tenant shall also be applied to such repair). Tenant shall pay
any amount in excess of such severance damages required to
complete such repair; provided, however, if the severance damages
are not sufficient to pay all of the repair costs and if any
specific item of repair work shall be expected to have a useful
life which extends beyond the term of this Lease (including the
term of any options which Tenant may have the right to exercise),
then Tenant shall be obligated to pay with respect to the
identifiable cost of such item of repair only the portion of the
total cost of such item of repair which bears the same ratio to
the total cost of such item of repair as the remaining term of
this Lease (as determined on the Condemnation Date and including
the term of any options which the Tenant may have the right to
exercise) bears to the reasonably anticipated useful life of such
item of repair.
(c) Temporary Condemnation. If the temporary use of the
whole or any part of the Premises shall be taken by condemnation,
the Term shall not be reduced or affected in any way, and Tenant
in such event shall continue to pay in full the Rent and other
charges herein reserved, without reduction or abatement, and,
except to the extent that Tenant is prevented from so doing by
reason of any order of the condemning authority, shall continue
to perform and observe all of the other covenants, conditions and
agreements of this Lease to be performed or observed by Tenant as
though such taking had not occurred. In the event of any such
temporary condemnation Tenant shall, so long as it is otherwise
in compliance with the provisions of this Lease, be entitled to
receive for itself any and all awards or payments made for such
use of that portion of the Premises so taken; provided, however,
that Tenant shall repair any and all damages to the Premises
(whether or not covered by any award to Tenant) caused by such
temporary condemnation.
16. Assignment and Subletting. (a) Consent. Tenant shall
not voluntarily or by operation of law assign, transfer,
mortgage, sublet, or otherwise transfer or encumber all or any
part of Tenant's interest in this Lease or in the Premises
without Landlord's prior written consent, which consent Landlord
shall not unreasonably withhold. Landlord may, however, withhold
its consent to such assignment, transfer, mortgage, subletting or
other transfer or encumbrance pursuant to the preceding sentence
for substantive reasons including, without limitation, the
financial condition of the proposed assignee or transferee. Any
attempted assignment, transfer, mortgage, subletting or
encumbrance without such consent shall be void and shall
constitute a breach of this Lease. The consent of Landlord to
any one assignment, transfer, mortgage, subletting, or
<PAGE> 28
encumbrance shall not be deemed to be a consent to any subsequent
assignment, transfer, mortgage, subletting, or encumbrance.
Subject to the provisions of subparagraph 16(f) below, the
transfer of more than fifty percent (50%) of the stock or other
ownership interest in Tenant, or the merger or consolidation of
Tenant with or into another firm or entity, shall be deemed to be
a transfer of Tenant's interest under this Lease and shall be
subject to the provisions of this subparagraph (a).
(b) Tenant's Continuing Liability. Regardless of
Landlord's consent, no subletting or assignment shall alter the
primary liability of Tenant to pay the Rent or release Tenant of
Tenant's obligation to perform all other obligations to be
performed by Tenant hereunder unless Landlord's written consent
shall so specifically provide, and Landlord under no
circumstances shall be obligated to release Tenant from any such
liability. The acceptance of rent by Landlord from any other
person shall not be deemed to be a waiver by Landlord of any
provision hereof.
(c) Information. In connection with any proposed
assignment or sublease, Tenant shall submit to Landlord in
writing:
(i) The name of the proposed assignee or sublessee;
(ii) Such information as to the financial
responsibility and standing of said assignee or sublessee as
Landlord may reasonably require; and
(iii) All of the terms and conditions upon which the
proposed assignment or subletting is to be made.
(d) Excess Sublease Rental. If for any sublease or
assignment, Tenant receives rent or other consideration, either
directly or indirectly (by performance of Tenant's obligations or
otherwise) and either initially or over the Term of the sublease
or assignment, in excess of the Fixed Rent, Adjustments and
additional rent called for hereunder, or in the case of the
sublease or assignment of a portion of the Premises, in excess of
such Fixed Rent, Adjustments and additional rent fairly allocable
to such portion, after appropriate adjustments to assure that all
other payments called for hereunder are appropriately taken into
account, Tenant shall pay to Landlord, at the same time as Fixed
Rent is due hereunder, one-half (1/2) of the excess of each such
payment of rent or other consideration received by Tenant
promptly after its receipt.
(e) Release. Whenever Landlord conveys its interest in the
Premises, Landlord shall be automatically released from the
further performance of covenants on the part of Landlord herein
contained, and from any and all further liability, obligations,
<PAGE> 29
costs and expenses, demands, causes of action, claims or
judgments arising from or growing out of, or connected with this
Lease after the effective date of said release. The effective
date of said release shall be the date the assignee executes an
assumption of such an assignment whereby the assignee expressly
agrees to assume all of Landlord's obligations, duties,
responsibilities and liabilities with respect to this Lease. If
requested, Tenant shall execute a form of release and such other
documentation as may be required to effect the provisions of this
paragraph.
(f) Controlled Entity. Notwithstanding the provisions of
this paragraph 16, Tenant may assign or sublet the Premises, or
any portion thereof, without Landlord's consent, after written
notice to Landlord, to any entity which controls, is controlled
by, or is under common ownership with Tenant, or to any entity
resulting from the merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant as a
going concern of the business that is being conducted on the
Premises, provided that said assignee assumes, in full, the
obligations of Tenant under this Lease. Any such assignment
shall not, in any way, affect or limit the liability of Tenant
under the terms of this Lease even if after such assignment or
subletting the terms of this Lease are materially changed or
altered without the consent of Tenant, the consent of whom shall
not be necessary for such change or alteration.
(g) Attorneys' Fees. In the event that Landlord shall
consent to a sublease or assignment under subparagraph (a) above,
Tenant shall pay Landlord's reasonable attorneys' fees incurred
in connection with the giving of such consent and review of the
information submitted by Tenant.
17. Defaults; Remedies. (a) Defaults. The occurrence of
any one or more of the following events shall constitute a
material default and material breach of this Lease by Tenant:
(i) The vacating or abandonment of the Premises by
Tenant;
(ii) The failure by Tenant to make any payment of Rent
or any other payment required to be made by Tenant
hereunder, as and when due, where such failure shall
continue for a period of three (3) working days after
written notice thereof from Landlord to Tenant;
(iii) The failure by Tenant to observe or perform any
of the covenants, conditions or provisions of this Lease to
be observed or performed by Tenant, other than those
described in subparagraph (ii) above, where such failure
shall continue for a period of ten (10) days after written
notice thereof from Landlord to Tenant; provided, however,
<PAGE> 30
that if the nature of Tenant's default is such that it is
capable of being cured but more than ten (10) days are
reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commences such cure within
such ten (10) day period and thereafter diligently
prosecutes such cure to completion; or
(iv) The making by Tenant of any general assignment for
the benefit of creditors, the filing by or against Tenant of
a petition for order of relief in bankruptcy for the purpose
of bankruptcy liquidation or reorganization under any law
relating to bankruptcy whether now existing or hereafter
enacted (including, without limitation, any petition filed
by or against Tenant under any one or more of the following
Chapters of the Bankruptcy Reform Act of 1978, 11 U.S.C.
Sec. 101-1330 ("Bankruptcy Code") as amended: Chapter 7 or
Chapter 9 or Chapter 11 or Chapter 12 or Chapter 13) except
that, in the case of a filing against Tenant of such a
petition, such filing shall not be a default if the petition
is dismissed or discharged on or before one-hundred twenty
(120) days after the filing thereof; the appointment of a
trustee or receiver to take possession of all or
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 sixty (60) 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 sixty (60) days. Unless Landlord's
express written consent thereto is first obtained, in no
event shall this Lease, or any interest herein or hereunder
or any estate created hereby, be assigned or assignable by
operation of law or by, in or under voluntary or involuntary
bankruptcy liquidation or reorganization proceedings or
otherwise and in no event shall this Lease or any rights or
privileges hereunder be an asset of Tenant under any
bankruptcy liquidation or reorganization proceedings. Any
purported assignment or transfer in violation of the
provisions of this subparagraph (iv) shall constitute a
material default and breach of this Lease by Tenant and in
connection with any such default and breach Landlord shall
have the rights and remedies described in subparagraph (b)
below, including, without limitation, the election to
terminate this Lease. As used in this subparagraph (iv) the
words "bankruptcy liquidation or reorganization proceedings"
shall include any proceedings under any law relating to
bankruptcy whether now existing or hereafter enacted
(including, without limitation, proceedings under any one or
more of the Bankruptcy Code as amended: Chapter 7 or
Chapter 9 or Chapter 11 or Chapter 12 or Chapter 13).
<PAGE> 31
(b) Remedies.
(i) In the event of any default and breach by Tenant
of any of its obligations under this Lease and
notwithstanding the vacation or abandonment of the Premises
by Tenant, this Lease shall continue in effect so long as
Landlord does not expressly terminate Tenant's right to
possession in any of the manners specified in this paragraph
and Landlord may, at Landlord's option and without limiting
Landlord in the exercise of any other rights or remedies
which it may have by reason of such default and breach,
exercise all of its rights and remedies hereunder,
including, without limitation:
(A) The right to declare the Term ended and to reenter
the Premises and take possession thereof and remove all
persons therefrom, and Tenant shall have no further claim in
or to the Premises or under this Lease; or
(B) The right without declaring this Lease ended to
reenter the Premises, take possession thereof, remove all
persons therefrom and occupy or lease the whole or any part
thereof for and on account of Tenant and upon such terms and
conditions and for such rent as Landlord may deem proper and
to collect such rent or any other rent that may hereafter
become payable and apply the same as provided in
subparagraph (ii) below; or
(C) The right, even though Landlord may have relet the
Premises or brought an action to collect Rent and other
charges without terminating this Lease, to thereafter elect
to terminate this Lease and all of the rights of Tenant in
or to the Premises; or
(D) The right, without terminating this Lease, to
bring an action or actions to collect Rent and other charges
hereunder which are from time to time past due and unpaid or
to enforce any other provisions of this Lease imposing
obligations on Tenant, it being understood that the bringing
of any such action or actions shall not terminate this Lease
unless written notice of termination is given.
(ii) Should Landlord relet the Premises under the
provisions of subparagraph (b)(i)(B) above, Landlord may
execute any lease either in its own name or in the name of
Tenant, but Tenant hereunder shall have no right or
authority whatever to collect any rent from the new tenant.
The proceeds of any such reletting shall first be applied to
the payment of the costs and expenses of reletting the
Premises, including without limitation, reasonable brokerage
commissions and alterations and repairs which Landlord, in
its sole discretion, deems reasonably necessary and
<PAGE> 32
advisable and to the payment of reasonable attorneys' fees
incurred by Landlord in connection with the Tenant's
default, the retaking of the Premises and such reletting
and, second, to the payment of any indebtedness, other than
Rent, due hereunder, including, without limitation, storage
charges owing from Tenant to Landlord. When such costs and
expenses of reletting have been paid, and if there is no
such indebtedness or such indebtedness has been paid, Tenant
shall be entitled to a credit for the net amount of rental
received from such reletting each month during the unexpired
balance of the Term, and Tenant shall pay Landlord monthly
on the first day of each month as specified herein such sums
as may be required to make up the rentals provided for in
this Lease. Nothing contained herein shall be construed as
obligating Landlord to relet the whole or any part of the
Premises.
(iii) Should Landlord elect to terminate this Lease
under the provisions of subparagraphs (b)(i)(A) or (C)
above, Landlord shall be entitled to recover immediately
from Tenant (in addition to any other amounts recoverable by
Landlord as provided by law), the following amounts:
(A) The worth at the time of award of the unpaid rent
which had been earned at the time of termination;
(B) The worth at the time of award of 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 Tenant proves could have been
reasonably avoided;
(C) The worth at the time of award of the amount by
which the unpaid rent for the balance of the Term after the
time of award exceeds the amount of such rental loss that
Tenant proves could be reasonably avoided; and
(D) Any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure
to perform its obligations under the Lease or which in the
ordinary course of things would be likely to result
therefrom.
For purposes of computing "the worth at the time of the
award" of the amount specified in subparagraph (b)(iii)(C)
above, such amount shall be discounted at the discount rate
of the Federal Reserve Bank of San Francisco at the time of
award. For purposes of computing "the worth at the time of
the award" under subparagraphs (b)(iii)(A) and (b)(iii)(B)
above, an interest rate of ten percent (10%) per annum shall
be utilized.
<PAGE> 33
(iv) If Landlord shall elect to reenter the Premises
as provided above, Landlord shall not be liable for damages
by reason of any reentry. Tenant hereby waives all claims
and demands against Landlord for damages or loss arising out
of or in connection with any reentering and taking
possession of the Premises and waives all claims for damages
or loss arising out of or in connection with any destruction
of or damage to the Premises, or for any loss of property
belonging to Tenant or to any other person, firm or
corporation which may be in or upon the Premises at the time
of such reentry.
(v) Landlord shall not be deemed to have terminated
this Lease, Tenant's right to possession of the Premises or
the liability of Tenant to pay Rent thereafter to accrue or
its liability for damages under any of the provisions hereof
by any reentry hereunder or by any action in unlawful
detainer or otherwise to obtain possession of the Premises,
unless Landlord shall notify Tenant in writing that Landlord
has so elected to terminate this Lease. Tenant agrees that
the service by Landlord of any notice pursuant to the
unlawful detainer statutes or comparable statutes of the
state or locality in which the Premises are located and the
surrender of possession pursuant to such notice shall not
(unless Landlord elects to the contrary at the time of or at
any time subsequent to the service of such notice and such
election shall be evidenced by a written notice to Tenant)
be deemed to be a termination of this Lease or of Tenant's
obligations hereunder. No reentry or reletting under this
paragraph shall be deemed to constitute a surrender or
termination of this Lease, or of any of the rights, options,
elections, powers and remedies reserved by Landlord
hereunder, or a release of Tenant from any of its
obligations hereunder, unless Landlord shall specifically
notify Tenant, in writing, to that effect. No such
reletting shall preclude Landlord from thereafter at any
time terminating this Lease as herein provided.
(vi) All fixtures, furnishings, goods, equipment,
chattels or other personal property of Tenant remaining on
the Premises at the time that Landlord takes possession
thereof may at Landlord's election be stored at Tenant's
expense or sold or otherwise disposed of by Landlord in any
manner permitted by applicable law.
(vii) All rights, options, elections, powers and
remedies of Landlord under the provisions of this Lease are
cumulative of each other and of every other right, option,
election, power or remedy which Landlord may otherwise have
at law or in equity and all or any of which Landlord is
hereby authorized to exercise. The exercise of one or more
rights, options, elections, powers or remedies shall not
<PAGE> 34
prejudice or impair the concurrent or subsequent exercise of
other rights or remedies Landlord may have upon a breach and
default under this Lease and shall not be deemed to be a
waiver of Landlord's rights or remedies thereupon or to be a
release of Tenant from Tenant's obligations thereon unless
such waiver or release is expressed in writing and signed by
Landlord.
(viii) In the event of the exercise by Landlord of any
one or more of its rights and remedies hereunder, Tenant
hereby expressly waives any and all rights of redemption, if
any, granted by or under any present or future laws.
(c) Late Charges. Tenant hereby acknowledges that late
payment by Tenant to Landlord of Rent and other sums due
hereunder will cause Landlord to incur costs not contemplated by
this Lease, the exact amount of which will be extremely difficult
to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be
imposed on Landlord by the terms of any mortgage or trust deed
covering the Premises. Accordingly, if any installment of rent
or any other sum due from Tenant shall not be received by
Landlord or Landlord's designee within ten (10) days after such
amount shall be due, Tenant shall pay to Landlord a late charge
equal to five percent (5%) of such overdue amount. The parties
hereby agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of
late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord
from exercising any of the other rights and remedies granted
hereunder.
(d) Payment or Performance by Landlord. Landlord may, at
Landlord's option and without any obligation to do so, pay any
sum or do any act which Tenant has failed to pay or do at the
time Tenant was obligated to make such payment or perform such
act and Landlord shall be entitled to recover from Tenant, upon
demand, all sums expended by Landlord in making such payment or
performing such act, together with interest thereon at the rate
provided in subparagraph 18(d) from the date of expenditure until
repaid by Tenant. Such sum and interest shall be deemed
additional rent under this Lease.
18. Miscellaneous. (a) Estoppel Certificate.
(i) Tenant shall at any time upon not less than ten
(10) days prior written notice from Landlord execute,
acknowledge, and deliver to Landlord a statement in writing
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,
<PAGE> 35
is in full force and effect) and the date to which the Rent
and other charges are paid in advance, if any, and
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. Any such
statement may be conclusively relied upon by any person to
whom it shall be delivered by Landlord including any
prospective purchaser or encumbrancer of the Premises, the
Building, the Property, or any part thereof.
(ii) Tenant's failure to deliver such statement within
such time shall be conclusive upon Tenant that this Lease is
in full force and effect, without modification except as may
be represented by Landlord; that there are no uncured
defaults in Landlord's performance; and that not more than
one month's Rent has been paid in advance.
(iii) If Landlord desires to finance or refinance the
Premises, the Building, the Property, or any part thereof,
Tenant hereby agrees to deliver to any lender designated by
Landlord such financial statements of Tenant as may be
reasonably required by such lender. Such statements shall
include the past three years financial statements of Tenant.
All such financial statements shall be received by Landlord
in confidence and shall be used only for the purposes herein
set forth.
(b) Landlord's Liability. The term "Landlord" as used
herein shall mean only the owner or owners at the time in
question of the fee title (or the lessee's interest in any ground
or master lease) to the Premises and in the event of any transfer
of such title, Landlord herein named (and in case of any
subsequent transfers, the then grantor) shall be relieved from
and after the date of such transfer of all liability as respects
Landlord's obligations thereafter to be performed, provided that
any funds in the hands of Landlord or the then grantor at the
time of such transfer in which Tenant has an interest shall be
delivered to the grantee. The obligations contained in this
Lease to be performed by Landlord shall, subject as aforesaid, be
binding on Landlord's successors and assigns only during their
respective periods of ownership.
(c) Construction. Paragraph captions are solely for the
convenience of the parties and shall not be deemed to or be used
to define, construe, or limit the terms hereof. As used in this
Lease, the masculine, feminine and neuter genders shall be deemed
to include the others, and the singular number shall be deemed to
include the plural, whenever the context so requires. The
invalidity of any provisions of this Lease as determined by a
court of competent jurisdiction shall in no way affect the
validity of any other provision hereof. This Lease shall be
governed by the laws of the state in which the Premises are
located.
<PAGE> 36
(d) Interest on Past-Due Obligations. Except as expressly
herein provided, any amount due to Landlord not paid when due
shall bear interest at the lesser of (i) fifteen percent (15%)
per annum or (ii) the maximum rate permitted by law, from the
date due until the date such amount is paid. Payment of such
interest shall be made when such amount is paid. Payment of such
interest shall not excuse or cure any default by Tenant under
this Lease.
(e) Time of Essence. Time is of the essence of this Lease
and all of the covenants and obligations hereof.
(f) Counterparts. This Lease may be executed in two or
more counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same Lease.
(g) Incorporation of Prior Agreements; Amendments. This
Lease contains all agreements of the parties with respect to any
matter mentioned herein. No prior agreement or understanding
pertaining to any such matter shall be effective. This Lease may
be modified in writing only, which writing shall be signed by the
parties in interest at the time of the modification.
(h) Notices. Any notices, approvals, agreements,
certificates, other documents or communications between the
parties hereto required or permitted under this Lease shall be in
writing. Any such communications shall be deemed to have been
duly given or served if delivered in hand or forty-eight (48)
hours after deposit in the United States mail, certified or
registered, postage and fees prepaid, return receipt requested,
addressed to the parties at the addresses set forth in paragraph
1 of this Lease. The address to which any such communications
shall be sent may be changed by either party hereto from time to
time by a notice mailed as aforesaid.
(i) Waivers. No waiver by Landlord of any provision hereof
shall be deemed a waiver of any other provision hereof or of any
subsequent breach by Tenant of the same or any other provision.
Landlord's consent to or approval of any act shall not be deemed
to render unnecessary the obtaining of Landlord's consent to or
approval of any subsequent act by Tenant. The acceptance of Rent
hereunder by Landlord shall not be a waiver of any preceding
breach by Tenant of any provision hereof, other than the failure
of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of
acceptance of such Rent.
(j) Recording. Tenant shall not record this Lease without
Landlord's prior written consent and such recordation shall, at
the option of Landlord, constitute a noncurable default of Tenant
hereunder. Landlord and Tenant shall, upon the request of either
party, execute, acknowledge and deliver to the other a "short
form" memorandum of this Lease for recording purposes.
<PAGE> 37
(k) Holding Over. If Tenant remains in possession of the
Premises or any part thereof after the expiration of the Term or
sooner termination of this Lease with the express written consent
of Landlord and without executing a new lease, such occupancy
shall be construed as a tenancy from month-to-month at a rental
equal to one hundred fifty percent (150%) of the last monthly
Rent plus all other charges payable hereunder, and upon all the
terms hereof insofar as the same are applicable to a
month-to-month tenancy. Nothing contained in this subparagraph
shall be construed to grant Tenant the right to holdover without
the express written consent of Landlord.
(l) Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a
condition.
(m) Binding Effect. Subject to any provisions hereof
restricting assignment or subletting by Tenant and subject to the
provision of subparagraph (b) above, this Lease shall bind the
parties and their personal representatives, successors and
assigns.
(n) Subordination.
(i) This Lease, at Landlord's option, shall be
subordinate to any ground lease, mortgage, deed of trust, or
any other hypothecation for security now or hereafter placed
upon the Premises, the Building or the Property, or any part
or parts thereof, and to any and all advances made on the
security thereof and to all renewals, modifications,
consolidations, replacements and extensions thereof;
provided, however, Tenant's obligation to subordinate this
Lease to future ground leases, mortgages, deeds of trust or
other hypothecations shall be conditioned upon the creditor
under each such security transaction granting to Tenant a
non-disturbance right which provides that the rights of
Tenant under this Lease shall not be disturbed by such
creditor so long as Tenant is not in default under this
Lease. If any present or future mortgagee, trustee or
ground lessor shall at any time elect to have this Lease
prior to the lien of its mortgage, deed of trust or ground
lease, and written notice of such election shall be given to
Tenant, this Lease shall be deemed prior to such mortgage,
deed of trust, or ground lease, whether this Lease is dated
prior or subsequent to the date of said mortgage, deed of
trust or ground lease or the date of recording thereof.
(ii) Tenant agrees to execute any documents required to
effectuate such subordination or to make this Lease prior to
the lien of any mortgage, deed of trust or ground lease, as
the case may be, and failing to do so within ten (10) days
after written demand, does hereby make, constitute and
<PAGE> 38
irrevocably appoint Landlord as Tenant's attorney in fact
and in Tenant's name, place and stead, to do so.
(o) Attorneys' Fee. If either party brings an action to
enforce the terms hereof or declare rights under this Lease, the
prevailing party in the final adjudication of any such action, on
trial or appeal, shall be entitled to its costs and expenses of
suit, including, without limitation, its actual attorneys' fees,
to be paid by the losing party as fixed by the court. In any
situation in which a dispute is settled other than by action or
proceeding, Tenant shall pay all Landlord's costs and attorneys'
fees relating thereto.
(p) Landlord's Access. Landlord and Landlord's agents
shall have the right to enter the Premises at reasonable times
for the purpose of inspecting the same, showing the same to
prospective purchasers or lenders, and making such alterations,
repairs, improvements or additions to the Premises or the
improvements as Landlord may deem necessary or desirable.
Landlord may at any time place on or about the Premises any
ordinary "For Sale" signs and Landlord may at any time during the
last one hundred twenty (120) days of the Term place on or about
the Premises any ordinary "For Lease" signs, all without rebate
of rent or liability to Tenant.
(q) Auctions. Tenant shall not conduct any auction on the
Premises without Landlord's prior written consent.
(r) Merger. The voluntary or other surrender of this Lease
by Tenant, or a mutual cancellation thereof, shall not work a
merger, and shall, at the option of Landlord, terminate all or
any existing subtenancies or may, at the option of Landlord,
operate as an assignment to Landlord of any or all of such
subtenancies. During any period while Tenant is in default under
this Lease, Landlord, in addition to any other rights and
remedies it may have under this Lease, shall have the right to
collect directly from any subtenant all rentals owing to Tenant
under any subtenancy and to apply such rentals to any amounts
owing to Landlord by Tenant and the payment of such amounts by
the subtenant directly to Landlord shall not be a default under
the subtenancy.
(s) Joint and Several Liability. Each party signing this
Lease as Tenant shall be jointly and severally liable for the
failure on the part of Tenant to pay any sums due under the terms
of this Lease or for the breach by Tenant or any of the covenants
or obligations of Tenant contained herein.
(t) Individual Liability. The obligations of Landlord
under this Lease do not constitute personal obligations of the
individual partners, directors, officers, or shareholders of
Landlord, and Tenant shall look solely to the real estate that is
<PAGE> 39
the subject of this Lease and to no other assets of Landlord for
satisfaction of any liability in respect of this Lease and will
not seek recourse against the individual partners, directors,
officers or shareholders of Landlord or any of their personal
assets for such satisfaction.
(u) Attornment. Tenant shall, in the event any proceedings
are brought for the foreclosure of, or in the event of exercise
of the power of sale under any mortgage or deed of trust made by
the Landlord, its successors or assigns, encumbering the
Premises, or any part thereof, or in the event of termination of
the ground lease, if any, and if so requested, attorn to the
purchaser upon such foreclosure or sale or upon any grant of a
deed in lieu of foreclosure and shall recognize such purchaser as
the Landlord under this Lease.
(v) Lenders Right to Cure. Tenant agrees to give the
holder of any mortgage or trust deed encumbering the Premises, by
registered mail, a copy of any notice of default or
nonperformance served upon Landlord, provided that prior to such
notice, Tenant has been notified in writing (by way of Assignment
of Rents and Leases or otherwise) of the address of such
mortgagee or trust deed holder. Tenant further agrees that
Landlord shall not be in default under this Lease unless (i)
Tenant has given a written notice to Landlord stating that
Landlord has failed to perform Landlord's obligations under this
Lease and (ii) specifying with particularity the obligations
which Landlord has failed to perform, and Landlord thereafter
fails to perform any of its obligations so specified within a
reasonable time after Landlord's receipt of such notice. If
Landlord shall fail to cure such nonperformance in a timely
manner, then such mortgagee or trust deed holder shall have an
additional thirty (30) days within which to cure the default, or,
if such default cannot be cured within that time, then such
additional time as may be necessary if within such thirty (30)
days such mortgagee or trust deed holder has commenced and is
diligently pursuing the remedies necessary to cure such default
(including but not limited to commencement of foreclosure
proceedings, if necessary to effect such cure), in which event
this Lease shall not be terminated by Tenant while such remedies
are being so diligently pursued.
(w) Revisions to Lease. Tenant hereby agrees to make any
reasonable revisions to this Lease which may be required in good
faith by a bona fide construction, interim or permanent lender in
connection with the financing of the Premises so long as such
revisions do not adversely affect rights granted to and
obligations imposed upon Tenant under this Lease or the economic
benefits of Tenant hereunder.
<PAGE> 40
(x) Administrative Charge. In addition to Fixed Rent,
Adjustments and other charges hereunder, Tenant shall pay to
Landlord an overall administrative charge of five percent (5%) of
any charge which is Tenant's responsibility to pay, which
Landlord pays on behalf of Tenant and for which Landlord
subsequently bills Tenant.
19. Toxic Materials. (a) Definitions.
(i) As used in this Lease, the term "Hazardous
Material[s]" means any oil, flammable items, explosives,
radioactive materials, hazardous or toxic substances,
material or waste or related materials including, without
limitation, any substances that pose a hazard to the
Premises or to persons on or about the Premises and any
substances defined as or included in the definition of
"hazardous substance," "hazardous waste," "hazardous
material," "toxic substance," "extremely hazardous waste,"
"restricted hazardous waste" or words of similar import, now
or subsequently regulated in any way under applicable
federal, state or local laws or regulations, including
without limitation, petroleum-based products, paints,
solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products,
asbestos, PCBs, urea formaldehyde foam insulation,
transformers or other equipment containing dielectric fluid,
levels of polychlorinated biphenyls, or radon gas, and
similar compounds, and including any different products and
materials which are subsequently found to have adverse
effects on the environment or the health and safety of
persons.
(ii) As used herein, the term "Environmental Law[s]"
means any one or all of the following: the Comprehensive
Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act
of 1986 (42 U.S.C. SEC. 9601 et seq.); the Resource
Conservation and Recovery Act as amended (42 U.S.C. Sec.
6901 et seq.); the Safe Drinking Water Act as amended (42
U.S.C. Sec. 300f et seq.); the Clean Water Act as amended
(33 U.S.C. Sec. 1251 et seq.); the Clean Air Act as amended
(42 U.S.C. Sec. 7401 et seq.); the Toxic Substances Control
Act as amended (15 U.S.C. Sec. 136 et seq.); the Solid Waste
Disposal Act as amended (42 U.S.C. Sec. 3251 et seq.); the
Hazardous Materials Transportation Act (49 U.S.C. Sec. 1801
et seq.); the regulations promulgated under any of the
foregoing; and all other laws, regulations, ordinances,
standards, policies, and guidelines now in effect or
hereinafter enacted by any governmental entity (whether
local, state or federal) having jurisdiction or regulatory
authority over the Premises or the Project or over
activities conducted therein and which deal with the
<PAGE> 44
regulation or protection of human health, industrial hygiene
or the environment, including the soil, subsurface soil,
ambient air, groundwater, surface water, and land use.
(iii) As used herein, the term "Environmental
Activity[ies]" means any generation, manufacture,
production, pumping, bringing upon, use, storage, treatment,
release, discharge, escaping, emitting, leaching, disposal
or transportation of Hazardous Materials.
(b) Prohibition on Hazardous Materials. Except as
specifically provided in subparagraph (c) below, Tenant shall not
cause or permit any Environmental Activities in, on or about the
Premises by Tenant or Tenant's agents, employees, contractors,
assignees, sublessees or invitees (hereinafter cumulatively
referred to as "Tenant's Agents") without the prior written
consent of Landlord. Landlord shall be entitled to take into
account such factors or facts as Landlord may reasonably
determine to be relevant in determining whether to consent to
Tenant's proposed Environmental Activity and Landlord may attach
conditions to any such consent if such conditions are reasonably
necessary to protect Landlord's interests in avoiding potential
liability upon Landlord or damage to Landlord's property arising
from any Environmental Activity by Tenant or Tenant's Agents. In
no event shall Landlord be required to consent to the
installation or use of any storage tanks on the Property.
(c) Exception to Prohibition. Notwithstanding the
prohibition set forth in subparagraph (b) above, but subject to
Tenant's covenant to comply with all Environmental Laws and with
the other provisions of this paragraph 19, Tenant may bring upon,
keep and use in the Premises (but not outside the Premises) (i)
general office supplies typically used in an office or warehouse
in the ordinary course of business, such as copier toner, liquid
paper, glue, ink and janitorial supplies, so long as such
supplies are used in the manner for which they were designed and
in such amounts as may be normal for the business operations
conducted by Tenant in the Premises; (ii) those Hazardous
Materials, if any, described on Exhibit D attached hereto and by
this reference made a part hereof so long as Tenant has delivered
to Landlord a description of the handling, storage, use and
disposal procedures to be utilized by Tenant with respect
thereto; and (iii) those Hazardous Materials, if any, as to which
(A) Tenant hereafter requests approval from Landlord for Tenant
to bring upon, keep upon and use in the Premises such items; (B)
Landlord grants such requested approval, which approval shall not
be unreasonably withheld; and (C) Tenant delivers to Landlord a
description of the handling, storage, use and disposal procedures
to be utilized therewith.
<PAGE> 42
(d) Compliance with Environmental Laws. Tenant shall keep
and maintain the Premises in compliance with, and shall not cause
or permit the Premises to be in violation of, any Environmental
Laws. All Tenant's activities at the Premises shall be in
accordance with all Environmental Laws. Additionally, Tenant
shall obtain any and all necessary permits for Tenant's
activities at the Premises. Tenant's obligations and liabilities
under this paragraph 19 shall continue so long as Landlord bears
any liability or responsibility under the Environmental Laws for
any action that occurs on the Premises during the term of this
Lease.
(e) Environmental Notices. Tenant shall immediately notify
Landlord of, and upon Landlord's request shall provide Landlord
with copies of, the following:
(i) Any correspondence, communication or notice, oral
or written, to or from any governmental entity regarding the
application of Environmental Laws to the Premises or
Tenant's operations on the Premises including, without
limitation, notices of violation, notices to comply and
citations;
(ii) Any reports filed pursuant to any Environmental
Law or self-reporting requirements;
(iii) Any permits and permit applications; and
(iv) Any change in Tenant's operations on the Premises
that will change or has the potential to change Tenant's or
Landlord's obligations or liabilities under Environmental
Laws.
Tenant shall also notify the Landlord of the release of any
Hazardous Material in, on, under, about or above the Premises,
the Building, the Property or the Project.
(f) Environmental Indemnity. Tenant shall protect,
indemnify, defend (with counsel satisfactory to Landlord) and
hold harmless Landlord and its directors, officers, partners,
employees, agents, lenders, and ground lessees, if any, and their
respective successors and assigns for, from and against any and
all losses, damages, claims, costs, expenses, penalties, fines
and liabilities of any kind (including, without limitation, the
cost of any investigation, remediation and cleanup, and
attorneys' fees) which, in Landlord's reasonable opinion, are
attributable to (i) any Environmental Activity on the Property or
Project or in the Building or Premises undertaken or committed by
Tenant or Tenant's Agents or caused by the negligence of such
persons during the Term of this Lease, (ii) any remedial or
clean-up work undertaken by or for Tenant in connection with
Tenant's Environmental Activities or Tenant's compliance with
<PAGE> 43
Environmental Laws, or (iii) the breach by Tenant of any of its
obligations and covenants set forth in this paragraph 19.
Landlord shall have the right but not the obligation to join and
participate in, and control, if it so elects, any legal
proceedings initiated in connection with the Environmental
Activities of Tenant or Tenant's Agents. Landlord may also
negotiate, defend, approve and appeal any action taken or issued
by any applicable governmental authority with regard to
contamination of the Premises or any portion of the Property or
Project by a Hazardous Material. Any costs or expenses incurred
by Landlord for which Tenant is responsible under this paragraph
19 or for which Tenant has indemnified Landlord shall be
reimbursed by Tenant on demand, as additional rent and with
interest thereon, as provided by subparagraph 17(d) of this
Lease. This indemnity shall survive the termination of this
Lease.
(g) Remedial Work. If (i) any Environmental Activity
undertaken by Tenant or Tenant's Agents results in contamination
of the Premises, Building, Property or Project or any portion
thereof, or the soil or groundwater thereunder, or (ii) any
investigation, site monitoring, containment, cleanup, removal,
restoration or other remedial work of any kind or nature
("Remedial Work") is necessary or appropriate due to or in
connection with Tenant's use or occupancy of the Premises, then,
subject to Landlord's prior written approval and any conditions
imposed by Landlord, Tenant shall promptly perform all Remedial
Work, at Tenant's sole expense and without abatement of rent, as
is necessary to return the affected portion of the Premises,
Building, Property and/or Project and the soil and groundwater to
the condition existing prior to the introduction of the
contaminating Hazardous Material and to otherwise comply with all
applicable Environmental Laws. Landlord's approval of such
Remedial Work shall not be unreasonably withheld so long as such
actions will not cause a material adverse effect on the Premises,
Building, Property or Project after expiration of the Lease Term
or any material adverse effect on the Premises, Building,
Property or Project. Landlord shall also have the right to
approve any and all contractors hired by Tenant to perform such
Remedial Work. All such Remedial Work shall be performed in
compliance with all applicable laws, ordinances and regulations
and in such a manner as to minimize any interference with the use
and enjoyment of the Premises, Building, Property and Project.
All costs and expenses of such Remedial Work shall be paid by
Tenant including, without limitation, the charges of such
contractor(s), and the reasonable fees and costs of the attorneys
and consultants for Landlord incurred in connection with
monitoring or review of such Remedial Work.
(h) Landlord's Option. Landlord may elect, at Landlord's
sole discretion, to perform any Remedial Work. Landlord and
Landlord's agents shall have the right to enter the Premises at
<PAGE> 44
all reasonable times to inspect, monitor and/or perform Remedial
Work. All expenses incurred by Landlord in connection with
performing Remedial Work are payable by Tenant, upon Landlord's
demand, with interest thereon, as provided by subparagraph 17(d).
(i) Injunctive Relief. Tenant's failure to abide by the
terms of this paragraph 19 shall be restrainable by injunction.
(j) Self-Help. Landlord shall have the right of
"self-help" or similar remedy in order to minimize any damages,
expenses, penalties and related fees or costs arising from or
related to a violation of any Environmental Law with respect to
the Premises or the Project.
(k) Other Tenants. Other tenants of the Project may be
using, handling or storing certain Hazardous Materials in
connection with such tenants' use of their premises. The failure
of another tenant to comply with applicable laws and procedures
could result in a release of Hazardous Materials and
contamination to improvements within the Project or the soil and
groundwater thereunder. In the event of such a release, the
tenant responsible for the release, and not Landlord, shall be
responsible for any claim, damage or expense incurred by Tenant
by reason of such contamination and Tenant shall exhaust all its
remedies against such other tenant without any right to seek any
recovery against Landlord.
(l) Environmental Inspection. Tenant shall, if reasonably
required by Landlord on account of the activities or suspected
activities of Tenant or Tenant's Agents, retain a recognized
environmental consultant (the "Consultant") acceptable to
Landlord to conduct an investigation of the Premises and of other
portions of the Project deemed appropriate by Landlord
("Environmental Assessment") (i) for Hazardous Materials
contamination in, about or beneath the Premises, the Building or
the Project as a result of such activities and (ii) to assess all
Environmental Activities of Tenant and Tenant's Agents on the
Premises or the Project for compliance with all applicable laws,
ordinances and regulations and for the use of procedures intended
to reasonably reduce the risk of a release of Hazardous
Materials. The Environmental Assessment shall be performed in a
manner reasonably calculated to discover the presence of
Hazardous Materials contamination and shall be of a scope and
intensity reflective of the general standards of professional
environmental consultants who regularly provide environmental
assessment services in connection with the transfer or leasing of
real property. Additionally, the Environmental Assessment shall
take into full consideration the past and present uses of the
Property and Project and other factors unique to the Property and
Project. If Landlord obtains the Environmental Assessment
because of the activities of Tenant or Tenant's Agents, Tenant
shall pay Landlord on demand the cost of the Environmental
<PAGE> 45
Assessment, with interest thereon, as additional rent and in
accordance with subparagraph 17(d). If Landlord so requires,
Tenant shall comply, at its sole cost and expense, with all
recommendations contained in the Environmental Assessment,
including any recommendation with respect to the precautions
which should be taken with respect to Environmental Activities on
the Premises or the Project or any recommendations for additional
testing and studies to detect the presence of Hazardous
Materials. Tenant covenants to reasonably cooperate with the
Consultant and to allow entry and reasonable access to all
portions of the Premises for the purpose of Consultant's
investigation.
(m) Surrender of Premises - Environmental Considerations.
Prior to or after the expiration or termination of the Lease
Term, Landlord may have an Environmental Assessment of the
Property performed in accordance with subparagraph (l) above.
Tenant shall perform, at its sole cost and expense, any Remedial
Work recommended by the Consultant which is necessary to remove,
mitigate or remediate any Hazardous Materials contamination of
the Premises, Building, Property or Project in connection with
any Environmental Activities of Tenant or Tenant's Agents. Prior
to surrendering possession of the Premises, Tenant shall also,
unless otherwise directed by Landlord, remove any personal
property, equipment, fixture (except for any fixture installed by
Landlord) and/or storage device or vessel on or about the
Premises, Building, Property and/or Project which is contaminated
by or contains Hazardous Materials as a result of the activities
of Tenant or Tenant's Agents and repair all damage to the
Premises, the Building and the Project caused by such removal.
20. Additional Security. (a) Letter of Credit. In
addition to the Security Deposit required by subparagraph 6(a) of
this Lease, Tenant shall deliver, or cause to be delivered, to
Landlord, simultaneously with the execution and delivery of this
Lease (the "LC Date") and in accordance with the provisions of
this paragraph 20, a Letter of Credit satisfying the requirements
set forth in Exhibit E attached hereto and by this reference made
a part hereof (the "Letter of Credit"). Tenant shall, subject to
renewal, substitution or release as specifically provided in
Exhibit E, cause the Letter of Credit to remain in full force and
effect from the date of execution of this Lease until thirty (30)
days after the expiration of the Term of this Lease. If Tenant
fails to have on deposit with Landlord at any time required
hereunder a Letter of Credit fully satisfying the requirements of
Exhibit E, such failure shall constitute a default under this
Lease. Landlord shall have all remedies under subparagraph 17(b)
of the Lease in the event of such a default. If the financial
institution issuing the Letter of Credit for any reason indicates
that the Letter of Credit will be terminated or expire prior to
the date specified in Exhibit E, even if such a termination or
expiration would be wrongful, Landlord may, in addition to any
<PAGE> 46
other rights and remedies it may have under this Lease or the
Letter of Credit, draw upon the Letter of Credit, treat the
entire amount of the proceeds of such drawing as an increase in
the amount of the Security Deposit under this Lease, and retain
and/or apply such proceeds in the same manner as the initial
Security Deposit may be retained and/or applied.
(b) Use of Proceeds. If Tenant fails to pay Rent or any
other charges payable by Tenant hereunder, or otherwise defaults
with respect to any provision of this Lease (including but not
limited to Tenant's obligation to have the Letter of Credit in
effect as provided in subparagraph 20(a), Landlord may, in
addition to any other rights and remedies it may have, at its
option and from time to time draw upon the Letter of Credit and
apply amounts received under the Letter of Credit (i) to remedy
Tenant's defaults in the payment of Rent or any other sums
payable by Tenant pursuant to the terms of this Lease; (ii) to
repair any damage to the Premises, (iii) to clean and otherwise
maintain the Premises, or (iv) to compensate Landlord for any
other loss or damage which Landlord may suffer thereby.
(c) Additional Rights and Remedies. In the event of any
termination of this Lease pursuant to this paragraph 20 or
pursuant to any other default by Tenant, (i) Landlord shall have
no further obligation to complete the Premises or to lease the
Premises to Tenant; (ii) Landlord shall be entitled to
reimbursement from Tenant of, and Tenant shall promptly pay to
Landlord, all expenses of Landlord incurred in connection with
the preparation and negotiation of this Lease and construction of
the Tenant Improvements through the date of such termination; and
(iii) Landlord may deduct the reimbursement amount determined
under clause (ii) above from any or all of the proceeds from a
drawing under the Letter of Credit, the Security Deposit and/or
any prepaid rent deposited with Landlord prior to refunding the
Letter of Credit, the Security Deposit or prepaid rent to Tenant,
but none of the Letter of Credit, the prepaid rent or Security
Deposit shall in any manner limit Tenant's liability for the full
amount of the reimbursement to which Landlord is entitled under
clause (ii) above. In addition, if this Lease is not terminated
as provided in this paragraph 20, Landlord may, at its option,
extend the Scheduled Commencement Date by a period of time equal
to the period between the LC Date and any subsequent date that
the Letter of Credit (in compliance with the foregoing
requirements) is furnished to and accepted by Landlord.
Upon reimbursement for the cost of the Tenant Improvements
as provided in clause (ii) above and any transaction privilege
tax applicable thereto, the Fixed Rent owing under the Lease
shall, for purposes of determining additional sums to be received
by Landlord after termination of this Lease as a result of
Tenant's default, be deemed reduced to that amount which would
reasonably have been charged to Tenant as Fixed Rent under this
<PAGE> 47
Lease if the Premises had originally been leased to Tenant
without any obligation on the part of Landlord to make the Tenant
Improvements.
(d) Remedies Not Exclusive. The rights and remedies of
Landlord set forth in this paragraph 20 are in addition to any
other rights and remedies of Landlord set forth in this Lease and
Landlord may pursue all or any of such rights and remedies in any
order Landlord may elect. In particular, and not by way of
limitation, Landlord may, at its option, exercise the rights and
remedies set forth in paragraph 6 of this Lease at any time and
from time to time, in whole or in part, even though additional
security for the performance of Tenant's obligations has been
furnished to Landlord pursuant to this paragraph 20. Moreover,
Landlord shall not be required to exercise its rights under this
paragraph 20 even if there has been a default under the Lease and
Landlord may elect to exercise any other rights and remedies it
may have as a result of the occurrence of such default.
(e) Return of Letter of Credit and Stock. If not
previously returned to Tenant under the provisions hereof or
applied to Tenant's obligations under this Lease, the Letter of
Credit if still held by Landlord and/or any proceeds from the
drawing(s) upon the Letter of Credit shall be returned to Tenant
at the same time as the Security Deposit would be returned.
IN WITNESS WHEREOF, the undersigned have executed this Lease
as of the date and year first above written.
HEWSON/BRECKNER AIRPARK, L.L.C., a California
corporation
BY: HEWSON PROPERTIES, INC., an Arizona
corporation, its Manager
BY: /s/ Michael J. Corbett
Its: Executive Vice President
MAXAM GOLD CORPORATION, a Utah corporation
BY: Alan E. Hubbard
Its: President
<PAGE> 48
TENANT ACKNOWLEDGMENTS:
CORPORATE
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this the 23rd day of September, 1997, before me, the
undersigned Notary Public, personally appeared Alan E. Hubbard,
who acknowledged himself to be the President of MAXAM GOLD
CORPORATION, a Utah corporation, and that he, as such officer,
being authorized so to do, executed the foregoing instrument for
the purposes therein contained, by signing the name of the
corporation, by himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Catherine Wochner
Notary Public
My Commission Expires:
December 15, 1998
LANDLORD ACKNOWLEDGMENTS:
STATE OF ARIZONA )
) ss.
County of Maricopa )
On this the 26th day of September, 1997, before me, the
undersigned Notary Public, personally appeared Michael J.
Corbett, who acknowledged himself to be the Executive Vice
President of HEWSON PROPERTIES, INC., a California corporation
and Manager of HEWSON/BRECKNER AIRPARK, L.L.C., an Arizona
limited liability company, and that he, as such officer, being
authorized so to do, executed the foregoing instrument for the
purposes therein contained, by signing the name of the
corporation as manager of Hewson/Breckner Airpark, L.L.C., by
himself as such officer.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
J. Marie Burns
Notary Public
My Commission Expires:
May 13, 2000
<PAGE> 49
EXHIBIT A
Diagram, not included for EDGAR filing.
EXHIBIT B
Diagram, not included for EDGAR filing.
EXHIBIT C
CERTAIN TENANT IMPROVEMENTS
* Space programming, planning, contract drawings and complete
architectural and engineering services.
* Building permits and associated fees.
* Standard office partitions, doors, door frames and
associated hardware.
* Drop ceiling grid with acoustical tiles.
* Recessed fluorescent light fixtures.
* Carpet and other typical finished floor coverings.
* Heating, ventilating and air conditioning equipment and
associated work ("HVAC").
* Roof insulation.
* Standard toilet rooms and plumbing fixtures.
* Evap-cooled warehouse area of approximately 3,132 s.f.
* Fluorescent strip light fixtures.
* Demising wall.
* Nine (9) covered parking spaces in the rear of the building.
* Tenant's signage.
EXHIBIT D
HAZARDOUS MATERIALS
NONE
<PAGE> 50
EXHIBIT E
15500 GREENWAY - HAYDEN LOOP, SCOTTSDALE, ARIZONA
LETTER OF CREDIT REQUIREMENTS
Except as hereinafter provided, Tenant shall keep in full
force and effect, from the date of execution of this Lease until
thirty (30) days after the expiration of this Lease, an
unconditional and irrevocable letter of credit in favor of
Landlord which satisfies all of the following requirements (the
"Letter of Credit"):
(a) The Letter of Credit shall have a term expiring not
less than one (1) month after the scheduled expiration of the
term of this Lease; provided, however, the Letter of Credit may
have a term of not less than one (1) year if the Letter of Credit
provides that it will automatically renew on an annual basis
throughout the above specified period unless written notice of a
non-renewal is furnished to Landlord on or before sixty (60) days
prior to the expiration of the then current term of the Letter of
Credit. If such a notice of non-renewal is given to Landlord,
Landlord may, at any time during the period commencing thirty
(30) days prior to the expiration of the Letter of Credit until
expiration of the Letter of Credit, draw upon the Letter of
Credit and treat the proceeds as an increase in the amount of the
Security Deposit hereunder unless Tenant, on or before such
drawing by Landlord, delivers to Landlord a substitute Letter of
Credit complying with all of the requirements of this Exhibit E.
(b) The Letter of Credit shall be in an amount not less
than $220,000.00; provided, however, if no default by Tenant has
occurred prior to the commencement of the fifth (5th) year of the
Term of this Lease, the amount of the Letter of Credit may be
reduced at any time thereafter, but only prior to the occurrence
of a default, to the amount of $150,000.
(c) The Letter of Credit shall be transferable by Landlord
and by any subsequent Landlord under this Lease in connection
with any assignment of this Lease to a new owner of the Premises.
(d) The Letter of Credit shall be issued by Bank One,
Arizona, NA, or other financial institution incorporated or
chartered under the laws of the United States or any state
thereof and approved by Landlord, which approval shall not be
unreasonably withheld or delayed so long as Tenant furnishes to
Landlord such information concerning the creditworthiness and
financial stability of such institution as Landlord shall
reasonably request, and shall otherwise be in form and substance
satisfactory to Landlord.
<PAGE> 51
(e) The Letter of Credit may be drawn upon from time to
time by Landlord upon presentation by the Landlord of the Letter
of Credit and a statement signed by Landlord certifying that
Landlord is entitled to draw upon the Letter of Credit in the
amount requested.
Tenant may, at any time during the term of this Lease that Tenant
is not in default under this Lease, furnish to Landlord annual
financial statements for a period of three (3) consecutive years,
which financial statements shall be audited and certified by a
certified public accounting firm and for each year shall include
but not be limited to a balance sheet, annual income statement
and statement of change in financial position, together with a
request that Landlord release the Letter of Credit. If such
financial statements reflect three (3) consecutive years of
profitable operations by the Tenant and at least two (2) of such
years are within the Term of this Lease, then the Landlord will
undertake a review to determine if Landlord will release the
Letter of Credit. If Tenant's financial condition, history of
operations, forecast of anticipated operations, and record of
performance under this Lease, as evidenced by such annual
financial statements and other information as may be available to
or required by Landlord, have reached a level where Landlord
would, in accordance with practices then being utilized by
Landlord, not require any security other than the Security
Deposit provided in subparagraph 1(l) of this Lease for the
performance of a tenant's obligation under a lease for space
similar in size, location and rental obligation to this Lease,
Landlord will release the Letter of Credit to the extent not
drawn upon previously.
MORGENSTERN & ALEXANDER
CERTIFIED PUBLIC ACCOUNTANTS
350 Broadway, 4th Floor
New York, NY 10013-3911
TEL: (212) 925-9490
FAX: (212)226-9134
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Shareholders and Board of Directors
Maxam Gold Corporation and subsidiary
We have issued our report dated May 20, 1997, accompanying
the consolidated financial statements of Maxam Gold Corporation
and subsidiary contained in the SB-2 Registration Statement. We
consent tot eh use of the aforementioned report in the SB-2
Registration Statement and to the use of our name as it appears
under the caption "Experts".
/s/ Morgenstern & Alexander
Morgenstern & Alexander
Certified Public Accountants
New York, New York
October 20, 1997
<PAGE> 1
CONRAD C. LYSIAK
Attorney and Counselor at Law
601 West First Avenue
Suite 503
Spokane, Washington 99201
(509) 624-1475
FAX: (509) 747-1770
CONSENT
I HEREBY CONSENT to the inclusion of my name in
connection with the Form SB-2 Registration Statement filed with
the Securities and Exchange Commission as attorney for the
registrant, Maxam Gold Corporation and to the reference to my
firm under the subcaption "Legal Matters."
DATED this 23rd day of October, 1997.
Yours truly,
/s/ Conrad C. Lysiak
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at June 30, 1997 (Unaudited) and the
Statement of Income for the six months ended June 30, 1997 (Unaudited) and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1997 DEC-31-1996
<CASH> 230,025 454,406
<SECURITIES> 0 400,000
<RECEIVABLES> 66,690 83,610
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 309,404 942,794
<PP&E> 1,149,474 714,338
<DEPRECIATION> 129,888 60,189
<TOTAL-ASSETS> 1,415,618 1,688,199
<CURRENT-LIABILITIES> 1,088,408 630,336
<BONDS> 0 0
0 0
0 0
<COMMON> 455 455
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 1,415,618 1,688,199
<SALES> 0 0
<TOTAL-REVENUES> 11,014 21,398
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 743,107 1,045,314
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 51,348 55,627
<INCOME-PRETAX> 0 0
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 0 0
<EPS-PRIMARY> (0.02) (0.02)
<EPS-DILUTED> (0.02) (0.02)
</TABLE>
<PAGE> 1
WARRANT AGREEMENT
MAXAM GOLD CORPORATION, a Utah corporation (the
"Company"), and INTERWEST TRANSFER CO., INC. ("INTERWEST"), P. O.
Box 17136, Salt Lake City, Utah 84117, a Utah corporation (the
"Warrant Agent"), agree as follows:
1. Purpose. The Company proposes to publicly offer
and issue 9,109,172 Warrants to purchase 9,109,172 shares of
Common Stock underlying the Warrants. Warrants are being issued
exclusively to shareholders of the Company. Warrants will be
issued to shareholders of record on March 14, 1997. One Warrant
will be issued for each five shares owned by a shareholder.
Fractional Warrants will not be issued.
2. Warrants. Each Warrant will entitle the registered
holder of a Warrant (the "Warrant Holder") to purchase from the
Company one share of Common Stock at an exercise price of $1.00
per warrant. A Warrant Holder may exercise all of any number of
Warrants resulting in the purchase of a whole number of Shares.
3. Exercise Period. The Warrants may be exercised
until five years from the effective date of the Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on October __, 1997, (the "Expiration Date") except as
provided by Section 12 of this Agreement. After the Expiration
Date, any unexercised warrants will be void and all rights of
Warrant Holders shall cease.
4. Detachability. A Warrant Certificates are
immediately detachable from a Share certificate contained in a
Unit.
5. Certificates. The Warrant Certificates shall be in
registered form only and shall be substantially in the form set
forth in "Exhibit A" attached to this Agreement. Warrant
Certificates shall be signed by, or shall bear the facsimile
signature of, the President of the Company and the Secretary of
the Company and if such Warrant Certificate shall contain the
signature of an officer of the Company who shall have ceased to
be such officer before such Warrant Certificate is countersigned,
issued and delivered, such Warrant Certificate shall be
countersigned, issued and delivered with the same effect as if
such person had not ceased to be such officer. Any Warrant
Certificate may be signed by, or made to bear the facsimile
signature of, any person who at the actual date of the
preparation of such Warrant Certificate shall be a proper officer
of the Company to sign such Warrant Certificate even though such
person was not such an officer upon the date of the Agreement.
<PAGE> 2
6. Countersigning. Warrant Certificates shall be
manually countersigned by the Warrant Agent and shall not be
valid for any purpose unless so countersigned. The Warrant Agent
hereby is authorized to countersign and deliver to, or in
accordance with the instructions of, any Warrant Holder any
Warrant Certificate which is properly issued.
7. Registration of Transfer and Exchanges. Subject to
the provisions of Section 4, the Warrant Agent shall from time to
time register the transfer of any outstanding Warrant Certificate
upon records maintained by the Warrant Agent for such purpose
upon surrender of such Warrant Certificate to the Warrant Agent
for transfer, accompanied by appropriate instruments of transfer
in form satisfactory to the Company and the Warrant Agent and
duly executed by the Warrant Holder or a duly authorized
attorney. Upon any such registration of transfer, a new Warrant
Certificate shall be issued in the name of and to the transferee
and the surrendered Warrant Certificate shall be cancelled.
8. Exercise of Warrants. Exercise of a Warrant is
subject to the Company maintaining an effective registration
statement with the Securities and Exchange Commission and
complying with the applicable state securities laws of the
residence of the Warrant Holder. Subject to the foregoing the
following will applicable:
a. Any one Warrant or any multiple of one Warrant
evidenced by any Warrant Certificate may be exercised on or
after the Exercise Date, an on or before the Expiration
Date. A Warrant shall be exercised by the Warrant Holder by
surrendering to the Warrant Agent the Warrant Certificate
evidencing such Warrant with the exercise form on the
reverse of such Warrant Certificate duly completed and
executed and delivering to the Warrant Agent, by good check
or bank draft payable to the order of the Company, the
Exercise Price for each Share to be purchased.
b. Upon receipt of a Warrant Certificate with the
exercise from thereon fully executed together with payment
in full of the Exercise Price for the Shares for which
Warrants are then being exercised, the Warrant Agent shall
requisition from any transfer agent for the Shares, and upon
receipt shall make delivery of, certificates evidencing the
total number of whole Shares for which Warrants are then
being exercised in such names and denominations as are
required for delivery to, or in accordance with the
instructions of, the Warrant Holder. Such certificates for
the Shares shall be deemed to be issued, and the person
which such Shares are issued of record shall be deemed to
have become a holder of record of such Shares, as of the
date of the surrender of such Warrant Certificate any
payment of the Exercise Price, which ever shall last occur,
<PAGE> 3
provided that if the books of the Company with respect to
the Shares shall be deemed to be issued, and the person to
whom such Shares are issued of record shall be deemed to
have become a record holder of such Shares, as of the date
on which such books shall next be open (whether before, on
or after the Expiration Date) but at the Exercise Price,
whichever shall have last occurred, to the Warrant Agent.
c. If less than all the Warrants evidenced by a
Warrant Certificate are exercised upon a single occasion, a
new Warrant Certificate for the balance of the Warrants not
so exercised shall be issued and delivered to, or in
accordance with, transfer instructions properly given by the
Warrant Holder until the Expiration Date.
d. All Warrant Certificates surrendered upon
exercise of the Warrants shall be cancelled.
e. Upon the exercise, or conversion of any
Warrant, the Warrant Agent shall promptly deposit the
payment into an escrow account established by mutual
agreement of the Company and the Warrant Agent at a
federally insured commercial bank. All funds deposited in
the escrow account will be disbursed on a weekly basis to
the issuer once they have been determined to be collected,
the Warrant Agent shall cause the shares certificate(s)
representing the exercised warrants to be issued.
f. Expenses incurred by INTERWEST TRANSFER CO.,
INC. while acting in the capacity as Warrant Agent will be
paid by the Company. These expenses, including delivery of
exercised share certificate to the shareholder, will be
deducted from the exercise fee submitted prior to
distribution of funds to the Company. A detailed accounting
statement relating to the number of shares exercised, names
of registered warrant holder and the net amount of
exercised, funds remitted will be given to the Issuer with
the payment of each exercise amount.
g. At the time of exercise of the Warrants(s),
the transfer fee is to be paid by the Company. In the event
the Warrant Holders must pay the fee and fails to remit
same, the fee will be deducted from the proceeds prior to
distribution to the Company.
9. Taxes. The Company will pay all taxes attributable
to the initial issuance of Shares upon exercise of Warrants. The
Company shall not, however, be required to pay any tax which may
be payable in respect to any transfer involved in any issue of
Warrant Certificates or in the issue of any certificates of
Shares in the name other than that of the Warrant Holder upon the
exercise of any Warrants.
<PAGE> 4
10. Mutilated or Missing Warrant Certificates. If any
Warrant Certificate is mutilated, lost, stolen or destroyed, the
Company and the Warrant Agent may, on such terms as to indemnify
or otherwise as they may in their discretion impose (which shall,
in the case of a mutilated Warrant Certificate, include the
surrender thereof), and upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such mutilation, loss, theft
or destruction, issue a substitute Warrant Certificate of like
denomination or tenor as the Warrant Certificate so mutilated,
lost, stolen or destroyed. Applicants for substitute Warrant
Certificate shall comply with such other reasonable regulations
and pay any reasonable charges as the Company or the Warrant
Agent may prescribe.
11. Reservation of Shares. For the purpose of
enabling the Company to satisfy all obligations to issue Shares
upon exercise of Warrants, the Company will at all times reserve
and keep available free from preemptive rights, out of the
aggregate of its authorized but unissued shares, the full number
of Shares which may be issued upon the exercise of Warrants will
upon issue be fully paid and nonassessable by the Company and
free from all taxes, liens, charges and security interests with
respect to the issue thereof.
12. Governmental Restrictions. If any Shares issuable
upon the exercise of Warrants require registration or approval of
any governmental authority, the Company will endeavor to secure
such registration or approval; provided that in no event shall
such Shares be issued, and the Company shall have the authority
to suspend the exercise of all Warrants, until such registration
or approval shall have been obtained; but all Warrants, the
exercise of which is requested during any such suspension, shall
be exercisable at the exercise Price. If any such period of
suspension continues past the Expiration Date, all Warrants, the
exercise of which have been requested on or prior to the
Expiration Date, shall be exercisable upon the removal of such
suspension until the close of business on the business day
immediately following the expiration of such suspension.
13. Adjustments. If prior to the exercise of any
Warrants, the Company shall have effected one or more stock
split-ups, stock dividends or other increases or reductions of
the number of shares of its $0.01 par value Common Stock
outstanding without receiving compensation therefore in money,
services or property the number of shares of Common Stock subject
to the Warrant granted shall, (i) if a net increase shall have
been effected in the number of outstanding shares of the
Company's Common Stock, be proportionately increased, and the
cash consideration payable per share shall be proportionately
reduced, and, (ii) if a net reduction shall have been effected in
the number of outstanding shares of the Company's Common Stock,
be proportionately reduced and the cash consideration payable per
share be proportionately increased.
<PAGE> 5
14. Notice to Warrant Holders. Upon any adjustment as
described in Section 13, the Company within 20 days thereafter
shall (i) cause to be filed with the Warrant Agent a certificate
signed by a Company officer setting forth the details of such
adjustment, the method of calculation and the facts upon which
such calculation is based, which certificate shall be conclusive
evidence of the correctness of the matters set forth therein, and
(ii) cause written notice of such adjustments to be given to each
Warrant Holder as of the record date applicable to such
adjustment. Also, if the Company proposes to enter into any
reorganization, reclassification, sale of substantially all of
its assets, consolidation, merger, dissolution, liquidation or
winding up, the Company shall give notice of such fact at least
20 days prior to such action to all Warrant Holders which notice
shall set forth such facts as indicated the effect of such action
(to the extent such effect may be known at the date of such
notice) on the Exercise Price and the kind and amount of the
share or other securities and property deliverable upon exercise
of the Warrants. Without limiting the obligation of the Company
hereunder to provide notice to each Warrant Holder, failure of
the Company to give notice shall not invalidate corporate action
taken by the Company.
15. No Fractional Warrants or Shares. The Company
shall not be required to issue fractions of Warrants upon the
reissuance of Warrants, any adjustments as described in Section
13 or otherwise; but the Company in lieu of issuing any such
fractional interest, shall round up or down to the nearest full
Warrant. If the total Warrants surrendered by exercise would
result in the issuance of a fractional shares, the Company shall
not be required to issue a fractional share but rather the
aggregate number of shares issuable will be rounded up or down to
the nearest full share.
16. Rights of Warrant Holders. No Warrant Holder, as
such, shall have any rights of a shareholder of the Company,
either at a law or equity, and the rights of the Warrant Holders,
as such, are limited to those rights expressly provided in this
Agreement or in the Warrant Certificates. The Company and the
Warrant Agent may treat the registered Warrant Holder in respect
of any Warrant Certificates as the absolute owner thereof for all
purposes notwithstanding any notice to the contrary.
17. Warrant Agent. The Company hereby appoints the
Warrant Agent to act as the agent of the Company and the Warrant
Agent hereby accepts such appointment upon the following terms
and conditions by all of which the Company and every Warrant
Holder, by acceptance of his/her Warrants, shall be bound:
<PAGE> 6
a. Statements contained in this Agreement and in
the Warrant Certificates shall be taken as statements of the
Company. The Warrant Agent assumes no responsibility for
the correctness of any of the same except such as describes
the Warrant Agent or for action taken or to be taken by the
Warrant Agent.
b. The Warrant Agent shall not be responsible for
any failure of the Company to comply with any of the
Company's covenants contained in this Agreement or in the
Warrant Certificates.
c. The Warrant Agent may consult at any time with
counsel satisfactory to it (who may be counsel for the
Company) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrant Holder in
respect of any action taken, suffered, or omitted by it
hereunder in good faith and in accordance with the opinion
or the advice of such counsel, provided the Warrant Agent
shall have exercised reasonable care in the selection and
continued employment of such counsel.
d. The Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrant Holder for
any action taken in reliance upon any notice, resolution,
wavier, consent, order, certificate or other paper, document
or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
e. The Company agrees to pay to the Warrant Agent
reasonable compensation for all services rendered by the
Warrant Agent in the execution of this Agreement, to
reimburse the Warrant Agent for all expenses, taxes and
governmental charge and all other charges of any kind in
nature incurred by the Warrant Agent in the execution of
this Agreement and to indemnify the Warrant Agent and save
it harmless against any and all liabilities, including
judgments, costs and counsel fees, for this Agreement except
as a result of the Warrant Agents's negligence or bad faith.
f. The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take
any other action likely to involve expense unless the
Company or one or more Warrant Holders shall furnish the
Warrant Agent with reasonable security and indemnity for any
costs and expenses which may be incurred in connection with
such action, suite or legal proceeding, but this provision
shall not effect the power of the Warrant Agent to take such
action as the Warrant Agent may consider proper, whether
with or without any such security or indemnity. All rights
of action under this Agreement or under any of the Warrants
may be endorsed by the Warrant Agent without the possession
<PAGE> 7
of any of the Warrant Certificates or the production thereof
at any trail or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant
Agent shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the
Warrant Holders as their respective rights or interest may
appear.
g. The Warrant Agent and any shareholder,
director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of
the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or
contact with or lend money to the Company or otherwise act
as fully and freely as though it were not Warrant Agent
under this Agreement. Nothing herein shall preclude the
Warrant Agent from acting in any other capacity for the
Company or for any other legal entity.
18. Successor Warrant Agent. Any corporation into
which the Warrant Agent may be merged or converted or with which
it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Warrant Agent
shall be a party, or any corporation succeeding to the corporate
trust business of the Warrant Agent, shall be the successor to
the Warrant Agent hereunder without the execution or filing of
any paper or any further act of a party or the parties hereto.
In any such event or if the name of the Warrant Agent is changed,
the Warrant Agent or such successor may adopt the
countersignature of the original Warrant Agent and may
countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant
Agent.
19. Change of Warrant Agent. The Warrant Agent may
resign or be discharged by the Company from its duties under this
Agreement by Warrant Agent or the Company, as the case may be,
giving notice in writing to the other, and by giving a date when
such resignation or discharge shall take effect, which notice
shall be sent at least 30 days prior to the date so specified.
If the Warrant Agent shall resign, be discharged or shall
otherwise become incapable of acting, the Company shall appoint a
successor to the Warrant Agent. If the Company shall fail to
make such appointment within a period of 30 days after it has
been notified in writing of such resignation or incapacity by the
resigning or incapacitated Warrant Agent or by any Warrant Holder
or after discharging the Warrant Agent, then any Warrant Holder
may apply to the District Court for Salt Lake County, Utah for
the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the
Company or by such Court, the duties of the Warrant Agent shall
be carried out by the Company. Any successor Warrant Agent,
<PAGE> 8
whether appointed by the Company or by such Court, shall be a
bank or a trust company, in good standing, organized under the
laws of the State of Utah or of the United States of America,
having its principal office in Salt Lake City, Utah and having at
the time of its appointment as Warrant Agent, a combined capital
and surplus of at least four million dollars. After appointment,
the successor Warrant Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed and the former
Warrant Agent shall deliver and transfer to the successor Warrant
Agent any property at the time held by it thereunder, and execute
and deliver any further assurance, conveyance, act or deed
necessary for effecting the delivery or transfer. Failure to
give any notice provided for in the section, however, or any
defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of
the successor Warrant Agent, as the case may be.
20. Notices. Any notice or demand authorized by this
Agreement to be given or made by the Warrant Agent or by any
Warrant Holder to or on the Company shall be sufficiently given
or made if sent by mail, first class, certified or registered,
postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
MAXAM GOLD CORPORATION
528 Fon du Lac Drive
East Peoria, Illinois 61611
Any notice or demand authorized by this Agreement to be given or
made by any Warrant Holder or by the Company to or on the Warrant
Agent shall be sufficiently given or made if sent by mail, first
class, certified or registered, postage prepaid, addressed (until
another address is filed in writing by the Warrant Agent with the
Company), as follows:
INTERWEST TRANSFER CO., INC.
P. O. Box 17136
Salt Lake City, Utah 84117
Any distribution, notice or demand required or authorized by this
Agreement to be given or made by the Company or the Warrant Agent
to or on the Warrant Holder shall be sufficiently given or made
if sent by mail, first class, certified or registered, postage
prepaid, addressed to the Warrant Holders at their last known
addresses as they shall appear on the registration books for the
Warrant Certificates maintained by the Warrant Agent.
<PAGE> 9
21. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this
Agreement without the approval of any Warrant Holders in order to
cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any
other provisions herein, or to make any other provisions in
regard to matters or questions arising hereunder with the Company
and the Warrant Agent may deem necessary or desirable.
22. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the
Warrant Agent shall bind and inure to the benefit of their
respective successors and assigns hereunder.
23. Termination. This Agreement shall terminate at
the close of business on the Expiration Date or such earlier date
upon which all Warrants have been exercised; provided, however,
that if exercise of the Warrants is suspended pursuant to Section
12 and such suspension continues past the Expiration Date, this
Agreement shall terminate at the close of business on the
business day immediately following expiration of such suspension.
The provisions of Section shall survive such termination.
24. Governing Law. This Agreement and each Warrant
Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Utah and for all purposes
shall be construed in accordance with the laws of said state.
25. Benefits of this Agreement. Nothing in this
Agreement shall be construed to give any person or corporation
other than the Company, the Warrant Agent and the Warrant Holder
any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the Warrant
Holders.
26. Counterparts. This Agreement may be executed in
any number of counterparts, each of such counterparts shall for
all purposes be deemed to be an original and all such
counterparts shall together constitute but one and the same
instrument.
<PAGE> 10
Dated this _____ day of ________________, 1997.
MAXAM GOLD CORPORATION
(a Utah corporation)
SEAL
ATTEST: BY: __________________________________
Title: ___________________________
_________________________________
Secretary
INTERWEST TRANSFER CO., INC.
(a Utah corporation)
SEAL
ATTEST: BY: __________________________________
Title: ___________________________
_________________________________
Secretary
<PAGE> 11
EXHIBIT A
WARRANTS CERTIFICATE
THIS IS TO CERTIFY that, for value received,
or registered assigns (the "Warrant Holder"), is the registered owner
of the above-indicated number of Warrants expiring at 5:00 p.m.,
Pacific Standard Time (PST), on _________________, 2002 (the
"Expiration Date"). Each full Warrant entitles the Warrant Holder to
purchase from MAXAM GOLD CORPORATION (the "Company"), a Utah
corporation, until _________________, 2002, one fully paid and
nonassessable share of the Company's Common Stock ($0.00001 par value
per share) at the purchase price of $1.00 (the "Exercise Price") in
lawful money of the United States of America for each full Warrant
represented hereby upon surrender of this Warrant Certificate, with
the exercise form hereon duly completed and executed, with payment of
the Exercise Price at the office of INTERWEST TRANSFER CO., INC.
(herein called the "Warrant Agent"), P. O. Box 17136, Salt Lake City,
Utah 84117, but only subject to the conditions set forth herein and in
a Warrant Agreement dated as of _______________, 1997 (the "Warrant
Agreement") between the Company and the Warrant Agent. The Redeemable
Warrants are exercisable at anytime after the __________, 1997
The Exercise Price, the number of shares purchasable upon exercise of
each Warrant, the number of Warrants outstanding and the Expiration
Date are subject to adjustments upon the occurrence of certain events
set forth in the Warrant Agreement. Reference is hereby made to the
provisions on the reverse side of this Warrant Certificate and the
provisions of the Warrant Agreement, all of which are hereby
incorporated by reference in and made a part of this Warrant
Certificate and which shall for all purposes have the same effect as
though fully set forth at this place.
Upon due presentment for registration for transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant
Certificate or Warrant Certificates of like tenor and evidencing in
the aggregate a like number of Warrants, subject to any adjustments
made in accordance with the provisions of the Warrant Agreement shall
be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, upon
payment of the transfer fee and any tax or other governmental charge
imposed in connection with such transfer.
The Warrant Holder of the Warrants evidenced by this Warrant
Certificate may exercise all or any whole number of such Warrants
during the exercise period and in the manner stated hereon. Exercise
of the Warrants is subject to the Company maintaining an effective
registration statement with the Securities and Exchange Commission and
complying with the state securities laws of the residence of the
Warrant Holder. The Exercise Price shall be payable in lawful money
of the United States of America by certified or cashier's check
payable to the order of the Company. Upon any exercise of any
Warrants evidenced by this Warrant Certificate in an amount less than
the number of Warrants so evidenced there shall be issued to the
<PAGE> 12
Warrant Holder a new Warrant Certificate evidencing the number of
Warrants not so exercised. No adjustment shall be made for any
dividends on any shares issued upon exercise of this Warrant.
No Warrant may be exercised after 5:00 p.m., PST, on the Expiration
Date and any Warrant not exercised by such time shall become void.
This Warrant Certificate shall not be valid unless manually
countersigned by the Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its President and by its Secretary, each by a facsimile
of his signature, and has caused a facsimile of its corporate seal to
be imprinted hereon.
Dated: _____________________________________, 199___.
MAXAM GOLD CORPORATION
BY: ____________________________
Alan Hubbard, President
BY: ____________________________
_________________, Secretary
Countersigned:
INTERWEST TRANSFER CO., INC.
BY: ________________________________
Title: _________________________
