As filed with the Securities and Exchange Commission on December _____, 1997
Registration No. 333-_________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------------
GRIFFIN GOLD GROUP, INC.
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(Exact name of Registrant specified in charter)
Delaware 1041 76-0528788
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(State of (Primary Industrial (I.R.S. Employer
Incorporation) Classification) I.D.#)
15915 Katy Freeway, Suite 250
Houston, Texas 77094
Tel: (281) 398-5588
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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.)
Richard W. Lancaster With a copy to:
President Randall W. Heinrich
15915 Katy Freeway, Suite 250 Gillis & Slogar, L.L.P.
Houston, Texas 77094 1000 Louisiana, Suite 6905
Tel: (281) 398-5588 Houston, Texas 77002
(Name, address, including zip code (713) 951-9100
and telephone number, including
area code of agent 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].
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate Amount of
registered registered price per share offering price registration fee
<S> <C> <C> <C> <C> <C>
Common Stock 1,000,000(1) -0- -0- -0-
Common Stock 5,000,000(2) $1.00(2) $5,000,000(2) $1,475.00
</TABLE>
(1) To be distributed to the stockholders of LS Capital Corporation, on a
pro rata basis, for no consideration from such stockholders.
(2) To be offered on a delayed or continuous basis pursuant to possible
business combination transactions in the future at prices equivalent to
the then current market price or a slight discount therefrom; for
purposes of fee calculation, determined to be $1.00 per share.
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 this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
PROSPECTUS
6,000,000 Shares
GRIFFIN GOLD GROUP, INC.
Common Stock
This Prospectus relates to the distribution (the "Distribution") by LS
Capital Corporation, a Delaware corporation ("LS Capital"), to holders of record
of LS Capital common stock at the close of business on __________________ _____,
1997 (the "Record Date") of 1,000,000 shares of Common Stock, par value $.01 per
share (the "Common Stock"), of Griffin Gold Group, Inc., a Delaware corporation
(the "Company"). The Company is a newly-formed company engaged in efforts to
extract (by means of proprietary technology) precious minerals believed to be
located on certain tracts of land controlled by the Company and located in the
Amargosa Valley in the upper Mohave Desert in California. See "BUSINESS."
In connection with the Distribution, each stockholder of LS Capital
will generally receive one share of Common Stock for each ten shares of LS
Capital common stock owned on the Record Date. However, fractional shares will
not be issued, but instead a LS Capital stockholder otherwise entitled to a
fractional share will receive cash in lieu thereof. The Distribution will result
in approximately 10% of the outstanding shares of Common Stock being distributed
to holders of LS Capital common stock on a pro rata basis. Certificates
representing the number of shares of Common Stock to which LS Capital
stockholders are entitled, and checks representing payment for any fractional
shares that otherwise would be issued, are being delivered to LS Capital
stockholders simultaneously with this Prospectus. Management believes that
shares of Common Stock comprising the Distribution and received by LS Capital's
stockholders will be characterized as taxable dividends to such stockholders
upon receipt. See "THE DISTRIBUTION -- Certain Federal Income Tax Consequences."
FOR A DISCUSSION OF CERTAIN RISKS RELATING TO THE OWNERSHIP OF THE COMMON STOCK,
SEE "RISK FACTORS."
No consideration will be paid by LS Capital's stockholders for the
shares of Common Stock comprising the Distribution. The Company will not receive
any proceeds from the Distribution. There is no current public trading market
for the shares of Common Stock. Subject to the sponsorship of a market maker,
shares of Common Stock will be traded in the over-the-counter market on the OTC
Electronic Bulletin Board.
In addition to the shares of Common Stock comprising the Distribution,
the Company is also registering 5,000,000 shares of Common Stock to be offered
on a continuous or delayed basis in the future (at prices equivalent to the then
current market price of the Common Stock or at slight discounts therefrom) in
connection with future business combination transactions.
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 ___________________ _____, 1997, 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 OBLIGATIONS
OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The date of this Prospectus is _________________
_____, 1997.
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<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 and exhibits relating
thereto (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), of which this Prospectus is a part. This Prospectus does
not contain all the information set forth in the Registration Statement.
Reference is made to such Registration Statement for further information with
respect to the Company and the securities of the Company covered by this
Prospectus. Statements contained herein concerning the provisions of documents
are necessarily summaries of such documents, and each statement is qualified in
its entirety by reference to the copy of the related document filed with the
Commission. The Commission maintains a World Wide Web site that contains
reports, proxy statements and information statements and other information
(including the Registration Statement) regarding issuers that file
electronically with the Commission. The address of such site is
http://www.sec.gov. The Registration Statement and exhibits may also be
inspected, and copies thereof may be obtained at prescribed rates, at the
offices of the Commission, Judiciary Plaza Building, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company is not currently a reporting company under the Securities
Exchange Act of 1934 (the "Exchange Act"). However, the Company currently
intends to register and become a reporting company under the Exchange Act as
soon as possible after the Registration Statement is declared effective. Until
such registration, the Company intends to deliver voluntarily annual reports
with audited financial statements to the Company's stockholders and to file with
the Commission Annual Reports on Form 10-KSB, which will contain audited
financial statements. After they are filed, these Annual Reports and audited
financial statements can be inspected at, and copies downloaded from, the
Commission's World Wide Web site at the Internet address stated in the previous
paragraph. These Annual Reports and audited financial statements can also be
inspected, and copies thereof may be obtained at prescribed rates, at the
offices of the Commission at the address also stated in the previous paragraph.
No person is authorized to give any information or to make any
representation not contained in this Prospectus, and, if given or made, any
information or representation not contained herein must not be relied upon as
having been authorized. This Prospectus does not constitute an offer to sell, or
a solicitation of an offer to purchase, any of the securities covered by this
Prospectus in any jurisdiction to or from any person to or from whom it is
unlawful to make such offer or such solicitation of an offer in such
jurisdiction. Neither the delivery of this Prospectus nor the securities covered
by this Prospectus shall, under any circumstances, create an implication that
there has been no change in the information set forth herein since the date
hereof.
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<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS.
Company Griffin Gold Group, Inc. (the "Company") is a newly-formed
Delaware corporation engaged in efforts to extract (by means
of proprietary technology) precious minerals believed to be
located on certain tracts of land controlled by the Company
and located in the Amargosa Valley in the upper Mohave Desert
in California. See "BUSINESS." The Company's offices are
located at 15915 Katy Freeway, Suite 250, Houston, Texas
77094. The Company's telephone number is (281) 398-5588.
Distributing LS Capital Corporation, a Delaware corporation.
Company
Primary To separate the historical business of LS Capital from the
Purposes of business of the Company so that each of LS Capital and the
Distribution Company can (i) adopt strategies and pursue objectives
appropriate to its specific business and industry, (ii)
better enable itself to make acquisitions using its capital
stock as consideration, (iii) better enable itself to obtain
financing with respect to its particular business and
projects from lenders possibly unwilling to lend to companies
in the other's business, (iv) be recognized by the
financial community as a distinct business, with the
expectation that stockholder value will be enhanced, and (v)
implement more focused incentive compensation arrangements
that are tied more directly to results of its operations.
Shares 1,000,000 shares of the Company's Common Stock, par value $.10
to be per share. The shares to be distributed will constitute
Distributed approximately 10% of the outstanding shares of Common Stock
of the Company as of the date of the Distribution.
Distribution Each LS Capital stockholder will generally receive one
Ratio share of Common Stock for each ten shares of LS Capital
common stock held on the Record Date.
Fractional Fractional shares will not be issued, but instead a LS
Shares Capital stockholder otherwise entitled to a fractional share
will receive cash in lieu thereof based on the average closing
price of the Common Stock for its first 10 days of trading.
Record Date Close of business on ____________________ _____, 1997.
Delivery of Certificates representing the shares of Common Stock to
Stock which LS Capital stockholders are entitled, and checks
Certificates representing payment for any fractional shares that otherwise
and Checks would be issued, are being delivered to LS Capital
stockholders simultaneously with this Prospectus.
Tax The Distribution is not being structured on a basis tax-free
Con- to LS Capital stockholders, and management believes that the
sequences Distribution could not be structured on such a basis.
Management believes that shares of Common Stock comprising the
Distribution and received by LS Capital's stockholders will be
characterized as taxable dividends to such stockholders upon
receipt. See "THE DISTRIBUTION -- Certain Federal Income Tax
Consequences."
Other In addition to the shares of Common Stock comprising the
Shares Distribution, the Company is also registering 5,000,000
Being shares of Common Stock to be offered on a continuous or
Registered delayed basis in the future (at prices equivalent to the
then current market price of the Registered Common Stock or at
slight discounts therefrom) in connection with future business
combination transactions.
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<PAGE>
Trading There is no current public trading market for the shares of
Market Common Stock. Subject to the sponsorship of a market maker,
shares of Common Stock will be traded in the over-the-
counter market on the OTC Electronic Bulletin Board.
Transfer The transfer agent and registrar for the Common Stock is
Agent Continental Stock and Transfer & Trust Company, 2 Broadway,
19th Floor, New York, New York 10004.
Dividend The payment and amount of cash dividends on the Common Stock
Policy after the Distribution will be at the discretion of the
Company's Board of Directors. The Company has not heretofore
paid any dividends, and the Company does not currently
anticipate paying any dividends on its Common Stock. The
Company's dividend policy will be reviewed by the Company's
Board of Directors at such future times as may be appropriate,
and payment of dividends will depend upon the Company's
financial position, capital requirements and such other
factors as the Company's Board of Directors deems relevant.
Risk Stockholders should carefully consider the matters discussed
Factors under the section entitled "RISK FACTORS" in this Prospectus.
The Company has only 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 constant and continual flow of revenues.
Use of The Company will not receive any proceeds from the Common
Proceeds Stock comprising the Distribution. Moreover, the Company will
not receive any proceeds when it issues any of the other
5,000,000 shares covered by this Prospectus. However,
such other shares are intended be used for business
combination transactions pursuant to which the Company will
acquire direct or indirect ownership of assets and properties.
Inquiries Stockholders of LS Capital with inquiries relating to the
Relating to Distribution should contact Keith J. McKenzie, by mail
Distribution at LS Capital's offices at 15915 Katy Freeway, Suite 250,
Houston, Texas 77094, or by telephone at his telephone number
800/263-1880.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Prospectus under the captions
"PROSPECTUS SUMMARY," "RISK FACTORS," and "BUSINESS" regarding beliefs as to the
mineralization present on the Company's mineral properties, the capability of
the technology to be used by the Company, the ability to market the Company's
production, the Company's regulatory compliance, the adequacy of insurance, the
availability of trucking services, the ability of the Company to attract and
retain competent personnel, the fairness of the Distribution to LS Capital
stockholders, the tax consequences of the Distribution, and other statements
contained herein regarding matters that are not historical facts, are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forwardlooking statements. Factors that could cause actual
results to differ materially include, but are not limited to, those discussed
under "Risk Factors." As a result, these forward-looking statements represent
the Company's judgment as of the date of this filing. The Company does not
express any intent or obligation to update these forward-looking statements.
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<PAGE>
RISK FACTORS
THE SECURITIES COVERED BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK AND,
THEREFORE, SHOULD BE CONSIDERED EXTREMELY SPECULATIVE. PROSPECTIVE INVESTORS
SHOULD READ THE ENTIRE PROSPECTUS AND CAREFULLY CONSIDER, AMONG THE OTHER
FACTORS AND FINANCIAL DATA DESCRIBED HEREIN, THE FOLLOWING RISK FACTORS:
1. Limited Operating History. The Company has only a limited operating
history and is subject to all risks inherent in a developing business
enterprise. The likelihood of success of the Company must be considered in light
of the problems, expenses, difficulties, complications, and delays frequently
encountered in connection with a new business in general and those specific to
the mineral exploration and extraction businesses and the competitive and
regulatory environment in which the Company will operate.
2. Lack of Mineral Extraction Experience by Management. No members of
the Company's management have ever had any direct experience in the management
or operation of any business engaged in the mineral extraction or exploration
industry, although members of management have extensive prior experience in the
natural resource industry. This lack of experience may make the Company more
vulnerable than others to certain risks, and it may also cause the Company to be
more vulnerable to business risks associated with errors in judgement that could
have been prevented by more experienced management. Management's lack of
previous direct experience in the mineral extraction and exploration industry
could have a material adverse effect on the future operations and prospects of
the Company.
3. Lack of Revenue and Need for Additional Capital. The Company has no
constant and continual flow of revenues. While the Company's need for additional
capital can not now be precisely ascertained because of the indefiniteness of
the ultimate size and scope of the Company's mineral extraction activity,
management believes that the Company's future capital needs will exceed the
Company's current financial position. The Company expects to finance its
operations for fiscal 1997 and 1998 through cash flow from operations, the
possible placement of the Company's equity securities, joint venture
arrangements (including project financing), the use of certain shares of Common
Stock to be registered pursuant to another registration statement to encourage
outside consultants to provide services to the Company, and the use of certain
of the shares of Common Stock covered by this Prospectus for purposes of
acquisitions. The Company is looking for sources of additional capital, but
there can be no assurance that such sources can be found or that, if found, the
terms of such capital will be commercially acceptable to the Company. Because of
the Company's need for additional capital, the lack of consistent revenues or
the inability to obtain necessary capital or both could prove to be detrimental
factors in the development of the Company's business.
4. Industry Risks. Mineral exploration and extraction (particularly for
gold) is highly speculative in nature, frequently is nonproductive, and involves
many risks, including, without limitation, unforeseen geological formations,
cave-ins, environmental concerns and personal injury. Such risks can be
considerable and may add unexpected expenditures or delays to the Company's
plans. Moreover, an extended period of time may be needed to develop the
Company's mineral properties. Because the market prices of any minerals produced
are subject to fluctuation, the economic feasibility of production may change
during this period of time of development. Another factor is that the Company
will use the evaluation work of professional geologists, geophysicists, and
engineers for estimates in determining whether to commence or continue
extraction work. These estimates generally rely on scientific estimates and
economic assumptions, which in some instances may not be correct, and could
result in the expenditure of substantial amounts of money on a property before
it can be determined whether or not the property contains economically
recoverable mineralization. The Company is not able to determine at present
whether or not, or the extent to which, such risks may adversely affect the
Company's strategy and business plans. There can be no assurance that the
Company's mineral extraction activities will be successful or profitable.
5. Lack of Proven or Probable Mineral Reserves. The economic viability
of a mineral property cannot be determined until extensive exploration and
development have been conducted and a comprehensive feasibility study performed.
Although the Company has conducted surface sampling on its mineral properties
indicating that precious minerals exist on these properties, the Company has not
confirmed the level of existing precious minerals, and the Company has not had
any independent testing
6
<PAGE>
undertaken to confirm the results of the Company's internal sampling. As a
result, the Company has not completed sufficient geological testing to establish
proven or probable mineral reserves for its mineral properties. Consequently,
the Company has been unable to ascertain with certainty whether adequate
minerals reserves sufficient for profitable operations exist. Nonetheless, the
Company is continuing with on-going internal testing and is planning on
obtaining independent third-party testing as soon as funds are available
therefor. Notwithstanding the preceding, management believes that the Company's
surface sampling indicates the existence of sufficient mineralization to warrant
continued development of the Company's mineral properties. However, there can be
no assurance that proven or probable ore reserves will ultimately be
established.
6. Limited Number of Mineral Properties. The Company is engaged only in
the mineral extraction business, and it currently has rights, and for the
foreseeable future will have rights, in only two mineral properties, although
the Company is registering additional shares so that it may engage in business
combination transactions in which additional mineral properties may be acquired.
At the present, the success of the Company depends entirely upon the Company's
ability to extract minerals from these two properties on a profitable basis.
This limited diversification may make the results of the Company's operations
more volatile than they would be if the Company operated in more than one
industry, or owned or controlled more mineral properties.
7. Technological Risk Factor. The ultimate realization of the Company's
investment in its mineral properties depends upon the commercial feasibility of
the proprietary technology that the Company intends to use in the Company's
mineral extraction process. This technology is new and has been determined to be
capable of extracting precious minerals in a laboratory setting. However, the
technology must prove capable of producing precious minerals on a larger scale
at cost levels that will enable production to occur profitably. There can be no
assurance that the technology will prove capable of producing precious minerals
at this scale and at these cost levels. The failure of the technology to produce
precious minerals at the foregoing scale and cost levels would most likely
materially and adversely affect the Company's ability to pursue its business
objectives. In addition to the preceding, other companies competing with the
Company are expected to have the right to use the Company's proprietary
technology and will thus have the same abilities as the Company in this regard.
8. Title. Title to mining properties in the western United States
involves certain inherent risks due to the impossibility of determining the
validity of unpatented claims from real estate records, as well as the potential
for problems arising from the frequently ambiguous conveyancing history
characteristic of many mining properties. Although the Company believes it
conducted reasonable investigations (in accordance with standard mining industry
practice) of the validity of ownership of and the ability of certain holders of
certain mining claims to transfer to the Company certain rights and other
interests therein, there can be no assurance that it holds good and marketable
title to all of its U.S. properties. The Company has conducted limited reviews
of title and obtained representations regarding ownership from holders of
mineral rights. The Company's practice will be, if possible, to obtain title
insurance with respect to its major mineral properties when a decision is made
to proceed with large scale mining. This insurance however may not be sufficient
to cover loss of investment or of future profits.
9. No Obligated Purchaser. The Company has not entered into any
long-term agreements with any purchasers of the Company's production. While
management believes that because of the nature of the market for precious
metals, the Company will not have significant trouble finding purchasers of the
most important portion of the Company's production, the failure to have an
obligate purchaser may the Company's business riskier than if the Company were
to have a substantial, credit-worthy purchaser obligated to purchase all or a
substantial portion of the Company's production.
10. Transition to Independent Public Company. The Company does not have
an operating history as an independent company. One of the challenges facing the
Company will lie in the Company's ability to transform itself from a privately
held company to a publicly held company, independent of LS Capital. There can be
no assurance that the Company will be successful in this regard. Prior to the
Distribution, a number of services have been provided to the Company by LS
Capital. After the Distribution, the Company will need to develop its own
services and support systems independent of LS Capital.
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11. 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.
12. Reliance Upon Directors and Officers and Limited Management
Resources. 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. The Company is substantially dependent
upon the efforts and skills of Richard W. Lancaster, a director and the
President of the Company, and Paul Montle, a director and the Vice President of
the Company. The loss of the services of either Mr. Lancaster or Mr. Montle, or
the inability of either of them to devote sufficient attention to the operations
of the Company, would have a materially adverse effect on the Company's
operations. The Company does not maintain key man life insurance on either of
Mr. Lancaster or Mr. Montle. In addition, there can be no assurance that the
current level of management is sufficient to perform all responsibilities
necessary or beneficial for management to perform, or that the Company would be
able to hire additional, qualified management personnel to perform such
responsibilities in view of tight employment market and financial constraints.
Mr. Montle has not entered into an employment agreement, and neither Mr.
Lancaster nor Mr. Montle has entered into a covenant not to compete agreement
with the Company.
13. Control, Cumulative Voting, and Preemptive Rights. After completion
of the Distribution, LS Capital and Kent E. Lovelace, Jr. (a director of LS
Capital) will own approximately 51.3% of the outstanding shares of the Common
Stock. Moreover, after completion of the Distribution, LS Capital, Keith J.
McKenzie, Edwin Hemsted and Mr. Lovelace will own in the aggregate approximately
88.8% of the outstanding shares of the Common Stock. 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 after completion of the
Distribution. There are no preemptive rights in connection with the Common
Stock. Thus, stockholders may be diluted in their percentage ownership of the
Company in the event additional shares are issued by the Company in the future.
14. Preferred Stock. The Company's Certificate of Incorporation
authorized the issuance of up to 10,000,000 shares of Preferred Stock, par value
$.01 per share, of which none were issued as of the date of this Prospectus. The
authorized Preferred Stock constitutes what is commonly referred to as "blank
check" preferred stock. This type of preferred stock allows the Board of
Directors from time to time to divide the Preferred Stock into series, to
designate each series, to fix and determine separately for each series any one
or more relative rights and preferences and to issue shares of any series
without further stockholder approval. One of the effects of the existence of
authorized but unissued shares of preferred stock authorized in series may be to
enable the Company's Board of Directors to render it more difficult, or to
discourage an attempt, to gain control of the Company by means of a merger,
tender offer at a control premium price, proxy contest or otherwise and protect
the continuity of or entrench the Company's management, which concomitantly may
have a potentially adverse effect on the market price of the Common Stock.
15. Indemnification of Officers and Directors for Securities
Liabilities. The Bylaws of the Company provide that the Company shall indemnify
any director, officer, agent and/or employee as to those liabilities and on
those terms and conditions as are specified in the General Corporation Law of
Delaware. Further, the Company may purchase and maintain insurance on behalf of
any such persons whether or not the Company 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 Commission takes the position that
indemnification is against the public policy as expressed in the Act, and is,
therefore, unenforceable.
16. Regulatory Concerns. The Company's mining facilities and operations
are subject to substantial government regulation, including federal, state and
local laws concerning mine safety, land use and environmental protection. The
Company must comply with local, state and federal requirements regarding
exploration operations, public safety, employee health and safety, use of
explosives, air quality, water pollution, noxious odor, noise and dust controls,
reclamation, solid waste, hazardous waste and wildlife
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<PAGE>
as well as laws protecting the rights of other property owners and the public.
Although the Company believes that it is in substantial compliance with such
regulations, laws and requirements with respect to its mineral properties,
failure to comply could have a material adverse effect on the Company, including
substantial penalties, fees and expenses, significant delays in the Company's
operations and the potential shutdown of the Company's operations. The Company
must also obtain and comply with local, state and federal permits, including
waste discharge requirements, other environmental permits, use permits, plans of
operation and other authorizations. Obtaining these permits can be very costly
and take significant amounts of time. Although the Company foresees no material
problems or delays, no assurances can be given that the Company can obtain the
necessary permits or commence mining operations, or that, if permits are
obtained, there will be no delay in the Company operations or the Company can
maintain economic production in compliance with the necessary permits.
17. Absence of Prior Trading Market for the Common Stock. There has not
been any established public market for the trading of the Common Stock. Subject
to the sponsorship of a market maker, shares of Common Stock will be traded in
the over-the-counter market on the OTC Electronic Bulletin Board. There can be
no assurance as to the prices at which the Common Stock will trade after the
Distribution. Until the Common Stock comprising the Distribution is fully
distributed and an orderly market develops and even thereafter, the prices at
which shares trade may fluctuate significantly. Prices for shares of Common
Stock will be determined in the marketplace and may be influenced by many
factors, including the depth and liquidity of the market for the shares,
investor perception of the Company and the industry in which the Company
participates and general economic and market conditions.
18. Potential Future Sales Pursuant to Rule 144. Ten million shares of
Common Stock are presently issued and outstanding, all of which are "restricted
securities" as that term is defined in Rule 144 promulgated under the Act. One
million shares of Common Stock are being registered in connection with the
Distribution and should become generally freely tradeable as a result thereof,
except for shares of Common Stock received by persons who may be deemed to be
"affiliates" of the Company under the Act. As to the nine million remaining
restricted shares, Rule 144 (as amended effective April 29, 1997) provides in
general that 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 (as amended effective April 29, 1997) 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 years. Hence, the possible sale of these
restricted shares may, in the future dilute an investor's percentage of freely
tradeable 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
CAPITAL STOCK - Shares Eligible for Future Sale."
19. Risk of Potential to Dilution Future Share Issuances. The Company
is registering an aggregate of 5,000,000 shares of Common Stock to be offered by
the Company on a continuous or delayed basis in the future in connection with
anticipated business combination transactions. The issuance of such shares and
the consideration to be received therefor will be entirely within the discretion
of the Company's Board of Directors. Although the Board of Directors intends to
utilize its reasonable business judgement to fulfill its fiduciary obligations
to the Company's then existing stockholders in connection with any such
issuance, it is possible that the future issuance of additional shares could
cause immediate and substantial dilution to the net tangible book value of those
shares of Common Stock that are issued and outstanding immediately prior to such
transaction. Any future decrease in the net tangible book value of such issued
and outstanding shares could have a material effect on the market value of the
shares.
20. Risks Relating to Low-Priced Stocks. If the trading price of the
Common Stock were to start and remain below $5.00 per share, trading in the
Common Stock would be subject to the requirements of certain rules promulgated
under the Exchange Act which require additional disclosure by broker-dealers in
connection with any trades generally involving any non-NASDAQ equity security
that has a market price of less than $5.00 per share, subject to certain
exceptions. Such rules require the delivery, prior to any penny stock
transaction, of a disclosure schedule explaining the penny stock market and the
risks associated therewith, and impose various sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors (generally institutions). For these types
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<PAGE>
of transactions, the broker-dealer must make a special suitability determination
for the purchaser and have received the purchaser's written consent to the
transaction prior to sale. The additional burdens imposed upon broker-dealers by
such requirements may discourage broker-dealers from effecting transactions in
the Common Stock, which could severely limit the market liquidity of the Common
Stock.
21. 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 of Directors 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. If the Company obtains 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 CAPITAL
STOCK."
22. Competition. The Company operates in an industry that is
characterized by intense competition for resources, equipment and personnel.
Some of the Company's principal competitors are substantially larger, have
substantially greater resources, and expend considerably larger sums of capital
than the Company for exploration, rehabilitation and development.
23. Insurance Coverage and Uninsured Losses. The Company has procured
insurance covering personal injury, workers' compensation and damage to property
and equipment. There can be no assurance that the Company will be successful in
maintaining such insurance at rates acceptable to the Company or that such
insurance will prove adequate. Moreover, in view of recent trends in damage
awards in personal injury lawsuits, insurance apparently adequate at the time of
its procurement may prove insufficient to satisfy large losses or judgments
against that may subsequently be obtained against the Company. Furthermore,
certain types of insurance coverage (generally against losses caused by natural
disasters and Acts of God) are either unattainable or prohibitively expensive.
Substantial damage awards against the Company or substantial damages not covered
by insurance could affect the Company's ability to continue as a going concern
and may force the Company to seek protection under the federal bankruptcy laws.
24. Volatile Market Prices for Gold. The price of gold will have a
material effect on the Company's financial operations. Following deregulation,
the market price for gold has been highly speculative and volatile. The price of
gold reached a short-lived high in 1980 of slightly over $800 per ounce. The
price of gold has declined to a price of approximately $320 per ounce in
September 1997. Instability in the price of gold may affect the profitability of
the Company's operations. No assurances can be given that the Company has or
will discover gold mineralization in commercial quantities or, if such
mineralization in commercial quantities has been or is hereafter discovered,
that gold could be produced at a profit given the recent market price range for
gold.
25. Proposed Changes to Mining Laws. The Company's unpatented mining
claims on federal lands are currently subject to procedures established by the
U.S. General Mining Law of 1872. Legislation has been introduced in prior and
current sessions of the U.S. Congress to make significant revisions to the U.S.
Mining Laws including strict new environmental protection standards and
conditions, additional reclamation requirements and extensive new procedural
steps which would likely result in delays in permitting and which could have a
material adverse effect on the Company's ability to develop minerals on federal
lands. The proposed revisions would also impose royalties on gold production
from unpatented mining claims. Although legislation has not been enacted,
attempts to amend these laws can be expected to continue. The extent of the
changes that actually will be enacted and their potential impact on the Company
cannot be predicted.
FOR ALL OF THE AFORESAID REASONS AND OTHERS SET FORTH HEREIN, THE SHARES COVERED
BY THIS PROSPECTUS INVOLVE A HIGH DEGREE OF RISK. STOCKHOLDERS SHOULD BE AWARE
OF THESE AND OTHER FACTORS SET FORTH IN THIS PROSPECTUS.
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BUSINESS
Introduction
Griffin Gold Group, Inc. (the "Company") was incorporated on October
30, 1996 under the laws of the State of Delaware. The Company was formed for the
purpose of engaging in efforts to extract (by means of proprietary technology)
precious minerals believed to be located on certain tracts of land controlled by
the Company and located in the Amargosa Valley in the upper Mohave Desert in
California. The Company's proposed principal products are a condensate and dore
bars both containing precious minerals. Neither of these products is currently
being produced on a commercial basis. Once produced, both of these products will
be sold to third parties for further refining. The Company has only a limited
operating history and involves all the risks associated with a company with a
limited operating history.
In connection with the formation of the Company, an agreement governing
certain matters respecting the formation of the Company (the "Formation
Agreement") was entered into. The parties to the Formation Agreement were Edwin
Hemsted ("Hemsted"); Zeotech Industries, Inc. ("Zeotech"), a company under Mr.
Hemsted's control; Keith J. McKenzie ("McKenzie"); KJM Capital Corp. ("KJM"), a
company under Mr. McKenzie's control; W.D. Groves ("Groves"); Kent E. Lovelace,
Jr. ("Lovelace"); LS Capital; and the Company. In April 1997, the Formation
Agreement was amended by means of a First Amendment to Agreement (the "First
Amendment"), and in July 1997, the Formation Agreement was amended again by
means of a Second Amendment to Agreement (the "Second Amendment"). Unless the
context indicates otherwise, the term "Formation Agreement" hereafter means the
Formation Agreement as amended by the First Amendment and the Second Amendment.
Pursuant to the provisions of the Formation Agreement, Hemsted,
Zeotech, McKenzie, KJM, Groves and Lovelace were to contribute to the Company
certain unpatented mining claims that have now become the Company's mineral
properties. Although the Formation required Hemsted, Zeotech, McKenzie, KJM,
Groves and Lovelace to contribute such claims to the Company, such persons
actually used their influence to cause certain other persons to give to the
Company an option to lease such claims. For their efforts in this regard,
Hemsted, McKenzie, Groves and Lovelace were to receive pursuant to the Formation
Agreement 1,250,000, 1,375,000, 1,250,000 and 1,125,000 shares, respectively, of
the Common Stock. The Formation Agreement provided that Hemsted, McKenzie and
Groves were also to receive 166,666, 166,667 and 166,666 shares, respectively,
of LS Capital common stock. In consideration of the issuance of these shares of
LS Capital common stock, LS Capital was issued 5,000,000 shares of Common Stock.
As it was originally entered into, the Formation Agreement provided
that Hemsted, McKenzie and Groves were required to make by April 30, 1997 an
aggregate additional capital contribution to the Company in the amount of
$500,000. By means of the First Amendment and the Second Amendment, the
Formation Agreement was amended to postpone the date for the additional capital
contribution first until July 31, 1997 and eventually until November 30, 1997.
In the Formation Agreement, Hemsted, McKenzie and Groves pledged to LS Capital
the shares of the Common Stock that they were to receive pursuant to the
Formation Agreement to secure their additional capital contribution obligations.
The Formation Agreement provides that if Hemsted, McKenzie and Groves do not
timely fulfill their additional capital contribution obligations, they will
forfeit their unsold Common Stock and LS Capital common stock, LS Capital may
exercise the rights of a secured creditor with respect to the pledged shares of
the Common Stock, and the Company will reconvey to Hemsted, McKenzie and Groves
each mining claim contributed by them to the Company. (The Formation Agreement
has not been amended to provide for the forfeiture any rights to claims granted
by third parties to the Company.) As of October 20, 1997, Hemsted, McKenzie and
Groves had contributed an aggregate of $493,261 to the Company in partial
fulfillment of their additional capital contribution obligations.
During April 1997, Groves decided that he no longer wanted to
participate in the Company's business. In this connection, Groves and the other
parties to the Formation Agreement entered into a Release and Partial
Termination Agreement (the "Release") whereby Groves terminated his status as a
party to the Formation Agreement and released all claims he may have under the
Formation Agreement. Pursuant to the Release, Groves conveyed to Hemsted the
166,666 shares of LS Capital common stock that he was to receive pursuant to the
Formation Agreement, and Groves conveyed to Hemsted and Douglas Schmitt
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<PAGE>
1,125,000 and 125,000 shares, respectively, of the Common Stock that he also was
to receive pursuant to the Formation Agreement.
Properties
The Company currently holds interests in two precious mineral
properties located in the Amargosa Valley in the upper Mohave Desert in
California. One of these properties comprising 1,600 acres is located near
Tecopa, California about 60 miles west of Las Vegas, while the other comprising
1,920 acres is located about 25 miles east of Barstow, California. These two
properties have a combined total of about 5.5 square miles in surface land.
Access to the general vicinity of the two mineral properties is by means of
state highways. Once in the general vicinity of the claims, easy access to the
claims is possible over dry, stable sands.
Geological records indicate that about a million or so years ago, large
inland fresh water lakes were located in the Amargosa Valley during the Ice Age.
Then, as glaciers receded and the lakes drained, the lowest places became
collection basins for minerals and deposits which are spread throughout the
valley. It is believed that large inland lakes, which dried up over a million
years ago, left behind significant deposits of precious minerals, especially
gold.
The Company has conducted surface sampling on its two mineral
properties. The sampling indicates that land underlying these properties may
contain gold, platinum, iridium, palladium, rhodium and ruthenium. However, the
Company has not confirmed the level of existing precious minerals, and the
Company has not had any independent testing undertaken to confirm the results of
the Company's internal sampling. As a result, the Company has not completed
sufficient geological testing to establish proven or probable mineral reserves
for its mineral properties. Nonetheless, the Company is continuing with on-going
internal testing and is planning on obtaining independent third-party testing as
soon as funds are available therefor. Notwithstanding the preceding, management
believes that the Company's surface sampling indicates the existence of
sufficient mineralization to warrant continued development of the Company's
mineral properties. However, there can be no assurance that proven or probable
ore reserves will ultimately be established.
Operations
Extraction.
The base material for the Company's extraction process will consist of
ore procured from the Company's mineral properties through standard open-cast
mining operations. Open-cast mining resembles open-pit mining, except that in
the case of open-cast mining unused portions of the mined materials are not
transported to waste piles for disposal but instead are cast or hauled directly
into adjacent mined-out panel. Thus, reclamation immediately follows mining.
A large component of the mined ore will be zeolites. Zeolites are a
large family of complex hydrous sodium, calcium, and aluminum silicates whose
structures allow them to trap other ions and atoms. Because of the nature of
zeolites, microscopic precious metal particles can become ionically bound in
metal salt complexes trapped in the zeolite.
To extract the minerals believed to be contained in the zeolite, the
Company intends to use a certain proprietary, low-toxicity microfine precious
metals extraction technology (the "Technology"). (For a description of the
Company's rights with respect to the Technology, see "BUSINESS - Intellectual
Property.") Using the Technology, ore mined from the Company's mineral
properties will be treated so that trapped precious minerals will be separated
from the zeolite. The result of the treatment will be a condensate. The Company
can then either sell the condensate or treat it further. If the Company elects
to treat the condensate further, the Company will electroplate the condensate to
produce dore. (Dore is a molten mixture containing unseparated precious metals.)
The dore is then further treated in an induction furnace. After this treatment,
the dore is poured to produced dore bars, which are then sold to metal refiners
and smelters for the ultimate production of precious metals.
The Company does not have the facilities to extract precious minerals
from the sands mined from its mineral properties. Instead, to extract the
precious minerals, the Company will rely upon Desert Minerals,
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Inc. ("DMI"), a Delaware corporation and partially-owned subsidiary of LS
Capital. DMI has entered into a two-year agreement with the Company to process
its ore on a limited basis in connection with the testing of DMI's "pilot" plant
and Technology, both discussed below. In consideration of DMI's processing such
ore, the Company agreed to pay to DMI the amount of DMI's direct costs involved
in the processing plus an additional amount equal to 10% of such direct costs.
In the event that DMI's technology proves successful, DMI has agreed to
negotiate in good faith with the Company with a view to the execution and
delivery of an agreement pertaining to the proposed larger processing plant
discussed below.
DMI currently has in operation only a "pilot" plant for testing the
extraction process described above. The pilot plant is a 50'x100' facility
consisting of a processing area, a laboratory building and two mobile homes to
serve as living quarters for personnel. The pilot plant is located in Amargosa
Valley, Nevada, near the Company's Tecopa mineral property. The Company intends
to commence its extraction business by trucking ore from its Tecopa mineral
property to the pilot plant. Trucking will initially be done by outside trucking
firms providing service and rates that management believe will be adequate and
acceptable.
Construction of DMI's pilot plant commenced in the summer of 1996 and
was completed in September 1997. The pilot plant is currently testing ore at a
rate of one to three tons per day ("TPD"). Thus far, the pilot plant has been
able to produce gold in a small-scale laboratory setting. The ultimate goal of
the pilot plant is to produce gold on a larger scale at a commercially feasible
cost. DMI has been conducting on-going tests to determine whether the pilot
plant will be able to product gold on this scale and at this cost level. While
such tests have heretofore been encouraging, such tests have not yet determined
that the pilot plant will be able or unable to product gold on a larger scale at
a commercially feasible cost.
The Company has invested approximately $250,000 in the pilot plant, and
previous thereto Zeotech Industries, Inc., one of the major minority
stockholders, had invested approximately $100,000. The pilot plant's facility
and equipment are new and are in good operating condition and repair. It has an
ample supply of on-site well water for undertaking its extraction processing.
Waste water is recycled on-site and will be used for irrigation. Electrical
power for the pilot plant comes from an on-site, 35-kilowatt three-phase
generator owned by DMI and three-phase power generated off-site by Edison Co.,
the local utility company.
If production and operations at the pilot plant satisfy the
expectations of LS Capital management, LS Capital expects to exercise its right
to receive a sublicense on the Technology. LS Capital will then attempt to
proceed with the construction of a larger processing plant at a site to be
selected in the future and to be owned by one of the LS Capital's subsidiaries.
LS Capital intends to cause the subsidiary ultimately owning the plant to enter
into an agreement with the Company to process the Company's ore on terms
generally made available to other customers of such subsidiary, if not on
somewhat more favorable terms. LS Capital currently expects that the larger
plant would be capable of processing ore at a minimum rate of 1,000 TPD. LS
Capital currently expects that this larger plant (if undertaken) will be
finished in 1998 at a cost of between $2.5 and $5.0 million dollars. The
construction of the larger plant will be contingent on procuring necessary
financing.
Plan of Operation.
For the next twelve months, the Company will continue to work to
achieve consistent yields from processed ores. As yields become more consistent,
the Company will endeavor to scale up the level of processing to ten TPD. Once
this scale is achieved, the Company and LS Capital intend to commission an
engineering and design feasibility study with regard to the larger plant
described above. In the interim, the Company and LS Capital expect to devote
efforts to procuring financing for the larger plant in the event a decision is
made to pursue construction.
The Company does not now have funds sufficient to pursue its plan of
operation over the next twelve months. The Company expects to finance its plan
of operations over the next twelve months through cash flow from operations, the
possible placement of the Company's equity securities, joint venture
arrangements (including project financing), the use of certain shares of Common
Stock to be registered pursuant to another registration statement to encourage
outside consultants to provide services to the Company, and the use
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of certain of the shares of Common Stock covered by this Prospectus for purposes
of acquisitions. See "RISK FACTORS - Lack of Revenue and Need for Additional
Capital." One way or the other, the Company expects to raise additional amounts
over the next twelve months in amounts and by means not now certain.
In addition, the Company expects that it will need to have as many as
20 employees if the Company's level of processing increases to ten TPD and more
if processing exceeds this level. The Company does not now foresee any problem
in hiring a sufficient number of qualified employees.
Mining Claims.
The Company has rights in certain mining claims (these claims are
referred to hereinafter as the "Claims"). (For additional information about the
land covered by the Claims, see "BUSINESS - Properties.") To acquire its rights
to its Claims, the Company entered into an Exploration Agreement and Option to
Lease (the "Exploration/Option Agreement") in June 1997 with a group of
individuals who hold the Claims. For minimal cash payments, the
Exploration/Option Agreement permits the Company to enter onto the land covered
by the Claims for purposes of exploring, investigating, sampling, examining and
testing for any precious metals located on such land. The initial term of the
Exploration/Option Agreement is for five years, and the Company has the right to
extend the Exploration/Option Agreement for two additional five-year extension
terms. Depending on the results of the Company's exploration effort and for a
minimal cash payment, the Company has the option under the Exploration/Option
Agreement to enter into a lease of the related Claims pursuant to the terms,
provisions and conditions of a mining lease agreement attached as an exhibit to
the Exploration/Option Agreement (a "Mining Lease").
The Mining Lease will permit the Company to exploit the minerals
covered by the related Claims. The term of each Mining Lease will be for 20
years and for so long as the Company is processing ore on properties located
within a five-mile radius of any of the Claims covered by the Mining Lease. The
Mining Lease will obligate the Company to pay a production royalty for all
minerals mined, removed and sold from the Claims covered by the Mining Lease
equal to 2.5% of the Smelter Returns. The Mining Lease defines "Smelter Returns"
as the gross amount received from the sale of valuable minerals after recovery
of all exploration, development and capital costs and less all taxes levied,
incurred or imposed on the sale, severance or production of such minerals and
less costs of extraction, mining, milling, treating, transportation to the
smelter and/or refinery, smelting and refining charges and costs of sale. The
Mining Lease will obligate the Company to pay minimal advanced royalties, which
will be credited to the production royalty described immediately above. Once
executed, the Mining Lease can be terminated by the lessors thereunder upon the
occurrence of certain customary events of default, and by the Company upon
three-months notice. Under the Mining Lease, the Company will have a right of
first refusal to purchase the Claims covered by the Mining Lease if the lessors
under the Mining Lease propose to transfer such Claims.
Intellectual Property.
The technology that the Company propose to use in its precious mineral
extraction efforts (the "Technology") has been and is still in the process of
being developed by Douglas Schmitt ("Schmitt"), an independent consultant to the
Company. DMI and Schmitt entered into a letter agreement dated March 27, 1997
(the "Technology Agreement") regarding the Technology. The Technology Agreement
stipulated certain criteria that Schmitt must meet to perform satisfactorily
under the Technology Agreement. First, Schmitt must deliver to DMI all formulae,
process designs and systems engineering necessary to implement and repeat the
recovery process comprising the Technology on a consistent, large-scale basis.
Second, either (a) the Technology must be demonstrated to and audited by an
independent third party mining engineering firm of international repute that is
willing (after the demonstration) to allow its name to used publicly to verify
that the Technology can consistently extract gold and other precious metals from
desert sands on a large-scale commercial basis, or (b) commercially salable
quantities of precious metals must be produced from the Company's Tecopa mineral
property in a form acceptable to a reputable refiner and at production costs not
greater than 75% of sale proceeds. Once Schmitt is determined to have
satisfactorily performed, DMI is obligated to pay to him the amount of $90,000,
and LS Capital and DMI, on the one hand, will be equal owners of the Technology
with Schmitt, on the other hand. LS Capital and DMI will then have the right to
assign and license the Technology to their subsidiaries and affiliates. In
addition, LS Capital and
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DMI have a right of first refusal regarding all projects in which Schmitt
proposes to use the Technology, and if the Company and DMI decline to pursue any
proposed project, Schmitt is obligated to take appropriate measures to maintain
the integrity and security of the Technology.
In consideration of the creation of the Company's and DMI's interests
in the Technology, the Technology Agreement provides in favor of Schmitt a
five-percent royalty of gross proceeds from the related refiner minus direct
production costs (but not including any general overhead or administrative
costs) on all precious minerals extracted or produced in marketable form
utilizing the Technology. The royalty can be paid in cash or in kind. LS Capital
and DMI have the right to discontinue the use of the Technology at any time (a)
in favor of either technology provided by another source that LS Capital and DMI
believe is more attractive or cost effective or (b) upon the abandonment of
DMI's desert sands project. In either case, all royalty obligations to Schmitt
cease so long as LS Capital and DMI are not using the Technology. LS Capital and
DMI will forfeit their interests in the Technology if they fail to construct an
operating plant capable of processing sand at a rate of 1,000 TPD within three
years from the date of the Technology Agreement; provided, however, that if
negotiations or design work on such a plant are underway at the time that LS
Capital's and DMI's interests would otherwise be forfeited, LS Capital and DMI
may extend the forfeiture date for up to 12 months by the payment of $25,000.
In addition to the preceding, the Technology Agreement provides that
Schmitt will receive weekly payments of $1,500 for on-going consulting services
and a $10,000 sign-on bonus, which has already been paid. Moreover, Schmitt
received 125,000 shares of Common Stock in connection with the execution and
delivery of the Technology Agreement.
Market and Marketing.
Precious metals have two main categories of use -- product fabrication
and bullion investment. Fabricated precious metals have a wide variety of end
uses, including industrial and technology uses. Purchasers of official coins and
high-karat jewelry frequently are motivated by investment considerations, so
that net private bullion purchases alone do not necessarily represent the total
investment activity in precious metals.
The profitability of the Company's current and proposed operations are
significantly affected by changes in the market price of precious metals. The
market prices of precious metals can fluctuate widely and are affected by
numerous factors beyond the Company's control, including industrial and jewelry
demand, expectations with respect to the rate of inflation, the strength of the
U.S. dollar and of other currencies, interest rates, central bank sales, forward
sales by producers, global or regional political or economic events, and
production and cost levels in major mineral-producing regions such as South
Africa. In addition, the prices of precious metals sometimes are subject to
rapid short-term changes because of speculative activities. The current demand
for and supply of precious metals affect precious metals prices, but not
necessarily in the same manner as current supply and demand affect the prices of
other commodities. The supply of precious metals consists of a combination of
new mine production and existing stocks of bullion and fabricated precious
metals held by governments, public and private financial institutions,
industrial organizations and private individuals. As the amounts produced in any
single year constitute a very small portion of the total potential supply of
precious metals, normal variations in current production do not necessarily have
a significant impact on the supply of precious metals or on their prices. If the
Company's revenues from precious metals sales falls for a substantial period
below its cost of production at any or all of its operations, the Company could
determine that it is not economically feasible to continue commercial production
at any or all of its operations or to continue the development of some or all of
its projects. In summary, the markets for precious metals generally are
characterized by volatile prices.
Because of the availability of a sufficient number of refiners and
smelters and the competitive nature of the gold market, management believes that
the Company will be able to sell all gold produced by them separately at then
current market rates. Due to the more restrictive and less competitive nature of
the platinum market, management believes that the Company will be less able to
sell all platinum and related minerals produced by them separately. Management
does not foresee that other minerals that are likely to be produced on the
Company's mineral properties will be of any significant consequence. The
Company's
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current policies is to sell their separate production at current prices and not
enter into hedging or other arrangements which would establish a price for the
sale of their separate future production.
Competition.
The mining industry is very competitive. There is a high degree of
competition to obtain favorable mining properties and suitable mining prospects
for drilling, exploration, development and mining operations. The Company will
encounter significant competition from firms currently engaged in the mining
industry. In general, all of these companies are substantially larger than the
Company, and have substantially greater resources and operating histories.
Accordingly, there can be no assurance that the Company will be successful in
competing with existing and emerging companies in the mining industry.
Government Regulation and Environmental Concerns.
The mining and mineral extraction operations of the Company will be
subject to extensive federal, state and local laws and regulations governing
exploration development and production. In addition, such operations will be
subject to inspection and regulation by the Mining, Safety and Health
Administration of the Department of Labor under provisions of the Federal Mine
Safety and Health Act of 1977, which is designed to ensure operational safety
and employee health and safety. The United States government also regulates the
environmental impact of the mining industry through the Clean Air Act, the Clean
Water Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act of 1976 and the Federal Land Policy and Management Act of 1976. In
addition to imposing air quality standards and other pollution controls, the
most significant provisions of the above legislation deal with mineral land
reclamation and waste discharges from mines, mills and further processing
operations. The Company is also subject to extensive health and safety
regulations at the state level, as well as legislation and regulation with
respect to the environmental impact of its mining operations in the State of
California. Due to the nature of the Company's mineral extraction process, the
Company believes that its processing operations will have a modest effect on the
environment.
The Company generally will be required to mitigate long-term
environmental impacts by stabilizing, contouring, reshaping and revegetating
various portions of a site once mining and processing are completed. Reclamation
efforts will be conducted in accordance with detailed plans which will have been
reviewed and approved by the appropriate regulatory agencies. The Company plans
for reclamation to be conducted concurrently with mining. Management believes
that reclamation expenditures will not be material, although there can be no
certainty in this regard. Compliance with the foregoing laws and regulations
increases the costs of planning, designing, drilling, developing, constructing,
operating and closing mining operations. It is possible that the costs and
delays associated with compliance with such laws and regulations could become
such that the Company would not proceed with the development of a project or
continue to operate a mine.
Though the Company believes that its mining operations will be
conducted in compliance with all present health, safety and environmental rules
and regulations, there is always some uncertainty associated with such due to
the complexity and application of such rules and regulations. The Company does
not anticipate that compliance with existing environmental laws and regulations
will have a material impact on its earnings in the foreseeable future; however,
possible future health, safety and environmental legislation, regulations and
actions could cause additional expense, capital expenditures, restrictions and
delays in the activities of the Company, the extent of which cannot be
predicted.
The Company's unpatented mining claims on federal lands are currently
subject to procedures established by the U.S. General Mining Law of 1872.
Legislation has been introduced in prior and current sessions of the U.S.
Congress to make significant revisions to the U.S. Mining Laws including strict
new environmental protection standards and conditions, additional reclamation
requirements and extensive new procedural steps which would likely result in
delays in permitting and which could have a material adverse effect on the
Company's ability to develop minerals on federal lands. The proposed revisions
would also impose royalties on gold production from unpatented mining claims.
Although legislation has not been enacted, attempts to amend these laws can be
expected to continue. The extent of the changes that actually will be enacted
and their potential impact on the Company cannot be predicted.
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Seasonability.
The Company's business is not generally expected to be seasonal in nature.
Employees.
The Company has six employees. None of these employees are covered by a
collective bargaining agreement and relations with them are considered to be
good. The Company expects that it may have as many as 20-30 employees within the
next year. The Company does not now foresee problems in hiring additional
qualified employees to meet its labor needs.
Legal Proceedings.
Since the date of its organization through the date of this Prospectus,
the Company has not been involved in any legal proceedings. There can be no
assurance, however, that the Company will not in the future be involved in
litigation incidental to the conduct of its business.
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MANAGEMENT
Directors and Executive Officers.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
<S> <C> <C> <C>
Richard W. Lancaster 55 Director/President
Paul J. Montle 48 Director/Vice President
C. Thomas Cutter 56 Director
</TABLE>
Richard W. Lancaster has served as a director and the President and
Chief Executive Officer of the Company (as well as of DMI and Shoshone Mining
Co., another subsidiary of LS Capital) since June 1, 1997. From 1992 to May 31,
1997, Mr. Lancaster served as President of Remediation Services of America,
Inc., which is engaged in environmental remediation of industrial waste. From
1988 to 1992, he served as Engineering Manager from Walk/Haydel's Satellite
Engineering for Shell Offshore, an offshore exploration and production company.
Paul J. Montle has served as a director and the Vice President of the
Company since inception. He has also served as the Chairman of the Board and
Chief Executive Officer of LS Capital since 1992 and has held the additional
title of President since October 1995. From 1991 to October 15, 1994, Mr. Montle
served as President and Chief Executive Officer of Viral Testing Systems
Corporation, a distributor of a FDA-licensed AIDS test and other medical
diagnostic products, and from 1991 to 1992, he also served as Chairman of the
Board of such company. VTS filed for protection under Chapter 11 of the
Bankruptcy Code on January 4, 1995. Eventually this bankruptcy proceeding was
converted to a proceeding under Chapter 7, and the remaining assets of VTS have
been liquidated.
C. Thomas Cutter has served as a director of the Company since
inception. He has also served as a Director of LS Capital since December 1992.
Since 1968, he has served as President, Director and sole shareholder of Cutter
Fire Brick Co., Inc., which is engaged in the repair and maintenance of
industrial heat enclosures. Since 1975, Mr. Cutter has served as President,
Director and sole shareholder of both Cutter Ceramics, Inc., a manufacturer and
distributor of art clay, and ADC Supply Corp., a distributor of industrial
insulation materials. Moreover since 1985, Mr. Cutter has served as President,
Director and sole shareholder of Cutter Northern Refractories, Inc., which is
engaged in the repair and maintenance of industrial heat enclosures.
EXECUTIVE COMPENSATION
The Company does not expect to pay any executive officer in the current
fiscal year total annual salary and bonus exceeding $100,000.
The Company has entered into an employment agreement (the "Employment
Agreement") with Richard W. Lancaster, the Company's President and Chief
Operating Officer. Pursuant to the Employment Agreement, Mr. Lancaster is to
receive an initial annual salary of $72,000.00. Mr. Lancaster's salary will be
reviewed annually in January by the Company's compensation committee. Pursuant
to the Employment Agreement, LS Capital issued to Mr. Lancaster 50,000 shares of
its common stock, and LS Capital agreed to grant to Mr. Lancaster options to
acquire shares of LS Capital common stock. These options cover 250,000 shares of
LS Capital common stock, which may be purchased at an option price of $1.00 per
shares and which will vest in batches of 50,000 shares every 90 days commencing
June 24, 1997. These options also cover an additional 250,000 shares of LS
Capital common stock, which may be purchased at an option price of $2.00 per
shares and which will vest in batches of 50,000 shares every 90 days commencing
September 24, 1997. Notwithstanding the preceding, all options will be vested
upon the sale or merger of LS Capital. Mr. Lancaster is also entitled to
participate in all executive health, disability, life insurance and
18
<PAGE>
pension plans created for the officers of LS Capital. The Employment Agreement
is terminable by both Mr. Lancaster or the Company at any time; provided,
however, that Mr. Lancaster has agreed to give to the Company two-months prior
written notice. In the Employment Agreement, the Company has agreed (unless Mr.
Lancaster's employment is terminated by the Company for cause) to pay to Mr.
Lancaster his salary under the Employment Agreement for three months after
termination or until the commencement of his new employment, whichever occurs
sooner. If the Company terminates Mr. Lancaster's employment, one-half of the
current period's unvested options will vest, but if Mr. Lancaster terminates his
employment, all unvested options will be canceled as of the date of his
termination notice. The Employment Agreement does not contain a covenant not to
compete.
The authorized number of directors of the Company is presently fixed at
three. 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.
CERTAIN TRANSACTIONS
The Company was organized through the efforts of Hemsted, Zeotech,
McKenzie, KJM, Groves, Lovelace and LS Capital. Hemsted, Zeotech, McKenzie, KJM,
Groves and Lovelace used their influence to cause certain other persons to enter
into the Exploration/Option Agreement with the Company by which the Company
acquired its rights to its Claims. For their efforts in this regard, Hemsted,
McKenzie, Groves and Lovelace were to receive 1,250,000, 1,375,000, 1,250,000
and 1,125,000 shares, respectively, of the Common Stock. In addition, Hemsted,
McKenzie and Groves were also to receive 166,666, 166,667 and 166,666 shares,
respectively, of LS Capital common stock. In consideration of the issuance of
these shares of LS Capital common stock, LS Capital was issued 5,000,000 shares
of Common Stock. Eventually, Groves decided that he no longer wanted to
participate in the Company's business. In this connection, Groves conveyed to
Hemsted and Douglas Schmitt 1,125,000 and 125,000 shares, respectively, of the
Common Stock that he was to receive, and Groves conveyed to Hemsted the 166,666
shares of LS Capital common stock that he was to receive. Moreover, Hemsted and
McKenzie are obligated to make an aggregate additional capital contribution to
the Company in the amount of $500,000 by a specified date, the failure of which
may result in the forfeiture of their unsold Common Stock and LS Capital common
stock. As of October 20, 1997, Hemsted, McKenzie and Groves had contributed an
aggregate of $493,261 to the Company in partial fulfillment of their additional
capital contribution obligations.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of December 3, 1997 information regarding
the beneficial ownership of Common Stock (i) by each person who is known by the
Company to own beneficially more than 5% of the outstanding Common Stock; (ii)
by each director; and (iii) by all directors and officers as a group.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership Name and
Address of Prior to Distribution(1) After Distribution(1)
Beneficial Owner Number Percent Number Percent
<S> <C> <C> <C> <C>
Kent E. Lovelace, Jr. 6,125,000 61.3%(2) 5,125,000 51.3%(3)
3300 West Beach Blvd., Suite 202
Gulfport, Mississippi 39502
LS Capital Corporation 5,000,000 50.0% 4,000,000 40.0%
15915 Katy Freeway, Suite 250
Houston, Texas 77094
Paul J. Montle 5,000,000 50.0%(4) 4,000,000 40.0%(5)
15915 Katy Freeway, Suite 250
Houston, Texas 77094
Edwin Hemsted 2,375,000 24.0% 2,375,000 24.0%
1155 Harwood St. #1003
Vancouver, British Columbia
CANADA V6E 1S1
Keith J. McKenzie 1,375,000 14.0% 1,375,000 14.0%
1400 355 Burrand St.
Vancouver, British Columbia
CANADA V6C 2G8
All directors and officers
as a group (four persons) 5,000,000 50.0%(4) 4,000,000 90.0%(5)
</TABLE>
(1) Includes shares Stock beneficially owned pursuant to options and warrants
exercisable within 60 days after the date of this Prospectus.
(2) Includes 1,125,000 shares owned directly; and includes 5,000,000 shares
owned beneficially and of record by LS Capital Corporation, a corporation of
which Mr. Lovelace is a director.
(3) Includes 1,125,000 shares owned directly; and includes the 4,000,000 shares
that will owned beneficially and of record after the Distribution by LS Capital
Corporation, a corporation of which Mr. Lovelace is a director. (4) Includes
5,000,000 shares owned beneficially and of record by LS Capital Corporation, a
corporation of which Mr. Montle is a director and the Chief Executive Officer.
(5) Includes the 4,000,000 shares that will be owned beneficially and of record
after the Distribution by LS Capital Corporation, a corporation of which Mr.
Montle is a director and the Chief Executive Officer.
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<PAGE>
THE DISTRIBUTION
Reasons for the Distribution.
LS Capital's historical business has been the gaming industry, while
the Company has recently begun its business in the mineral exploration and
extraction industry. LS Capital's and the Company's respective industries are
considerably different. The respective Board of Directors of LS Capital and the
Company have determined that it is in the best interests of LS Capital and the
Company to undertake the Distribution, thereby separating the business of the
Company from the business of LS Capital, for the reasons described herein.
The Distribution is designed to establish the Company as a stand alone
independent company which can adopt strategies and pursue objectives appropriate
to its specific business. The Distribution will enable each management team at
LS Capital and the Company to better focus on the profitable growth
opportunities in their respective industries. Also, the Distribution will
enhance each of LS Capital's and the Company's respective abilities, as and when
appropriate, to engage in strategic acquisitions in their respective existing
and new lines of business through acquisitions using their own respective
capital stock. Moreover, the Distribution should better enable the Company's
ability, as and when appropriate, to procure project financing from lenders that
might otherwise be unwilling to provide financing because of the business in
which LS Capital is engaged. In addition, LS Capital and the Company believe
that the separation of LS Capital's gaming business from the Company's mineral
exploration and extraction business will cause the two entities to be recognized
by the financial community as distinct businesses with different investment risk
and return profiles. As a result of the Distribution, LS Capital should retain
its following in the financial community primarily as a gaming concern while the
Company should develop its following primarily as a mineral exploration and
extraction. In this regard, investors will be better able to evaluate the merits
and future prospects of the businesses of LS Capital and the Company, enhancing
the likelihood that each will achieve appropriate market recognition for its
performance and potential, and thereby enhance stockholder value. Furthermore,
current stockholders and potential investors will be able to direct their
investments to their specific areas of interest. The Distribution is also
designed to allow the Company to establish its own employee stock ownership plan
and other equity-based compensation plans so that there will be a more direct
alignment between the performance of the Company and the compensation of
employees of the Company, which, among other things, is intended to strengthen
and support the Company's ability to achieve cost savings, greater efficiencies
and sales growth.
In addition, LS Capital has hired a consultant to evaluate the best
structure to manage LS Capital's proposed business activities and maximize value
for its stockholders. LS Capital has not received the report from the consultant
but LS Capital has been advised that such report may include a recommendation
that LS Capital convert to closed-end non-diversified investment holding company
status. If this recommendation is made and followed, LS Capital expects to make
additional distributions (similar to the Distribution) of stock in other of its
subsidiaries.
For the reasons stated above, the LS Capital Board of Directors
believes that the Distribution is in the best interest of LS Capital. In
reaching its conclusions, the LS Capital Board of Directors has determined that
the Distribution is fair, from a financial point of view, to the holders of
shares of LS Capital common stock, although the Board of Directors has not
sought the opinion of any financial advisor to such effect.
Manner of Effecting the Distribution.
The Distribution consists of an aggregate of 1,000,000 shares of Common
Stock. These shares of Common Stock shall be distributed to persons who are
stockholders of record of LS Capital at the close of business on Record Date.
Each stockholder of LS Capital on the Record Date will generally receive one
share of Common Stock for each ten shares of LS Capital common stock owned on
the Record Date. However, fractional shares will not be issued, and LS Capital
stockholders who would otherwise be entitled to receive a fractional share of
Common Stock will receive cash in lieu thereof. The amount of cash to which such
a LS Capital stockholder will be entitled will be the average closing sale price
of the Common Stock on the OTC Bulletin Board on the first 10 days that the
Common Stock is traded, multiplied by the percentage represented by the
fractional share that the stockholder would otherwise be entitled to receive.
21
<PAGE>
The Distribution will result in approximately 10% of the outstanding shares of
Common Stock being distributed to holders of LS Capital common stock on a pro
rata basis. Certificates representing the shares of Common Stock to which LS
Capital stockholders are entitled, and checks representing payment for any
fractional shares that otherwise would be issued, are being delivered with this
Prospectus. The shares of Common Stock will be fully paid and nonassessable. The
holders thereof will not be entitled to preemptive rights nor cumulative voting
rights. See "DESCRIPTION OF CAPITAL STOCK."
No holder of LS Capital common stock will be required to pay any cash
or other consideration for the shares of Common Stock received in the
Distribution or to surrender or exchange shares of LS Capital common stock in
order to receive shares of Common Stock.
Shares of Common Stock distributed to LS Capital stockholders in
connection with the Distribution generally will be freely transferable. Such
shares are expected to be traded in the over-the-counter market, and thus may be
purchased and sold through the usual investment channels, including securities
broker/dealers. Subject to the sponsorship of a market maker, shares of Common
Stock are expected to be traded on the OTC Electronic Bulletin Board.
Notwithstanding the above, shares of Common Stock received in connection with
the Distribution by persons who are deemed "affiliates" of the Company under the
Act will be subject to certain restrictions. Persons who may be deemed to be
affiliates of the Company after the Distribution generally include individuals
or entities that control, are controlled by, or are under common control with
the Company and may include the directors and principal executive officers of
the Company as well as any principal stockholder of the Company. Persons who are
affiliates of the Company will be permitted to sell their shares of Common Stock
only pursuant to an effective registration statement under the Act or an
exemption from the registration requirements of the Act, such as the exemptions
afforded by Section 4(2) of the Act and Rule 144 thereunder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Neither the Company nor LS Capital has obtained a private letter ruling
from the Internal Revenue Service nor an opinion of tax counsel with respect to
possible federal income tax consequences of the Distribution. However, the
Company and LS Capital are generally aware of the taxability of a corporate
distribution of property pro rata to its shareholders.
Distributions by corporations to their shareholders may be taxable. In
general, where the distribution is made out of the earnings and profits of the
corporation, the amount received is taxable as ordinary income. Where
distributions are made in excess of the corporation's earnings and profits, the
recipient is normally not taxed to the extent of its basis in the stock.
Distributions in excess of earnings and profits and basis are normally taxed as
if the shareholder had sold his stock.
As of June 30, 1997, LS Capital had no accumulated earnings and
profits. Therefore, distributions of shares of Common Stock to LS Capital
shareholders are not taxable as ordinary income. The amount of such distribution
is the fair market value of the Common Stock on the date of distribution. In
this case, valuation of Common Stock is not easily possible, given the unproven
nature of the mining claims and incomplete status of the ore extraction
technology development. There has been no attempt to place a value on the Common
Stock by the management of the Company or of LS Capital, and such valuation is
the responsibility of each LS Capital shareholder who receives Company stock,
and his or her own tax advisor. However, in the opinion of Company management,
such valuation might be reasonably placed at $.0248 per Company share, if the
Company's net investment in its mining claims and the extraction technology is
one-third of LS Capital's total net investment in mining claims and extraction
technology, and such claims and technology investment represents 12% of LS
Capital's total assets (at cost) as of June 30, 1997.
If an individual LS Capital shareholder agrees with this estimate, the
tax consequences to him are that if his adjusted tax basis of his LS Capital
shares are in excess of $.00248 per share (each share of Common Stock is
distributed for every ten LS Capital shares), then such Common Stock
distribution to him should be considered a "non-taxable return of capital." Such
$.00248 per share should then be deducted from such shareholder's LS Capital per
share tax basis and $.0248 per share will be the new cost basis of his or her
Company stockholdings.
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<PAGE>
For domestic corporations which hold LS Capital common stock, the
amount of the Distribution for purposes of determining dividend income, return
of capital, or capital gain will be the lesser of (i) the fair market value of
the Common Stock at the date of the Distribution, or $.0248 per share if such
corporate shareholder accepts the Company's valuation methodology, or (ii) its
adjusted per share basis of its investment in LS Capital common stock. A
domestic corporation's basis in LS Capital common stock will also be the lesser
of the foregoing amounts.
STATE AND LOCAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION WILL VARY FROM
JURISDICTION TO JURISDICTION. SHAREHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISORS TO DETERMINE APPLICABLE TAX CONSEQUENCES OF THE ISSUANCE AND
DISPOSITION OF THE SHARES BEING DISTRIBUTED.
Receipt of Shares.
The receipt of shares of Common Stock will result in a taxable capital
gain to LS Capital shareholders to the extent that such fair value of Company
Stock exceeds their tax basis in LS Capital common stock at the time of
issuance.
Sale of Shares.
A LS Capital stockholder whose shares of Common Stock are sold will
realize capital gain or loss measured by the difference between the amount
realized and the stockholder's tax basis in such shares.
Holding Period.
The holding period of the shares of Common Stock received in connection
with the Distribution is measured from the date that the shares are distributed
to LS Capital stockholders.
Other Tax Consequences.
There may be other federal, state, local or foreign tax considerations
(including potential withholding requirements) applicable to the circumstances
of particular LS Capital stockholders who should consult with their own tax
advisors to determine the applicable tax consequences of the issuance and
disposition of the shares of Common Stock being distributed.
OTHER SHARES BEING REGISTERED
In addition to the shares comprising the Distribution, the Company is
registering with the Commission, and this Prospectus covers, an additional
5,000,000 shares of Common Stock in order to facilitate the Company's ability to
pursue other mineral exploration and extraction opportunities. It is antic
ipated that this will enable the Company to issue registered stock in connection
with any one or more acquisitions of assets or mergers with existing businesses.
The Company has not identified any acquisitions that it currently intends to
pursue.
The issuance of such shares and the consideration to be received
therefor will be entirely within the discretion of the Company's Board of
Directors. Although the Board of Directors intends to utilize its reasonable
business judgement and to fulfill its fiduciary obligations to the Company's
then existing stockholders in connection with any issuance, it is possible that
the future issuance of additional shares could cause immediate and substantial
dilution to the net tangible book value of those shares of the Common Stock that
are issued and outstanding immediately prior to such transaction. Any future
decrease in the net tangible book value of the Company's issued and outstanding
shares could have a material adverse effect on the market value of the shares.
OTHER MATTERS
The Distribution is not being made in any states or other jurisdictions
in which it in unlawful to do so. The Company may delay the commencement of the
Distribution in certain states or other jurisdictions in
23
<PAGE>
order to comply with the securities law requirements of such states or other
jurisdictions. It is not anticipated that there will be any changes in the terms
of the Distribution. The Company may, if it so determines in its sole
discretion, decline to make modifications to the terms of the Distribution
requested by certain states or other jurisdictions, in which event LS Capital
stockholders resident in such states or other jurisdictions will not be eligible
to participate in the Distribution.
DESCRIPTION OF CAPITAL STOCK
The following description of certain terms of the capital stock of the
Company does not purport to be complete and is qualified in its entirety by
reference to the Company's Certificate of Incorporation incorporated herein by
reference.
Common Stock.
The authorized Common Stock of the Company consists of 50,000,000 shares,
par value $0.01 per share. As of the date of this Prospectus, 10,000,000 shares
of Common Stock were outstanding. All of the shares of Common Stock are validly
issued, fully paid and nonassessable. Holders of record of Common Stock will be
entitled to receive dividends when and if declared by the Board of Directors out
of funds of the Company legally available therefor. In the event of any
liquidation, dissolution or winding up of the affairs of the Company, whether
voluntary or otherwise, after payment of provision for payment of the debts and
other liabilities of the Company, including the liquidation preference of all
classes of preferred stock of the Company, each holder of Common Stock will be
entitled to receive his pro rata portion of the remaining net assets of the
Company, if any. Each share of Common stock has one vote, and there are no
preemptive, subscription, conversion or redemption rights. Shares of Common
Stock do not have cumulative voting rights, which means that the holders of a
majority of the shares voting for the election of directors can elect all of the
directors.
Preferred Stock.
The Company's Certificate of Incorporation authorizes the issuance of up to
10,000,000 shares of the Company's $0.01 par value preferred stock (the
"Preferred Stock"). As of the date of this Prospectus, no shares of Preferred
Stock were outstanding. The Preferred Stock constitutes what is commonly
referred to as "blank check" preferred stock. "Blank check" preferred stock
allows the Board of Directors, from time to time, to divide the Preferred Stock
into series, to designate each series, to issue shares of any series, and to fix
and determine separately for each series any one or more of the following
relative rights and preferences: (i) the rate of dividends; (ii) the price at
and the terms and conditions on which shares may be redeemed; (iii) the amount
payable upon shares in the event of involuntary liquidation; (iv) the amount
payable upon shares in the event of voluntary liquidation; (v) sinking fund
provisions for the redemption or purchase of shares; (vi) the terms and
conditions pursuant to which shares may be converted if the shares of any series
are issued with the privilege of conversion; and (vii) voting rights. Dividends
on shares of Preferred Stock, when and as declared by the Board of Directors out
of any funds legally available therefor, may be cumulative and may have a
preference over Common Stock as to the payment of such dividends. The provisions
of a particular series, as designated by the Board of Directors, may include
restrictions on the ability of the Company to purchase shares of Common Stock or
to redeem a particular series of Preferred Stock. Depending upon the voting
rights granted to any series of Preferred Stock, issuance thereof could result
in a reduction in the power of the holders of Common Stock. In the event of any
dissolution, liquidation or winding up of the Company, whether voluntary or
involuntary, the holders of each series of the then outstanding Preferred Stock
may be entitled to receive, prior to the distribution of any assets or funds to
the holders of the Common Stock, a liquidation preference established by the
Board of Directors, together with all accumulated and unpaid dividends.
Depending upon the consideration paid for Preferred Stock, the liquidation
preference of Preferred Stock and other matters, the issuance of Preferred Stock
could result in a reduction in the assets available for distribution to the
holders of the Common Stock in the event of liquidation of the Company. Holders
of Preferred Stock will not have preemptive rights to acquire any additional
securities issued by the Company.
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<PAGE>
Once a series has been designated and shares of the series are outstanding,
the rights of holders of that series may not be modified adversely except by a
vote of at lease a majority of the outstanding shares constituting such series.
One of the effects of the existence of authorized but unissued shares of
Common Stock or Preferred Stock may be to enable the Board of Directors of the
Company to render it more difficult or to discourage an attempt to obtain
control of the Company by means of a merger, tender offer at a control premium
price, proxy contest or otherwise and thereby protect the continuity of or
entrench the Company's management, which concomitantly may have a potentially
adverse effect on the market price of the Common Stock. If in the due exercise
of its fiduciary obligations, for example, the Board of Directors were to
determine that a takeover proposal were not in the best interests of the
Company, such shares could be issued by he Board of Directors without
stockholder approval in one or more private placements or other transactions
that might prevent or render more difficult or make more costly the completion
of any attempted takeover transaction by diluting voting or other rights of the
proposed acquirer or insurgent stockholder group, by creating a substantial
voting block in institutional or other hands that might support the position of
the incumbent Board of Directors, by effecting an acquisition that might
complicate or preclude the takeover, or otherwise.
Delaware Legislation.
The Company is a Delaware corporation and consequently is subject to
certain anti-takeover provisions of the Delaware General Corporation Law (the
"Delaware Law"). The business combination provision contained in Section 203 of
the Delaware Law ("Section 203") defines an interested stockholder of a
corporation as any person that (i) owns, directly or indirectly, or has the
right to acquire, fifteen percent (15%) or more of the outstanding voting stock
of the corporation or (ii) is an affiliate or associate of the corporation and
was the owner of fifteen percent (15%) or more of the outstanding voting stock
of the corporation at any time within the three-year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder; and the affiliates and the associates of such person.
Under Section 203, a Delaware corporation may not engage in any business
combination with any interested stockholder for a period of three years
following the date such stockholder became an interested stockholder, unless (i)
prior to such date the board of directors of the corporation approved either the
business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, or (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at lease eighty-five percent (85%) of the voting
stock of the corporation outstanding at the time the transaction commenced
(excluding, for determining the number of shares outstanding, (a) shares owned
by persons who are directors and officers and (b) employee stock plans, in
certain instances), or (iii) on or subsequent to such date the business
combination is approved by the board of directors and authorized at an annual or
special meeting of the stockholders by at least sixty-six and two-thirds percent
(66 2/3%) of the outstanding voting stock that is not owned by the interested
stockholder. The restrictions imposed by Section 203 will not apply to a
corporation if (i) the corporation's original certificate of incorporation
contains a provision expressly electing not be governed by this section or (ii)
the corporation, by the action of its stockholders holding a majority of
outstanding stock, adopts an amendment to its certificate of incorporation or
by-laws expressly electing not be governed by Section 203 (such amendment will
not be effective until 12 months after adoption and shall not apply to any
business combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption).
The Company has not elected out of Section 203, and the restrictions
imposed by Section 203 apply to the Company. Section 203 could, under certain
circumstances, make it more difficult for a third party to gain control of the
Company.
Shares Eligible for Future Sale.
Prior to the Distribution, there has been no public market for the
Common Stock. Sales of a substantial amount of Common Stock in the public
market, or the perception that such sales may occur, could adversely affect the
market price of the Common Stock prevailing from time to time in the public
market and could impair the Company's ability to raise additional capital
through the sale of its equity securities in the future.
25
<PAGE>
Upon completion of the Offering, the Company will have issued and
outstanding 10,000,000 shares of Common Stock, approximately 9,526,600 of which
are believed to be "restricted" or "control" shares for purposes of the Act.
"Restricted" shares are those acquired from the Company or an "affiliate" other
than in a public offering, while "control" shares are those held by affiliates
of the Company regardless as to how they were acquired. The vast majority of
these restricted and control shares of Common Stock are believed eligible for
sale under Rule 144 (as amended effective April 29, 1997) subject to the volume
limitations of Rule 144.
In general, under Rule 144 (as amended effective April 29, 1997), one
year must have elapsed since the later of the date of acquisition of restricted
shares from the Company or any affiliate of the Company. No time needs to have
lapsed in order to sell control shares. Once the restricted or control shares
may be sold under Rule 144, the holder is entitled to sell within any
three-month period such number of restricted or control shares that does not
exceed the greater of 1% of the then outstanding shares or the average weekly
trading volume of shares during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain restrictions on the manner of selling, notice
requirements and the availability of current public information about the
Company. Under Rule 144 (as amended effective April 29, 1997), if two years have
elapsed since the holder acquired restricted shares from the Company or from any
affiliate of the Company, and the holder is deemed not to have been an affiliate
of the Company at any time during the 90 days preceding a sale, such person will
be entitled to sell such Common Stock in the public market under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.
In addition to the preceding, this Prospectus covers an additional
5,000,000 shares of Common Stock, which the Company may use in connection with
future business combination transactions.
DIVIDEND POLICY
The Company has paid no cash dividends on its Common Stock, and the Company
presently intents to retain earnings to finance the expansion of its business.
Payment of future dividends, if any, will be at the discretion of the Board of
Directors after taking into account various factors, including the Company's
financial condition, results of operations, current and anticipated cash needs
and plans for expansion.
USE OF PROCEEDS
The Company will not receive any proceeds from the Distribution. Moreover,
the Company will not receive any proceeds when it issues any of the other
5,000,000 shares covered by this Prospectus. However, such other shares are
intended be used for business combination transactions pursuant to which the
Company will acquire direct or indirect ownership of assets and properties.
EXPERTS
The financial statements and schedules of Griffin Gold Group, Inc. as of
June 30, 1997 and for the period October 30, 1996 (inception) through June 30,
1997 have been included herein and in the registration statement in reliance
upon the report of Malone & Bailey, PLLC, independent certified public
accountants, included herein, and upon the authority of said firm as experts in
accounting and auditing.
MANAGEMENT'S PLAN OF OPERATION
For the next twelve months, the Company will continue to work to
achieve consistent yields from processed ores. As yields become more consistent,
the Company will endeavor to scale up the level of processing to ten TPD. Once
this scale is achieved, the Company and LS Capital intend to commission an
engineering and design feasibility study with regard to the larger plant
described above. In the interim, the Company and LS Capital expect to devote
efforts to procuring financing for the larger plant in the event a decision is
made to pursue construction.
The Company does not now have funds sufficient to pursue its plan of
operation over the next twelve months. The Company expects to finance its plan
of operations over the next twelve months
26
<PAGE>
through cash flow from operations, the possible placement of the Company's
equity securities, joint venture arrangements (including project financing), the
use of certain shares of Common Stock to be registered pursuant to another
registration statement to encourage outside consultants to provide services to
the Company, and the use of certain of the shares of Common Stock covered by
this Prospectus for purposes of acquisitions. See "RISK FACTORS - Lack of
Revenue and Need for Additional Capital." One way or the other, the Company
expects to raise additional amounts over the next twelve months in amounts and
by means not now certain.
In addition, the Company expects that it will need to have as many as
20 employees if the Company's level of processing increases to ten TPD and more
if processing exceeds this level. The Company does not now foresee any problem
in hiring a sufficient number of qualified employees.
27
<PAGE>
<TABLE>
<S> <C>
Independent Auditor's Report ...................................................................................F-1
Balance Sheet as of June 30, 1997 ..............................................................................F-2
Income Statement for the period from
October 30, 1996 (Inception) to June 30, 1997.................................................................F-3
Statement of Stockholder's Equity for the period from
October 30, 1996 (Inception) to June 30, 1997.................................................................F-4
Statement of Cash Flows for the period from
October 30, 1996 (Inception) to June 30, 1997.................................................................F-5
Notes to Financial Statements...................................................................................F-6
</TABLE>
28
<PAGE>
October 20, 1997
Independent Auditor's Report
To the Board of Directors and Stockholders
Griffin Gold Group, Inc.
Houston, Texas
We have audited the accompanying balance sheet of Griffin Gold Group, Inc. as of
June 30, 1997, and the related statements of income , stockholders' equity, and
cash flows for the period from inception (October 30, 1996) to June 30, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Griffin Gold Group, Inc. as of
June 30, 1997, and the results of its operations and its cash flows for the
initial period then ended in conformity with generally accepted accounting
principles.
MALONE & BAILEY, PLLC
<PAGE>
GRIFFIN GOLD GROUP, INC.
(A Development Stage Company)
Balance Sheet
<TABLE>
<CAPTION>
June 30,
1997
<S> <C>
ASSETS
Current Assets
Cash $ 65
Marketable securities 50,000
Stock subscriptions receivable 56,407
Amounts receivable from affiliates 95,000
Prepaid services 10,010
Total Current Assets 211,482
Vehicles 24,071
Equipment 56,063
Mining claims 26,739
---------
TOTAL ASSETS $318,355
=========
LIABILITIES
Amounts payable to affiliates $209,973
Total Current Liabilities 209,973
Stockholder's Equity
Preferred stock, par value $.01, 10,000,000 shares
authorized, no shares issued or outstanding
Common stock, par value $.01, 50,000,000 shares
authorized, 10,000,000 shares issued and outstanding 100,000
Paid in capital 400,000
Deficit accumulated during the development stage (391,618)
---------
Total Stockholders' Equity 108,382
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $318,355
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GRIFFIN GOLD GROUP, INC.
(A Development Stage Company)
Income Statement
<TABLE>
<CAPTION>
October 30, 1996
(Inception) to
June 30, 1997
<S> <C>
Joint venture sharing of ore processing plant start up costs $310,840
General and administrative 78,699
Interest 2,079
Net loss $391,618
Net loss per common share $.04
Weighted average common shares outstanding 10,000,000
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GRIFFIN GOLD GROUP, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Paid in Accumulated
Shares Amount Capital Deficit Totals
----------- ----------- ----------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Shares issued to
parent company at
inception 5,000,000 $ 50,000 $(50,000)
Shares issued for
cash and mining
claims 5,000,000 50,000 450,000 $500,000
Net (deficit) $(391,618) (391,618)
---------- --------- ----------- ------------- --------------
Balances,
June 30, 1997 10,000,000 $100,000 $400,000 $(391,618) $108,382
========== ========== ======== =========== ============
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GRIFFIN GOLD GROUP, INC.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
October 30, 1996
( Inception) to
June 30, 1997
<S> <C>
Cash Flows from Operating Activities
Net loss $(391,618)
Adjustments to reconcile net loss to net cash
used in operating activities
Expenses paid with issuance of S-8 stock
of affiliate 252,188
Increase in prepaid services (10,010)
Purchases of marketable securities (50,000)
--------
(199,440)
Cash Flows from Investing Activities
Purchase of vehicle and field equipment (30,134)
Loans to affiliate to finance ore processing pilot
plant start up costs (95,000)
(125,134)
Cash Flows from Financing Activities
Sales of stock 436,854
Payments to an affiliate to reimburse compensation
expenses paid with affiliate stock (112,215)
324,639
Cash balance on June 30, 1997 $ 65
===========
Supplemental Cash flow information
Interest paid $ 2,079
Vehicle and equipment contributed by affiliate 50,000
Mining claim capitalized costs contributed by affiliates 26,739
Stock subscriptions receivable (cash collected July, 1997) 56,407
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GRIFFIN GOLD GROUP, INC.
Notes to Financial Statements
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
Business. Griffin Gold Group, Inc. ("Company") is a Delaware corporation formed
October, 1996 to locate and extract gold and other precious minerals using an
affiliate's new and proprietary ore processing technology.
Use of Estimates. The financial statements have been prepared in conformity with
generally accepted accounting principles and, as such, include amounts based on
informed estimates and judgments of management with consideration given to
materiality. Actual results could differ from those estimates.
Cash includes demand deposit bank accounts. Company policy includes any highly
liquid investments with original maturities of three months or less.
Marketable securities are shown at market value.
Depreciation is calculated using the straight-line method over the useful lives
of property and equipment.
Mining claims include costs incurred to procure the exploration and mining
rights to 3,520 acres in southeastern California. Such costs are considered
exploration and development costs and are capitalized until the claims are
producing or are written off as unproductive.
Income taxes are not due since the Company has losses in its first year.
Earnings (Loss) per share calculations do not include the dilutive effect of
common stock equivalents, if any, in years of losses.
NOTE 2 - TRANSACTIONS WITH AFFILIATES
The company was formed in October, 1996 as a wholly-owned subsidiary of L S
Capital Corporation ("L S Capital"). At the same time, the Company entered into
agreements with L S Capital and three Canadian individuals to acquire the mining
interests it currently owns plus
F-6
<PAGE>
GRIFFIN GOLD GROUP, INC.
Notes to Financial Statements
NOTE 2 - TRANSACTIONS WITH AFFILIATES (continued)
$500,000 in exchange for 5,000,000 shares of the Company and 500,000 shares of L
S Capital. The Company began receiving this cash in March, 1997 and as of
October 20, 1997, the Company has received $493,261 in net capital contributions
from these individuals.
The Company entered into another agreement to acquire an interest in these same
claims from an L S Capital board member for reimbursement of his acquisition
costs, or $20,000.
On March 1, 1997, the Company entered into an agreement with Desert Minerals,
Inc. ("DMI"), a sister company owned 47% by L S Capital and 48% by three of the
four individual stockholders of the Company. This agreement provided for
open-ended cash loans and expense reimbursements incurred by DMI to build and
test a pilot ore testing and processing plant near the location of the mining
claims. This pilot plant is still uncompleted as of October 20, 1997 and results
of initial testing by this facility of company mining claims are not yet
completed.
A summary of amounts advanced by L S Capital and other shareholders to the
Company and from the Company to DMI is as follows:
<TABLE>
<CAPTION>
March through July through
June, 1997 October 20, 1997
<S> <C> <C>
Cash received from sale of stock to 3 individuals $ 436,854 $ 56,407
Cash (advanced to) repayments by L S Capital (112,215) 134,490
L S Capital stock used to pay Company expenses 258,188
---------- -----------
Net receipts $ 582,827 $ 190,897
========== ===========
Cash advanced to DMI, shown as to be repaid $ 95,000 $ 106,040
Payment of DMI ore processing plant start up
expenses 310,840 132,362
---------- -----------
Net disbursements $ 405,840 $ 238,402
========= ==========
</TABLE>
In addition to the above, in May, 1997 L S Capital contributed a truck and
certain ore testing equipment to the Company valued at its original cost of
$50,000. This equipment is being used on site at the DMI pilot plant facility.
NOTE 3 - MARKETABLE SECURITIES
The purchase of $50,000 in common stock of MG Gold, Inc. was made in March, 1997
and rescinded in July, 1997 by a full refund of the purchase price.
F-7
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION ............................................................................. 3
PROSPECTUS SUMMARY ................................................................................. 4
RISK FACTORS........................................................................................ 6
BUSINESS............................................................................................ 11
MANAGEMENT ......................................................................................... 17
EXECUTIVE COMPENSATION.............................................................................. 17
CERTAIN TRANSACTIONS................................................................................ 18
PRINCIPAL STOCKHOLDERS.............................................................................. 19
THE DISTRIBUTION.................................................................................... 20
CERTAIN FEDERAL INCOME TAX CONSEQUENCES............................................................. 21
OTHER SHARES BEING REGISTERED....................................................................... 22
OTHER MATTERS....................................................................................... 22
DESCRIPTION OF CAPITAL STOCK........................................................................ 23
DIVIDEND POLICY..................................................................................... 25
USE OF PROCEEDS..................................................................................... 25
EXPERTS............................................................................................. 25
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, to the fullest
extent authorized by the Delaware Law, the Company shall indemnify each person
who was or is made a party or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding") because he is or was a director or officer of the
Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against all expenses, liabilities and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by him in connection with such Proceeding.
Under Section 145 of the Delaware Law, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed Proceeding (other than an action by or in the right of the
corporation) if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in the
right of the corporation, the corporation may indemnify a director, officer,
employee or agent of the corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of any threatened, pending or completed action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that a
court determines upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
The Company's Certificate of Incorporation also provides that expenses
incurred by a person in his capacity as director of the Company in defending a
Proceeding may be paid by the Company in advance of the final disposition of
such Proceeding as authorized by the Board of Directors of the Company in
advance of the final disposition of such Proceeding as authorized by the Board
of Directors of the Company upon receipt of an undertaking by or on behalf of
such person to repay such amounts unless it is ultimately determined that such
person is entitled to be indemnified by the Company pursuant to the Delaware
Law. Under Section 145 of the Delaware Law, a corporation must indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees) actually and reasonably incurred in by him in
connection with the defense of a Proceeding if he has been successful on the
merits or otherwise in the defense thereof.
The Company's Certificate of Incorporation provides that a director of the
Company shall not be personally liable to the Company of its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for breach of a director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware Law for the willful or negligent unlawful payment of dividends,
stock purchase or stock redemption or (iv) for any transaction from which a
director derived an improper personal benefit.
The Company intends to attempt to procure directors' and officers'
liability insurance which insures against liabilities that directors and
officers of the Company may incur in such capacities.
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses set forth below, will be borne by the Company.
<TABLE>
<CAPTION>
Item Amount
<S> <C>
SEC Registration Fee ....................................................................$ 1,475.00
Blue Sky Filing Fees and Expenses........................................................$ 5,000.00
Legal Fees and Expenses..........................................................................*
Accounting Fees and Expenses ....................................................................*
Miscellaneous....................................................................................*
Total ...........................................................................................*
</TABLE>
* This figure will be supplied in an amendment to the registration statement.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In connection with the formation of the Company, the Company issued to
Edwin Hemsted ("Hemsted"), Keith J. McKenzie ("McKenzie") and Kent E. Lovelace,
Jr. ("Lovelace") 2,375,000, 1,375,000 and 1,125,000 shares, respectively, of the
Company's common stock (the "Common Stock"), in consideration of the exertion of
their influence to cause certain other persons to enter into the
Exploration/Option Agreement with the Company by which the Company acquired its
rights to its Claims. In addition, LS Capital Corporation, a Delaware
corporation ("LS Capital"), issued to Hemsted and McKenzie 333,332 and 166,667
shares, respectively, of LS Capital common stock. In consideration of the
issuance of these shares of LS Capital common stock, LS Capital was issued
5,000,000 shares of Common Stock. In further consideration of the issuance of
their shares, Hemsted and McKenzie and Groves agreed to make an aggregate
additional capital contribution to the Company in the amount of $500,000 by a
specified date without the issuance of any additional shares, the failure of
which may result in the forfeiture of their unsold Common Stock and LS Capital
common stock. As of October 20, 1997, Hemsted, McKenzie and Groves had
contributed an aggregate of $493,261 to the Company in partial fulfillment of
their additional capital contribution obligations. Because Hemsted, McKenzie,
Groves and Schmitt are Canadian nationals, the issuances of Common Stock to them
are claimed to be exempt pursuant to Regulation S under the Act. Because the
Company is a partially-owned subsidiary of LS Capital and Lovelace is a director
of LS Capital, the issuances of Common Stock to them is claimed to be exempt
pursuant Section 4(2) of the Act.
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.01 Certificate of Incorporation of the Company
3.02 Bylaws of the Company
4.01 Specimen Common Stock Certificate
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, as to the legality of
securities being registered, to be filed by amendment.
10.01 Agreement dated October 30, 1996 among Zeotech Industries, Inc., Ed Hemsted, W.D. Groves,
KJM Capital Corp., Keith J. McKenzie, Kent E. Lovelace, Jr., Griffin Gold Group, Inc. and the
Company.
10.02 Services Agreement dated March 1, 1997 between Griffin Gold Group, Inc. and Desert Minerals,
Inc.
10.03 Release and Partial Termination Agreement among W.D. Groves,
Zeotech Industries, Inc., Ed Hemsted, KJM Capital Corp., Keith
J. McKenzie, Kent E. Lovelace, Jr., Griffin Gold Group, Inc.
and the Company.
10.04 First Amendment to Agreement dated October 30, 1996 among Zeotech Industries, Inc., Ed
Hemsted, W.D. Groves, KJM Capital Corp., Keith J. McKenzie, Kent E. Lovelace, Jr., Griffin Gold
Group, Inc. and the Company.
10.05 Second Amendment to Agreement dated October 30, 1996 among Zeotech Industries, Inc., Ed
Hemsted, W.D. Groves, KJM Capital Corp., Keith J. McKenzie, Kent E. Lovelace, Jr., Griffin Gold
Group, Inc. and the Company.
10.06 Letter Employment Agreement dated March 27, 1998 between the Company and Richard W.
Lancaster.
10.07 Letter Agreement dated March 27, 1997 among the Company, LS Capital Corporation, Desert
Minerals, Inc., Douglas Schmitt, Zeotech Industries, Inc. and Ed Hemsted.
10.08 Exploration Agreement and Option to Lease dated June 5, 1997 among Charles Jackson, Marie
Unruh, James Hopkins, Sr., Tracy Hopkins, Rick Jackson, Mara Jackson, Paul Jackson, Jared
Jackson, and the Company
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, contained in Exhibit 5.01.
25.01 Power of Attorney (included on the signature page hereto).
27 Financial Data Schedule
</TABLE>
<PAGE>
ITEM 28. UNDERTAKINGS
A. The undersigned Registrant will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to include any
prospectus required by section 10(a)(3) of the Securities Act, reflect in the
prospectus any facts or events which, individually or together, represent a
fundamental change in the information in the registration statement, and include
any additional or changed material information on the plan of distribution.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of such securities at that time to be the
initial bona fide offering thereof.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
B. (1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer 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.
(2) In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses incurred or
paid by a director, officer or controlling person of the small business issuer
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer 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 whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
<PAGE>
SIGNATURES
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
requirement for filing on Form SB-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas on December 5, 1997.
GRIFFIN GOLD GROUP, INC.
By: /s/ Richard W. Lancaster
Richard W. Lancaster, President
(Principal Executive Officer,
Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
<S> <C> <C>
/s/ Richard W. Lancaster Director and President December 5, 1997
Richard W. Lancaster (Principal Executive Officer
and Principal Financial Officer)
/s/ Paul J. Montle Director December 5, 1997
Paul J. Montle and Vice President
/s/ C. Thomas Cutter Director December 5, 1997
C. Thomas Cutter
</TABLE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C>
3.01 Certificate of Incorporation of the Company
3.02 Bylaws of the Company
4.01 Specimen Common Stock Certificate
5.01 Opinion and Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, as to the
legality of securities being registered, to be filed by amendment.
10.01 Agreement dated October 30, 1996 among Zeotech Industries, Inc., Ed
Hemsted, W.D. Groves, KJM Capital Corp., Keith J. McKenzie, Kent E.
Lovelace, Jr., Griffin Gold Group, Inc. and the Company.
10.02 Services Agreement dated March 1, 1997 between Griffin Gold Group, Inc. and
Desert Minerals, Inc.
10.03 Release and Partial Termination Agreement among W.D. Groves, Zeotech
Industries, Inc., Ed Hemsted, KJM Capital Corp., Keith J. McKenzie, Kent E.
Lovelace, Jr., Griffin Gold Group, Inc. and the Company.
10.04 First Amendment to Agreement dated October 30, 1996 among Zeotech
Industries, Inc., Ed Hemsted, W.D. Groves, KJM Capital Corp., Keith J.
McKenzie, Kent E. Lovelace, Jr., Griffin Gold Group, Inc. and the Company.
10.05 Second Amendment to Agreement dated October 30, 1996 among Zeotech
Industries, Inc., Ed Hemsted, W.D. Groves, KJM Capital Corp., Keith J.
McKenzie, Kent E. Lovelace, Jr., Griffin Gold Group, Inc. and the Company.
10.06 Letter Employment Agreement dated March 27, 1998 between the Company and Richard W.
Lancaster.
10.07 Letter Agreement dated March 27, 1997 among the Company, LS Capital
Corporation, Desert Minerals, Inc., Douglas Schmitt, Zeotech Industries, Inc. and
Ed Hemsted.
10.08 Exploration Agreement and Option to Lease dated June 5, 1997 among Charles
Jackson, Marie Unruh, James Hopkins, Sr., Tracy Hopkins, Rick Jackson, Mara
Jackson, Paul Jackson, Jared Jackson, and the Company
23.01 Consent of Malone & Bailey, PLLC
23.02 Consent of Randall W. Heinrich, Of Counsel to Gillis & Slogar, contained in
Exhibit 5.01.
25.01 Power of Attorney (included on the signature page hereto).
27 Financial Data Schedule
</TABLE>
EXHIBIT 3.01
CERTIFICATE OF INCORPORATION
OF
GRIFFIN GOLD GROUP, INC.
First: The name of the Corporation is GRIFFIN GOLD GROUP, INC.
Second: The name and address of the registered agent for service of process
on the Corporation in the State of Delaware is Corporation Service Company, 1013
Center Road, New Castle County, Wilmington, Delaware 19805.
Third: The nature of the business, objects and purposes to be transacted,
promoted or carried on by the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
Fourth: The total number of shares of capital stock which the Corporation
shall have
<PAGE>
authority to issue is Sixty Million (60,000,000), divided into Fifty Million
(50,000,000) shares of Common Stock of the par value of one cent ($0.01) per
share and Ten Million (10,000,000) shares of Preferred Stock of the par value of
one cent ($0.01) per share.
A. No holder of Common Stock or Preferred Stock of the Corporation
shall have any pre-emptive, preferential, or other right to purchase or
subscribe for any shares of the unissued stock of the Corporation or of any
stock of the Corporation to be issued by reason of any increase of the
authorized capital stock of the Corporation or of the number of its shares, or
of any warrants, options, or bonds, certificates of indebtedness, debentures, or
other securities convertible into or carrying options or warrants to purchase
stock of the Corporation or of any stock of the Corporation purchased by it or
its nominee or nominees or other securities held in the treasury of the
Corporation, whether issued or sold for cash or other consideration or as a
dividend or otherwise, other than such rights, if any, as the Board of Directors
in its discretion from time to time may grant and at such price as the Board of
Directors in its discretion may fix.
B. The holders of Common Stock shall have the right to one vote per
share on all questions to the exclusion of all other classes of stock, except as
by law expressly provided or as otherwise herein expressly provided with respect
to the holders of any other class or classes of stock.
C. The Board of Directors is authorized, subject to limitations
prescribed by law, by resolution or resolutions to provide for the issuance of
shares of Preferred Stock in series, and by filing a certificate pursuant to the
General Corporation Law of Delaware, to establish from time to time the number
of shares to be included in each such series, and to fix the designation,
powers, preferences, and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof. The authority of the Board
with respect to each series shall include, but not be limited to, determination
of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series;
(2) The dividend rights and dividend rate on the shares of that
series, whether dividends shall be cumulative, and, if so, from which date
or dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(4) Whether that series shall have conversion or exchange privileges,
and, if so, the terms and conditions of such conversion or exchange
including provision for adjustment of the conversion or exchange rate in
such events as the Board of Directors shall determine;
(5) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or
date upon or after which they shall be redeemable, and the amount per share
payable in cash on redemption, which amount may vary under different
conditions and at different redemption dates;
(6) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and amount of
such sinking
<PAGE>
fund;
(7) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the corporation,
and the relative rights of priority, if any, of payment of shares of that
series;
(8) Any other relative rights, preferences and limitations of that
series; or
(9) Any or all of the foregoing terms.
D. Except where otherwise set forth in the resolution or resolutions
adopted by the Board of Directors of the Corporation providing for the issue of
any series of Preferred Stock created thereby, the number of shares comprising
such series may be increased or decreased (but not below the number of shares
then outstanding) from time to time by like action of the Board of Directors of
the Corporation. Should the number of shares of any series be so decreased, the
shares constituting such decrease shall resume the status which they had prior
to adoption of the resolution originally fixing the number of shares of such
series.
E. Shares of any series of Preferred Stock which have been redeemed
(whether through the operation of a sinking fund or otherwise), purchased or
otherwise acquired by the Corporation, or which, if convertible or exchangeable,
have been converted into or exchanged for shares of stock of any other class or
classes, shall have the status of authorized and unissued shares of Preferred
Stock and may be reissued as a part of the series of which they were originally
a part or may be reclassified or reissued as part of a new series of Preferred
Stock to be created by resolution or resolutions of the Board of Directors or as
part of any other series of Preferred Stock, all subject to the conditions or
restrictions adopted by the Board of Directors of the Corporation providing for
the issue of any series of Preferred Stock and to any filing required by law.
Fifth: The Corporation is to have perpetual existence.
Sixth: The number of directors constituting the initial Board of Directors
is one, and the name and address of the person who is to serve as director until
the first annual meeting of the stockholders or until his successor is elected
and qualify is:
Name Mailing Address
Kent E. Lovelace, Jr. 3300 West Beach Street
Gulfport, Mississippi 39502
Seventh: In furtherance and not in limitation of the powers conferred by
the General Corporation Law of Delaware, the Board of Directors is expressly
authorized:
(1) To make, alter or repeal the by-laws of the Corporation.
(2) To authorize and cause to be executed mortgages and liens upon the
real and personal property of the Corporation.
(3) To set apart out of any of the funds of the Corporation available
for dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
<PAGE>
(4) By a majority of the whole Board of Directors, to designate one or
more committees, each committee to consist of two or more of the directors
of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. Any such committee,
to the extent provided in the resolution or in the by-laws of the
Corporation, shall have and may exercise the powers of the Board of
Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers
which may require it; provided, however, the by-laws may provide that in
the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at
the meeting in the place of any such absent or disqualified member.
(5) When and as authorized by the affirmative vote of the holders of a
majority of the stock issued and outstanding having voting power given at a
stockholders' meeting duly called upon such notice as is required by the
General Corporation Law of Delaware, or when authorized by the written
consent of the holders of a majority of the voting stock issued and
outstanding, to sell, lease or exchange all or substantially all the
property and assets of the Corporation, including its goodwill and its
corporate franchises, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or property
including securities of any other corporation or corporations, as the Board
of Directors shall deem expedient and for the best interests of the
Corporation.
Eighth: To the fullest extent permitted by the General Corporation Law of
Delaware as the same exists or may hereafter be amended, a director of this
Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
Ninth: This Corporation shall, to the maximum extent permitted from time to
time under the law of the State of Delaware, indemnify and upon request shall
advance expenses to any person who is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit, proceeding or
claim, whether civil, criminal, administrative or investigative, by reason of
the fact that such person is or was or has agreed to be a director or officer of
this Corporation or any of its direct or indirect subsidiaries or while such a
director or officer is or was serving at the request of this Corporation as a
director, officer, partner, trustee, employee or agent of any corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to employee benefit plans, against expenses (including attorney's fees
and expenses), judgments, fines, penalties and amounts paid in settlement
incurred in connection with the investigation, preparation to defend or defense
of such action, suit, proceeding or claim; provided, however, that the foregoing
shall not require this Corporation to indemnify or advance expenses to any
person in connection with any action, suit, proceeding, claim or counterclaim
initiated by or on behalf of such person. Such indemnification shall not be
exclusive or other indemnification rights arising under any bylaws, agreement,
vote of directors or stockholders or otherwise and shall inure to the benefit of
the heirs and legal representatives of such person. Any person seeking
indemnification under this Article Ninth shall be deemed to have met the
standard of conduct required for such indemnification unless the contrary shall
be established.
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Tenth: In connection with the exercise of its judgement in determining what
is in the best interest of the Corporation and of the stockholders, when
evaluating a Business Combination, the Board of Directors of the Corporation is
hereby expressly authorized to consider, in addition to the adequacy of the
consideration to be paid in connection with such transaction, the following
factors and any other factors which it deems relevant, including, without
limitation: (i) the long term interests of the Corporation's stockholders,
including, among other factors, the consideration being offered in relation to
(a) the then current market price of the Corporation's equity securities and the
historical range of such prices, (b) the then current value of the Corporation
in a freely negotiated transaction, and (c) the Board of Directors' then
estimate of the future value of the Corporation as an independent entity; (ii)
the economic, social and legal effects on the Corporation and its subsidiaries,
including, among other factors, such effects on the Corporation's employees,
customers, suppliers and the communities in which they operate or are located;
(iii) the business and financial condition and earnings prospects of the
acquiring person or persons, including, but not limited to, debt service and
other existing financial obligations, financial obligations to be incurred in
connection with the acquisition, and other likely financial obligations of the
acquiring person or persons, and the possible effect of such conditions upon the
Corporation, its subsidiaries, and the other elements of the communities in
which the Corporation and its subsidiaries operate or are located; and (iv) the
competence, experience and integrity of the acquiring person or person, and its
or their management. For purposes of this Article Tenth, "Business Combination"
is defined as (a) a tender or exchange offer for any equity securities of the
Corporation, (b) a proposal to merge or consolidate the Corporation with another
company, (c) a proposal to purchase or otherwise acquired all or substantially
all of the properties and assets of the Corporation, or (d) a proposal to engage
in any other similar form of combination with the Corporation.
Eleventh: Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws may provide. The books of the Corporation may be
kept (subject to any provision contained in the General Corporation Law of
Delaware) outside the State of Delaware at such place or places as may be
designated from time to time by the Boards of Directors or in the by-laws of the
Corporation. Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall so provide.
Twelfth: Whenever the vote of stockholders at a meeting thereof is required
or permitted to be taken for or in connection with any corporate action, the
meeting and vote of stockholders may be dispensed with and such action may be
taken with the written consent of stockholders having not less than the minimum
percentage of the vote required by the General Corporation Law of Delaware for
the proposed corporate action, provided that prompt notice shall be given to all
stockholders of the taking of corporate action without a meeting and by less
than unanimous consent.
Thirteenth: Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receive or receivers appointed for this Corporation under the
provisions of Section 291 of the General Corporation Law of Delaware or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provision of Section 279 of the General
Corporation Law of Delaware, order a meeting of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing
<PAGE>
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise arrangement, the said compromise
or arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders, of
this Corporation, as the case may be, and also on this Corporation.
Fourteenth: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the General Corporation Law of Delaware,
and all rights conferred upon stockholders herein are granted subject to this
reservation.
Fifteenth: The name and mailing address of the incorporator are:
Name Mailing Address
Randall W. Heinrich 1000 Louisiana, Suite 6905
Houston, Texas 77002
THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose
of forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this Certificate, hereby declaring and certifying that this
is my act and deed and the facts herein stated are true, and accordingly have
hereunto set my hand this 30th day of October, 1996.
/s/ Randall W. Heinrich
Randall W. Heinrich,
Incorporator
EXHIBIT 3.02
BYLAWS
OF
GRIFFIN GOLD GROUP, INC.
(a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by (a) the
Chairman or Vice-Chairman of the Board of Directors, if any, or by the President
or a VicePresident and (b) by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to
<PAGE>
be such officer, transfer agent, or registrar before such certificate is issued,
it may be issued by the corporation with the same effect as if he were such
officer, transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class
of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen, or destroyed, and the Board of Directors may require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General
Corporation Law, the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
<PAGE>
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and, in the case of shares represented by certificates, on
surrender of the certificate or certificates for such shares of stock properly
endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by the General Corporation Law, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
Board of Directors adopts the resolution taking such prior action. In order that
the corporation may determine the stockholders entitled to receive
<PAGE>
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS.
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
-CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting. Special
meetings must also be called upon the instruction of one or more stockholders
holding singly or collectively at least 20% of the outstanding common stock in
the corporation.
-NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law. Except as otherwise provided by the General
Corporation Law, a copy of the notice
<PAGE>
of any meeting shall be given, personally or by mail, not less than ten days nor
more than sixty days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished by request in writing to the Secretary of the corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States Mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be given to any
stockholder who submits a written waiver of notice signed by him before or after
the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided over
by one of the following officers in the order of seniority and if present and
acting -- the Chairman of the Board, if any, the Vice-Chairman of the Board, if
any, the President, a Vice-President, or, if none of the foregoing is in office
and present and acting, by a chairman to be chosen by the stockholders. The
Secretary of the corporation, or in his absence, an Assistant Secretary, shall
act as secretary of every meeting, but if neither the Secretary nor an Assistant
Secretary is present the Chairman of the meeting shall appoint a secretary of
the meeting.
- PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the
<PAGE>
meeting by the person presiding thereat. Each inspector, if any, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspectors at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots, or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots, or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the meeting,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question, or matter determined by him or them and execute a
certificate of any fact found by him or them. Except as otherwise required by
subsection (e) of Section 231 of the General Corporation Law, the provisions of
that Section shall not apply to the corporation.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- VOTING. Each share of stock shall entitle the holders thereof to one
vote. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any other
action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required by the General
Corporation Law to be taken at any annual or special meeting of stockholders, or
any action which may be taken at any annual or special meeting of stockholders,
may be taken without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Action taken pursuant to this paragraph shall be subject to the provisions of
Section 228 of the General Corporation Law.
9. STOCKHOLDER PROPOSALS. At an annual or a special meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual or special
meeting business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Chairman of the Board,
the President, or the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Chairman of the Board, the President,
or the Board of Directors, or (c) otherwise properly brought before the meeting
by a stockholder.
No proposal by a stockholder shall be presented at an annual or a special
meeting of stockholders unless such stockholder shall provide the Board of
Directors or the Secretary of the corporation with timely written notice of
intention to present a proposal for action at the forthcoming meeting of
stockholders, which notice shall include (a) the name and address of such
stockholder, (b) the number of voting securities he or she holds of record and
which he or she holds beneficially, (c) the text of the proposal to be presented
at the meeting, (d) a statement in support of the proposal, and (e) any material
interest of the stockholder in such proposal. To be timely, a stockholder's
notice must be
<PAGE>
delivered to or mailed and received at the principal executive offices of the
corporation, not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the fifth (5th) day following the day on which such notice
of the date of the annual meeting was mailed or such public disclosure was made.
Any stockholder may make any other proposal at an annual or special meeting of
stockholders and the same may be discussed and considered, but unless stated in
writing and filed with the Board of Directors or the Secretary prior to the date
set forth above, no action with respect to such proposal shall be taken at such
meeting and such proposal shall be laid over for action at an adjourned,
special, or annual meeting of the stockholders taking place no earlier than 60
days after such meeting.
This provision shall not prevent the consideration and approval or
disapproval at an annual meeting of reports of officers, directors, and
committees; but in connection with such reports, no new business shall be acted
upon at such annual meeting unless stated and filed as provided in these Bylaws.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at any annual or special meeting except in accordance with the
procedures set forth in this these Bylaws. The chairman of the annual meeting
shall, if the facts warrant, determine and declare to the meeting that business
was not properly brought before the meeting and in accordance with the
provisions of these Bylaws, and if he should so determine, he shall so declare
to the meeting and any such business not properly brought before the meeting
shall not be transacted.
Notwithstanding any other provision of these Bylaws, the corporation shall be
under no obligation to include any stockholder proposal in its proxy statement
materials or otherwise present any such proposal to stockholders at a special or
annual meeting of stockholders if the Board of Directors reasonably believes the
proponents thereof have not complied with Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder, and the corporation shall not be required to include in its proxy
statement material to stockholders any stockholder proposal not required to be
included in its proxy material to stockholders in accordance with such Act,
rules, or regulations.
10. NOMINATION OF DIRECTORS. Only persons who are nominated in accordance
with the procedures of these Bylaws shall be eligible for election as directors.
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or by any stockholder entitled to vote in the election of directors generally
who complies with the notice procedures set forth in this these Bylaws. Any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as a director at a meeting only if timely
written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by U.S. mail, first
class postage prepaid, return receipt requested, to the Secretary of the
corporation.
To be timely, a stockholder's notice shall be delivered to or mailed and
received at the principal executive offices of the corporation not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is give or made to stockholders, notice by the stockholder to be
timely must be so received not later than the close of business on the fifth
(5th) day following the day on which such notice of the date of the meeting was
mailed or such public disclosure was made. Each such notice shall set forth: (a)
the name and address of the stockholder who intends to make the nomination, (b)
the name, age, business address, and home address of the person or persons to be
nominated; (c) the principal occupation of the person or persons nominated; (d)
a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting and intends to appear at the meeting to nominate the
person or persons specified in the
<PAGE>
notice; (e) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (f) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the rules of the Securities and Exchange Commission, had the nominee
been nominated, or intended to be nominated, by the Board of Directors; and (g)
the consent of each nominee to serve as a director of the corporation if so
elected. At the request of the Board of Directors any person nominated by the
Board of Directors for election as a Director shall furnish to the Secretary of
the corporation that information required to be set forth in a stockholder's
notice of nomination which pertains to the nominee.
No person shall be eligible for election as a Director of the corporation
unless nominated in accordance with the procedures set forth in these Bylaws.
The chairman of the meeting shall, if the facts warrant, determine and declare
to the meeting that a nomination was not made in accordance with the procedures
prescribed by the Bylaws, and if he should so determine, he shall so declare to
the meeting and the defective nomination shall be disregarded.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors of the
corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or resident of the State of Delaware. The initial
Board of Directors shall consist of one person. Thereafter the number of
directors constituting the whole board shall be the number determined by the
Board of Directors, provided, however, that at least one director is always
required. Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the
stockholders or of the directors, or, if the number is not fixed, the number
shall be three. The number of directors may be increased or decreased by action
of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies in the Board of Directors, including unfilled
vacancies resulting from the removal of directors for cause or without cause,
may be filled by the vote of a majority of the remaining directors then in
office, although less than a quorum, or by the sole remaining director.
<PAGE>
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after its
election as the directors may conveniently assemble.
- PLACE. Meetings shall be held at such place within or without the State
of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the direction
of the Chairman of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral, or
any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the directors need be specified in any written
waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Chairman of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the Vice-Chairman
of the Board, if any and if present and acting, or the President, if present and
acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any
<PAGE>
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
8. COMPENSATION. Unless otherwise restricted by the certificate of
incorporation, the Board of Directors shall have the authority to fix the
compensation of directors. No provision of these Bylaws shall be construed to
preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
9. RELIANCE. Each director and each member of any committee designated by
the Board of Directors shall, in the performance of his duties, be fully
protected in relying in good faith upon the books of account or reports made to
the corporation by any of its officers, or by an independent certified public
accountant, or by an appraiser selected with reasonable care by the Board of
Directors or by any such committee, or in relying in good faith upon other
records of the corporation.
ARTICLE III
OFFICERS
1. OFFICES AND QUALIFICATIONS. The officers of the corporation shall
consist of a President, a Secretary, a Treasurer, and, if deemed necessary,
expedient, or desirable by the Board of Directors, a Chairman of the Board, a
Vice-Chairman of the Board, an Executive Vice-President, one or more other
Vice-Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers with such titles as the resolution of the
Board of Directors choosing them shall designate. Except as may otherwise be
provided in the resolution of the Board of Directors choosing him, no officer
other than the Chairman or Vice-Chairman of the Board, if any, need be a
director. Any number of offices may be held by the same person, as the directors
may determine.
2. TERM. Unless otherwise provided in the resolution choosing him, each
officer shall be chosen for a term which shall continue until the meeting of the
Board of Directors following the next annual meeting of stockholders and until
his successor shall have been chosen and qualified. Any officer may resign at
any time upon written notice to the corporation. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
3. COMPENSATION. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors or pursuant to its
direction; no officer shall be prevented from receiving such salary by reason of
his also being a director.
<PAGE>
4. AUTHORITY AND DUTIES. All officers of the corporation shall have such
authority and perform such duties in the management and operation of the
corporation as shall be prescribed in the resolutions of the Board of Directors
designating and choosing such officers and prescribing their authority and
duties, and shall have such additional authority and duties as are incident to
their office except to the extent that such resolutions may be inconsistent
therewith. In addition to the preceding, the officers of the corporation shall
have the following authority and duties:
- CHAIRMAN OF THE BOARD. The Chairman of the Board (if such office is
created by the Board) shall preside at all meetings of the Board of Directors or
of the stockholders of the corporation. In the Chairman's absence, such duties
shall be attended to by the Vice Chairman of the Board (if any, but if there is
more than one, the Vice Chairman who is senior in terms of time as such) or (if
there is no Vice Chairman) by the President. The Chairman shall formulate and
submit to the Board of Directors or the executive committee (if any) matters of
general policy of the corporation and shall perform such other duties as usually
appertain to the office or as may be prescribed by the Board of Directors or the
executive committee.
- VICE CHAIRMEN OF THE BOARD. In the absence of the Chairman of the Board,
or in the event of his inability or refusal to act, the Vice Chairman (if any,
but if there is more than one, the Vice Chairman who is senior in terms of time
as such) shall perform the duties and exercise the powers of the Chairman of the
Board, and when acting shall have all the powers of and be subject to all the
restriction upon the Chairman of the Board. In the absence of the Chairman of
the Board, such Vice Chairman shall preside at all meetings of the Board of
Directors or of the stockholders of the corporation. In the Chairman's and Vice
Chairmen's absence, such duties shall be attended to by the President. The Vice
Chairmen shall perform such other duties, and shall have such other powers, as
from time to time may be assigned to them by the Board of Directors or the
executive committee (if any).
- PRESIDENT. The President shall be the chief executive officer of the
corporation and, subject to the control of the Board of Directors, shall in
general manage, supervise and control the properties, business and affairs of
the corporation with all such powers as may be reasonably incident to such
responsibilities. Unless the Board of Directors otherwise determines, the
President shall have the authority to agree upon and execute all leases,
contracts, evidences of indebtedness and other obligations in the name of the
corporation. In the absence of the Chairman of the Board, the President shall
preside at all meetings of the Stockholders and (should he be a director) of the
Board of Directors. He may also preside at any such meeting attended by the
Chairman of the Board if he is so designated by the Chairman. He shall have the
power to appoint and remove subordinate officers, agents and employees, except
those elected or appointed by the Board of Directors. The President shall keep
the Board of Directors and the Executive Committee fully informed and shall
consult them concerning the business of the corporation. He may sign with the
Secretary or any other officer of the corporation thereunto authorized by the
Board of Directors, certificates for shares of the corporation and any deeds,
bonds, mortgages, contracts, checks, notes, drafts or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof has been expressly delegated by these by-laws or
by the Board of Directors to some other officer or agent of the corporation, or
shall be required by law to be otherwise executed. He shall vote, or give a
proxy to any other officer of the corporation to vote all shares of stock of any
other corporation standing in the name of the corporation and shall exercise any
and all rights and powers which this corporation may possess by reason of its
ownership of securities in such other corporation and in general he shall
perform all other duties normally incident to the office of President and such
other duties, and shall have such other powers, as may be prescribed by the
stockholders, the Board of Directors or the Executive Committee (if any) from
time to time.
<PAGE>
- VICE PRESIDENTS. In the absence of the President, or in the event of his
inability or refusal to act, the Executive Vice President (or in the event there
shall be no Vice President designated Executive Vice President, any Vice
President designated by the Board) shall perform the duties and exercise the
powers of the President, and when so acting shall have all the powers of and be
subject to all the restrictions upon the President. In the absence of a
designation by the Board of Directors of a Vice President to perform the duties
of the President, or in the event of his absence or inability or refusal to act,
the Vice President who is present and who is senior in terms of time as a Vice
President of the corporation shall so act. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the corporation.
The Vice Presidents shall perform such other duties, and shall have such other
powers, as from time to time may be assigned to them by the President, the Board
of Directors or the executive committee (if any).
- SECRETARY. The Secretary shall (a) keep the minutes of the meetings of
the stockholders, the Board of Directors and committees of directors; (b) see
that all notices are duly given in accordance with the provisions of these
by-laws and as required by law; (c) be custodian of the corporate records and of
the seal of the corporation, and see that the seal of the corporation or a
facsimile thereof is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
corporation under its seal is duly authorized in accordance with the provisions
of these by-laws and attest the affixation of the seal of the corporation
thereto; (d) keep or cause to be kept a register of the post office address of
each stockholder which shall be furnished by such stockholder; (e) sign with the
President, or an Executive Vice President or Vice President, certificates for
shares of the corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation, which may be kept (subject to any provision
contained in the General Corporation Law) outside the State of Delaware at such
place or places as may be designated from time to time by the Board of
Directors; and (g) in general, perform all duties normally incident to the
office of Secretary and such other duties, and shall have such other powers, as
from time to time may be assigned to him by the President, the Board of
Directors or the executive committee (if any).
- TREASURER. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his duties in such sum and with such
surety or sureties as the Board of Directors shall determine. He shall (a) have
charge and custody of and be responsible for all funds and securities of the
corporation; receive and give receipts for moneys due and payable to the
corporation from any source whatsoever and deposit all such moneys in the name
of the corporation in such banks, trust companies or other depositories as shall
be selected in accordance with the provisions of these Bylaws; (b) prepare, or
cause to be prepared, for submission at each regular meeting of the Board of
Directors, at each annual meeting of the stockholders, and at such other times
as may be required by the Board of Directors, the President or the executive
committee (if any), a statement of financial condition of the corporation in
such detail as may be required; and (c) in general, perform all the duties
incident to the office of Treasurer and such other duties, and shall have such
other powers, as from time to time may be assigned to him by the President, the
Board of Directors or the executive committee (if any).
- ASSISTANT SECRETARY OR TREASURER. The Assistant Secretaries and
Assistant Treasurers shall, in general, perform such duties and have such powers
as shall be assigned to them by the Secretary or the Treasurer, respectively, or
by the President, the Board of Directors or the Executive Committee. The
Assistant Secretaries and Assistant Treasurers shall, in the absence or
inability or refusal to act of the Secretary or Treasurer, respectively, perform
all functions and duties which such absent officers may delegate, but such
delegation shall not relieve the absent officer from the responsibilities and
liabilities of his office. The Assistant Secretaries may sign, with the
President or a Vice President, certificates for shares of the corporation, the
issue of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if
<PAGE>
required by the Board of Directors, give bonds for the faithful discharge of
their duties in such sums and with such sureties as the Board of Directors shall
determine.
ARTICLE IV
INDEMNIFICATION
1. INDEMIFICATION. This corporation shall, to the maximum extent permitted
from time to time under the law of the State of Delaware, indemnify and upon
request shall advance expenses to any person who is or was a party or is
threatened to be made a party to any threatened, pending or completed action,
suit, proceeding or claim, whether civil, criminal, administrative or
investigative, by reason of the fact that such person is or was or has agreed to
be a director or officer of this corporation or any of its direct or indirect
subsidiaries or while such a director or officer is or was serving at the
request of this corporation as a director, officer, partner, trustee, employee
or agent of any corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, against
expenses (including attorney's fees and expenses), judgments, fines, penalties
and amounts paid in settlement incurred in connection with the investigation,
preparation to defend or defense of such action, suit, proceeding or claim;
provided, however, that the foregoing shall not require this corporation to
indemnify or advance expenses to any person in connection with any action, suit,
proceeding, claim or counterclaim initiated by or on behalf of such person. Such
indemnification shall not be exclusive of other indemnification rights arising
under any bylaws, agreement, vote of directors or stockholders or otherwise and
shall inure to the benefit of the heirs and legal representatives of such
person. Any person seeking indemnification under this Article IV shall be deemed
to have met the standard of conduct required for such indemnification unless the
contrary shall be established.
2. INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article IV of the by-laws.
3. DEFINITIONS. For purposes of this Article IV, reference to the
"corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence has continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article IV with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had continued.
For purposes of this Article IV, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit
<PAGE>
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this Article IV.
ARTICLE V
DIVIDENDS
1. DECLARATION. Dividends upon the capital stock of the corporation,
subject to applicable provisions of the certificate of incorporation, if any,
may be declared by the Board of Directors at any regular or special meeting,
pursuant to applicable law. Dividends may be paid in cash, in property or in
shares of capital stock, subject to applicable provisions of the certificate of
incorporation.
2. RESERVE. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
Board of Directors from time to time, in its absolute discretion, shall think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created.
ARTICLE VI
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
<PAGE>
ARTICLE VII
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of Directors.
ARTICLE VIII
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of
the Bylaws of Griffin Gold Group, Inc., a Delaware corporation, as in effect on
the date hereof.
Dated: October 31, 1996
/s/ Randall W. Heinrich
------------------------------------
Secretary of Griffin Gold Group, Inc.
(SEAL)
[SPECIMEN STOCK CERTIFICATE]
EXHIBIT 10.01
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of this the
30th day of October, 1996 by and among (a) Zeotech Industries, Inc. ("Zeotech"),
Ed Hemsted ("Hemsted"), W.D. Groves ("Groves"), KJM Capital Corp. ("KJM"), Keith
J. McKenzie ("McKenzie"), and Kent E. Lovelace, Jr. ("Lovelace"), (b) LS Capital
Corporation, a Delaware corporation ("LS Capital"), and (c) Griffin Gold Group,
Inc., a Delaware corporation and a wholly-owned subsidiary of LS Capital prior
to the consummation of the transactions provided for by this Agreement
("Griffin"). For purposes of this Agreement, in certain cases, Zeotech and
Hemsted (acting separately or collectively) are referred to collectively as
"Zeotech/Hemsted", and KJM and McKenzie (acting separately or collectively) are
referred to collectively as "KJM/McKenzie."
Recitals
WHEREAS, Zeotech/Hemsted, Groves, KJM/McKenzie and Lovelace (such persons
are referred to separately as a "Contributor" and collectively as the
"Contributors") separately own certain mining claims, namely the Amanda Claims
and that portion of the Barstow claims that are not committed, such claims being
more fully described on Exhibit A hereto applicable to the Amanda Claims and
Exhibit B hereto applicable to the Barstow Claim (such claims are referred to
separately as a "Claim" and collectively as the "Claims");
<PAGE>
WHEREAS, the Contributors are willing to contribute the Claims to Griffin
in exchange for shares of common stock in Griffin (the "Griffin Shares") and
shares of common stock in LS Capital (the "LS Capital Shares"), all upon the
terms, provisions and conditions set forth hereinafter; and
WHEREAS, Griffin is willing to receive a contribution of the Claims in
exchange for the issuance of Griffin Shares, all upon the terms, provisions and
conditions set forth hereinafter, and LS Capital is willing for Griffin to
receive a contribution of the Claims in exchange for the issuance of LS Capital
Shares, all upon the terms, provisions and conditions set forth hereinafter;
Agreement
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, $10.00 and other good and valuable consideration (the receipt, adequacy
and sufficiency of which are hereby acknowledged by each of the parties hereto),
each of the parties mentioned above hereby agrees as follows:
1. General Representations and Warranties.
(a) Each of Zeotech, Hemsted, Groves, KJM, McKenzie, and Lovelace
(referred to hereinafter separately as a "Representor" and collectively as the
"Representors"), severally but not jointly, hereby represents and warrants to LS
Capital and Griffin that such Representor has full right, power and authority to
execute and deliver this Agreement and all other agreements, documents and
instruments to be executed in connection herewith and perform such Representor's
obligation hereunder and thereunder; each corporate Representor has been duly
organized, is validly existing and is in good standing in the jurisdiction in
which it was incorporated; the execution and delivery by a corporate Representor
of this Agreement and all other agreements, documents and instruments to be
executed by such Representor in connection herewith have been authorized by all
necessary corporate action by such Representor; when this Agreement and all
other agreements, documents and instruments to be executed by such Representor
in connection herewith are executed by such Representor and delivered to LS
Capital and Griffin, this Agreement and such other agreements, documents and
instruments will constitute the valid and binding agreements of such Representor
enforceable against such Representor in accordance with their respective terms;
neither the execution and delivery of this Agreement or any other agreements,
documents and instruments to be executed in connection herewith nor the
consummation of the transactions contemplated hereby or thereby will (i)
violate, conflict with or result in the breach or termination of, or otherwise
give any other contracting party the right to terminate, or constitute a default
(by way of substitution, novation or otherwise) under the terms of, any contract
to which such Representor is a party or by which such Representor is bound or by
which any of the assets of such Representor is bound or affected, (ii) violate
any judgment against, or binding upon, such Representor or upon the assets of
such Representor, (iii) result in the creation of any lien, charge or
encumbrance upon any assets of such Representor pursuant to the terms of any
such contract, or (iv) violate any provision in the charter documents, bylaws or
any other agreement affecting the governance and control of any corporate
Representor; there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or threatened against,
involving or affecting any of the assets of such Representor, this Agreement, or
the transactions contemplated hereby, and there are no outstanding orders,
writs, injunctions or decrees of any court, governmental agency or arbitration
tribunal against, involving or affecting any assets of such Representor, this
Agreement, or the transactions contemplated hereby; no consent or approval from
any person is required in connection with the execution and delivery of this
Agreement other than board of director approval of each corporate Representor,
which has already been obtained; and the representations and warranties made
immediately above and elsewhere herein are material to LS Capital and Griffin
and are being relied upon by LS Capital and Griffin in connection with their
decisions to enter into the transactions provided for by this Agreement.
<PAGE>
(b) Each of LS Capital and Griffin, severally but not jointly, hereby
represents and warrants to each Representor that it has full right, power and
authority to execute and deliver this Agreement and all other agreements,
documents and instruments to be executed by it in connection herewith and
perform its obligation hereunder and thereunder; it has been duly organized, is
validly existing and is in good standing in the jurisdiction in which it was
incorporated; the execution and delivery by it of this Agreement and all other
agreements, documents and instruments to be executed by it in connection
herewith have been authorized by all necessary corporate action; when this
Agreement and all other agreements, documents and instruments to be executed by
it in connection herewith are executed by it and delivered to the Representors,
this Agreement and such other agreements, documents and instruments will
constitute the valid and binding agreements of it enforceable against it in
accordance with their respective terms; neither the execution and delivery of
this Agreement or any other agreements, documents and instruments to be executed
in connection herewith nor the consummation of the transactions contemplated
hereby or thereby will (i) violate, conflict with or result in the breach or
termination of, or otherwise give any other contracting party the right to
terminate, or constitute a default (by way of substitution, novation or
otherwise) under the terms of, any contract to which it is a party or by which
it is bound or by which any of the assets of it is bound or affected, (ii)
violate any judgment against, or binding upon, it or upon its assets, (iii)
result in the creation of any lien, charge or encumbrance upon any of its assets
pursuant to the terms of any such contract, or (iv) violate any provision in the
charter documents, bylaws or any other agreement affecting the governance and
control of it; there are no actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or threatened against,
involving or affecting any of its assets, this Agreement, or the transactions
contemplated hereby, and there are no outstanding orders, writs, injunctions or
decrees of any court, governmental agency or arbitration tribunal against,
involving or affecting any of its assets, this Agreement, or the transactions
contemplated hereby; no consent or approval from any person is required in
connection with the execution and delivery of this Agreement; the outstanding
capital stock of Griffin consists of 5,000,000 Griffin Shares, all of which are
owned by LS Capital; the Griffin Shares and the LS Capital Shares to be issued
to the Contributors pursuant to this Agreement shall be duly authorized, validly
issued, fully paid and non-assessable at the time that they are issued; and the
representations and warranties made immediately above and elsewhere herein are
material to each Representor and are being relied upon by each Representor in
connection with such Representor's decision to enter into the transactions
provided for by this Agreement.
2. Contribution of Claims and Issuance of Griffin Shares.
(a) Each Contributor agrees to contribute as soon as possible after the
date of this Agreement, by means of customary assignment documents reasonably
selected by LS Capital and Griffin and reasonably approved by the Contributors
(the "Assignments"), full right, title and interest in and to each Claim held by
such Contributor, free and clear of all liens, mortgages, security interests,
encumbrances, claims and restrictions on the transfer thereof. Each Contributor
hereby agrees that he will execute and deliver, or cause to be executed and
delivered, from time to time after the date hereof, upon the request of LS
Capital or Griffin, such other instruments of assignment, transfer and
conveyance and will take such other action as LS Capital or Griffin may
reasonably require to effectuate and/or evidence the contribution provided for
herein. Each Contributor hereby represents and warrants to LS Capital and
Griffin that the execution by such Contributor and delivery to Griffin of the
Assignment respecting the Claims to be contributed to Griffin by such
Contributor will vest in Griffin full right, title and interest in and to such
Claims, free and clear of any and all encumbrances, security interests, liens,
charges, claims, restrictions or limitations, whatsoever, by any person of any
kind, including those on the transfer thereof, whether known or unknown.
(b) In consideration of the contribution by the Contributors of the Claims
to Griffin, each Contributor shall be issued Griffin Shares; provided, however,
pending Griffin's receipt of the full amount of the Additional Capital
Contribution (as defined herein) the stock certificates representing
<PAGE>
the Griffin Shares issued to the Contributors shall be held by Griffin and
released to the Contributors only upon Griffin's receipt of the full amount of
the Additional Capital Contribution. The number of Griffin Shares to issued to
each Contributor is indicated in the table below.
Number of Griffin Shares
Zeotech/Hemsted 1,250,000
Groves 1,250,000
KJM/McKenzie 1,375,000
Lovelace 1,125,000
(c) (i) If any Contributor or LS Capital (referred to in this Section 2(c)
as the "Transferring Stockholder") desires to dispose of its Griffin Shares now
owned or hereafter acquired, the Transferring Stockholder shall first offer, in
writing in the manner provided for in Section 10(g) hereof, to sell its Griffin
Shares to Griffin, at a purchase price and on such terms as the Transferring
Stockholder intends in good faith to sell to a bona fide third party. The
written offer shall contain the identity of the proposed transferee and the
purchase price and terms upon which the transfer is proposed to occur. Following
the receipt of the written offer provided for hereinabove, Griffin shall have an
option, exercisable for thirty (30) days, to purchase all or any portion of the
Griffin Shares proposed to be sold at the price and on the terms set forth in
the notice. If Griffin fails to exercise its option with respect to all of the
Griffin Shares proposed to be transferred, then Griffin shall notify immediately
each of its stockholders of its failure to fully exercise its option. The
Griffin stockholders shall then have concurrent options, exercisable for fifteen
(15) days commencing on the date of Griffin's notice, to purchase all or any
portion of the Griffin Shares not purchased by Griffin, on a basis proportionate
to their respective stock ownership. If one or more of the Griffin stockholders
elects to purchase such stockholders' full proportionate shares and one or more
others do not, the Griffin stockholders who exercised their options to purchase
their full proportionate shares shall have concurrent options to purchase all of
the remaining Griffin Shares subject to the options, on a basis proportionate to
their respective stock ownership, exercisable for a period of five (5) days from
the expiration of the Griffin stockholders' initial concurrent options. The
foregoing procedure shall be repeated until each Griffin stockholder has had an
opportunity to purchase as many of the Griffin Shares subject to the options as
such stockholder desires, subject to the right of the other Griffin stockholders
to purchase their full proportionate shares. Notwithstanding anything else
contained in this Section 2(c), neither Griffin nor the Griffin stockholders
shall have any rights to purchase any Griffin Shares proposed to be transferred
by the Transferring Stockholder unless Griffin and/or the Griffin stockholders,
separately or collectively, exercise the options provided for in this Section
2(c) with respect to all, and not less than all, of the Griffin Shares proposed
to be transferred.
(ii) In the event that all of the Griffin Shares proposed to be sold
by the Transferring Stockholder are not purchased in accordance with this
Section 2(c) before the expiration of the time periods established in this
Section 2(c) therefor, all of the Griffin Shares may be sold to the transferee
identified in the written notice to Griffin at a price no lower and upon terms
no more favorable than the price and terms that the Griffin Shares could have
been purchased pursuant to the options to which it was subject. Such sale shall
be free and clear of the terms of this Section 2(c) during the three-month
period beginning on the date that the last option period in this Section 2(c)
terminates, but thereafter any Griffin Shares not so sold shall again be subject
to the terms and conditions of this Section 2(c). Any attempted disposition in
contravention of the provisions of this Section 2(c) shall be null and void
<PAGE>
and of no force and effect and, therefore, shall not preclude the exercise of
the options provided for in this Section 2(c).
(iii) The closing of the sale and purchase of any Griffin Shares
pursuant to this Section 2(c) shall occur within fifteen (15) days after the
last option exercised is exercised in accordance with this Section 2(c). At the
closing, (a) the Transferring Stockholder shall deliver the appropriate stock
certificates, properly endorsed or accom- panied by a properly prepared and
executed stock power, and (b) the purchasers shall deliver the consideration
required by this Section 2(c). Each of the parties hereby grants to the other
the right of specific performance with respect to this Section 2(c) in
recognition of the uniqueness of the subject matter hereof.
(iv) All certificates representing Griffin Shares now owned or that
may hereafter be acquired by a Contributor or LS Capital shall have a legend on
the back thereof substantially as follows:
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST
REFUSAL AGREEMENT WHICH PROVIDES SIGNIFICANT RESTRICTIONS ON THE
TRANSFERABILITY OF THE SHARES REPRESENTED HEREBY.
Such certificates shall state on the front thereof substantially as
follows:
SEE RESTRICTIONS ON TRANSFER HEREOF ON REVERSE SIDE.
(v) The agreements contained in this Section 2(c) may be terminated
by an instrument in writing signed by all Contributors and LS Capital. The
agreements contained in this Section 2(c) shall automatically terminate whenever
the Griffin Shares or any securities received with respect to the Griffin Shares
becomes registered under the Act.
3. Issuance of LS Capital Shares. In further consideration of the
contribution by Zeotech/Hemsted, Groves and KJM/McKenzie of their respective
Claims to Griffin, Zeotech/Hemsted, Groves and KJM/McKenzie shall be issued LS
Capital Shares. The number of LS Capital Shares to issued to Zeotech/Hemsted,
Groves and KJM/McKenzie is indicated in the table below.
Number of LS Capital Shares
Zeotech/Hemsted 166,666
Groves 166,666
KJM/McKenzie 166,667
4. Additional Capital Contribution. From time to time but on or before
April 30, 1997, Zeotech/Hemsted, Groves and KJM/McKenzie shall make an
additional capital contribution (the "Additional Capital Contribution") to
Griffin in the aggregate amount of $500,000 for which Zeotech/Hemsted, Groves
and KJM/McKenzie shall receive no additional Griffin Shares, LS Capital Shares
or any other item. Each of Zeotech/Hemsted, Groves and KJM/McKenzie grants to LS
Capital a pledge of and security interest in and agrees and acknowledges that LS
Capital has and shall continue to have a pledge of and security interest each
and every one of the Griffin Shares issued to them separately pursuant to
Section 2 above, to secure their obligations to make the Additional Capital
Contribution on or before April 30, 1997; and if they fail to fulfill such
obligations timely LS Capital shall have all rights and remedies of a secured
party with respect to such Griffin Shares.
5. Securities Representations and Warranties.
<PAGE>
(a) Each Contributor (other than Lovelace), severally but not jointly,
hereby represents and warrants to LS Capital and Griffin that such Contributor
is not a "U.S. Person" as that term in defined in Regulation S under Securities
Act of 1933 (the "Act"); at the time the buy order originated for any Griffin
Shares or LS Capital Shares and the date of this Agreement, such Contributor was
and will be outside of the United States of America (the "U.S."); such
Contributor is acquiring the Griffin Shares and the LS Capital Shares for its
own account and not on behalf of any U.S. Person, and a sale has not been
prearranged with a U.S. Person or a purchaser in the U.S.; such Contributor
agrees that all offers and sales of the Griffin Shares and the LS Capital Shares
prior to the expiration of a period commencing on the date of the issuance
thereof and ending 40 days thereafter shall only be made in compliance with the
safe harbor contained in Regulation S, or pursuant to the registration thereof
or an exemption from registration (and in all cases in accordance with Section
2(c) hereof), and that all offers and sales in the U.S. after expiration of the
40- day period shall be made only pursuant to the registration thereof or an
exemption from registration (and in all cases in accordance with Section 2(c)
hereof); all offering documents received by such Contributor have included
statements, and all stock certificates that such Contributor shall receive
representing Griffin Shares or LS Capital Shares shall feature legends, to the
effect that the Griffin Shares and the LS Capital Shares have not been
registered under the Act and may not be offered or sold in the U.S. or to U.S.
Persons prior to the expiration of a period commencing on the date of the
issuance thereof and ending 40 days thereafter and all offers and sales shall
only be made in compliance with the safe harbor contained in Regulation S, or
pursuant to the registration thereof or an exemption from registration; such
Contributor has been furnished with LS Capital's most recent Annual Report on
Form 10-K and any subsequent Quarterly Reports on Form 10-Q and Current Reports
on Form 8-K; such Contributor is familiar with the business and financial
condition, properties, operations and prospects of LS Capital and Griffin, and
has been given full access to all material information concerning the condition,
properties, operations and prospects of LS Capital and Griffin; such Contributor
has had an opportunity to ask such questions of, and to receive such information
from, LS Capital and Griffin as such Contributor has desired and to obtain any
additional information necessary to verify the accuracy of the information and
data received; and such Contributor is satisfied that there is no material
information concerning the condition, properties, operations and prospects of LS
Capital and Griffin, of which such Contributor is unaware.
(b) Lovelace hereby represents and warrants to LS Capital and Griffin that
he is a director of LS Capital and that as such he is familiar with the business
and financial condition, properties, operations and prospects of LS Capital and
Griffin, he has been given full access to all material information concerning
the condition, properties, operations and prospects of LS Capital and Griffin,
he has had an opportunity to ask such questions of, and to receive such
information from, LS Capital and Griffin as he has desired and to obtain any
additional information necessary to verify the accuracy of the information and
data received, and he is satisfied that there is no material information
concerning the condition, properties, operations and prospects of LS Capital and
Griffin, of which he is unaware; he has such knowledge, skill and experience in
business, financial and investment matters so that he is capable of evaluating
the merits and risks of an acquisition of the Griffin Shares; he has reviewed
its or his financial condition and commitments and that, based on such review,
he is satisfied that he (a) has adequate means of providing for contingencies,
(b) has no present or contemplated future need to dispose of all or any of the
Griffin Shares to satisfy existing or contemplated undertakings, needs or
indebtedness, (c) is capable of bearing the economic risk of the ownership of
the Griffin Shares for the indefinite future, and (d) has assets or sources of
income which, taken together, are more than sufficient so that he could bear the
loss of the entire value of the Griffin Shares; he is acquiring the Griffin
Shares solely for his own beneficial account, for investment purposes, and not
with a view to, or for resale in connection with, any distribution of the
Griffin Shares; he understands that the Griffin Shares have not been registered
under the Act or any state securities laws and therefore the Griffin Shares are
"restricted" under such laws; and he has not offered or sold any portion of the
Griffin Shares and has no present intention of reselling or otherwise disposing
of any portion of the Griffin
<PAGE>
Shares either currently or after the passage of a fixed or determinable period
of time or upon the occurrence or non-occurrence of any predetermined event or
circumstance.
6. Securities Registration. Griffin may at the option of its Board of
Directors register with the United States Securities and Exchange Commission
(the "Commission") an in-kind dividend to the stockholders of LS Capital
consisting of 1,000,000 Griffin Shares owned by LS Capital, which shares equal
10% of the total number of outstanding Griffin Shares. In the event of such
registration, Griffin shall use its best efforts to qualify such Griffin Shares
under the securities laws for each state for which an exemption is not available
and qualification is required, unless the cost and expense of such qualification
outweighs the benefit of qualification. In connection with any registration
undertaken pursuant to this Section 6, each Contributor shall use reasonable
efforts to cooperate with Griffin and LS Capital and will furnish to Griffin and
LS Capital in writing such information, as shall be reasonably necessary in
order to assure compliance with federal and applicable state securities laws
pertaining to disclosure and otherwise, with respect to the Claims, the gold
mining industry and the micro-fine leach recovery technology, know-how, trade
secrets and inventions developed by Groves (as described in United States Patent
No. 5,405,430 or any substitutes, revisions, continuations,
continuations-in-part, renewals, reissues, re-examinations, extensions, and
divisions thereof, or any other Letters Patent therefore in the United States or
any countries foreign to the United States), as well as any subsequent
improvements, modifications, variations, additions, substitutions, or
enhancements of such technology, know-how, trade secrets and inventions.
Moreover, each Contributor shall, upon the request of Griffin, review drafts of
the registration statement to be filed the Commission and any and all amendments
thereto and furnish Griffin with such Contributor's comments upon and approval
of or reasons for declining to approve such portions of the drafts for which
Griffin has requested comments and approval. Any such portions with respect to
which a Contributor has not expressly disapproved in writing shall be deemed
approved by such Contributor. Griffin shall pay all registration expenses in
connection with any registration undertaken pursuant to this Section 6.
7. Spin-Off. As soon as possible after the registration statement filed in
connection with any registration undertaken pursuant to Section 6 above is
declared effective, LS Capital shall declare and effect to its stockholders a
pro-rata, in-kind dividend of the Griffin Shares registered. In this connection,
LS Capital shall deliver to each of its stockholders receiving the registered
Griffin Shares an unlegended stock certificate representing the Griffin Shares
that such stockholder is to receive as well as a copy of the prospectus
comprising part of the registration statement declared effective during the
course of any registration undertaken pursuant to Section 6.
8. Termination. If Zeotech/Hemsted, Groves and KJM/McKenzie fails to make
the full $500,000 Additional Capital Contribution on or before April 30, 1997,
this Agreement shall, except as hereafter provided, become null and void, the
parties hereto shall be relieved of any further duties, obligations and
responsibilities with respect to this Agreement, and the parties shall cooperate
in good faith in unwinding all actions taken in reliance on this Agreement.
Notwithstanding the preceding, the following actions shall occur upon the
termination of this Agreement pursuant to the preceding:
(a) Each Contributor shall deliver to LS Capital and Griffin (as the case
may be) all stock certificates representing Griffin Shares and LS Capital Shares
not theretofore sold, and such stock certificates shall be cancelled;
(b) LS Capital may exercise the rights of a secured creditor to realize
the portion of the Additional Capital Contribution not made in accordance with
Section 4 above;
(c) Griffin shall reconvey to each Contributor each Claim contributed by
such Contributor to Griffin, such reconveyance being by means of a document in
substantially the form of the Assignment contributing such Claim to Griffin; and
<PAGE>
(d) The indemnification provisions of Section 9 shall remain in full force
and effect for two years after the date of termination.
9. General Indemnification.
(a) All representations and warranties made herein by a party hereto shall
survive all transactions provided for or contemplated herein, including, without
limitation, the contribution of the Claims to Griffin, the issuance and sale of
the Griffin Shares and the LS Capital Shares, the Additional Capital
Contribution, any registration of the Griffin Shares permitted in Section 6
hereof, any spin-off of the Griffin Shares provided for in Section 7 hereof, or
the termination of this Agreement.
(b) Each of Zeotech, Hemsted, Groves, KJM, McKenzie, and Lovelace,
severally but not jointly, shall protect, indemnify and hold LS Capital and
Griffin harmless from any and all demands, claims, actions, causes of actions,
lawsuits, proceedings, judgments, losses, damages, injuries, liabilities,
obligations, expenses and costs (including costs of litigation and attorneys'
fees), arising from any breach of any agreement, representation or warranty made
by such indemnifying party in this Agreement.
(c) Each of LS Capital and Griffin, severally but not jointly, shall
protect, indemnify and hold each of Zeotech, Hemsted, Groves, KJM, McKenzie, and
Lovelace harmless from any and all demands, claims, actions, causes of actions,
lawsuits, proceedings, judgments, losses, damages, injuries, liabilities,
obligations, expenses and costs (including costs of litigation and attorneys'
fees), arising from any breach of any agreement, representation or warranty made
by it in this Agreement.
10. Securities Indemnification.
(a) Each of Zeotech, Hemsted, Groves, KJM, McKenzie, and Lovelace,
severally but not jointly, shall protect, indemnify and hold LS Capital and
Griffin harmless from any and all demands, claims, actions, causes of actions,
lawsuits, proceedings, investigations, judgments, losses, damages, injuries,
liabilities, obligations, expenses and costs (including costs of litigation and
attorneys' fees), arising out of or based upon (a) any untrue statement or
alleged untrue statement of any material fact contained in or incorporated by
reference into the registration statement under which the Griffin Shares are
registered pursuant to Section 6, any preliminary prospectus or final prospectus
contained therein, or any amendment or supplement thereto, (b) the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (c) any material
violation by the indemnifying party of any rule or regulation promulgated under
the Act applicable to the indemnifying party and relating to action or inaction
by the indemnifying party in connection with any such registration; provided,
however, that the indemnifying party shall be liable in the case of (a) and (b)
above only if and to the extent that the event giving rise to indemnification
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in conformity with information furnished by
the indemnifying party in writing specifically for use in the registration
statement or prospectus or information contained in a writing that has been
expressly approved or deemed approved by the indemnifying party.
(b) Each of LS Capital and Griffin, severally but not jointly, shall
protect, indemnify and hold each of Zeotech, Hemsted, Groves, KJM, McKenzie, and
Lovelace harmless from any and all demands, claims, actions, causes of actions,
lawsuits, proceedings, investigations, judgments, losses, damages, injuries,
liabilities, obligations, expenses and costs (including costs of litigation and
attorneys' fees), arising out of or based upon (a) any untrue statement or
alleged untrue statement of any material fact contained in or incorporated by
reference into the registration statement under which the Griffin Shares are
registered pursuant to Section 6, any preliminary prospectus or final prospectus
contained
<PAGE>
therein, or any amendment or supplement thereto, (b) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (c) any material
violation by Griffin or LS Capital of any rule or regulation promulgated under
Act applicable to Griffin or LS Capital and relating to action or inaction by
Griffin in connection with any such registration; provided, however, that
Griffin and LS Capital will not be liable in the case of (a) and (b) above if
and to the extent that the event otherwise giving rise to indemnification arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in conformity with information furnished by a
person otherwise indemnified hereby in writing specifically for use in the
registration statement or prospectus or information contained in a writing that
has been expressly approved or deemed approved by the otherwise indemnified
party.
(c) Promptly after receipt by an indemnified party under this Section 10
of notice of the threat or commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against an indemnifying party
hereunder, notify each such indemnifying party in writing thereof, but the
omission so to notify an indemnifying party shall not relieve it from any
liability which it may have to any indemnified party to the extent that the
indemnifying party is not prejudice as a result thereof. In case any such action
shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel reasonably satisfactory to such
indemnified party, and, after notice from the indemnifying party to such
indemnified party of its election so to assume and undertake the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so elected; provided,
however, that, if the defendants in any such action include both an indemnified
party and an indemnifying party and the related indemnified party shall have
reasonably concluded that there may be reasonable defenses available to it which
are different from or additional to those available to the indemnifying party or
if the interests of the indemnified party reasonably may be believed to conflict
with the interests of the indemnifying party, the indemnified party shall have
the right to select separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred. No indemnifying party
will be subject to any liability for any settlement made without consent which
shall not be unreasonably withheld. No indemnifying party will consent to the
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability with respect to such claim or
litigation.
11. General.
(a) THIS AGREEMENT AND ALL QUESTIONS RELATING TO ITS VALIDITY,
INTERPRETATION, PERFORMANCE, AND ENFORCEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
(b) Mandatory venue for any controversy arising out of or relating to this
Agreement or any modification or extension thereof, including any claims for
breach, for damages, and/or for recision or reformation, shall be in a court of
competent jurisdiction located in Harris County, Texas.
(c) This Agreement contains the entire understanding among the parties
hereto with respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings, inducements, or conditions,
express or implied, oral or written, except as herein contained. This Agreement
may not be modified or amended other than by an agreement in writing signed by
all parties affected.
<PAGE>
(d) The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
The section headings in this Agreement are for convenience only; they form no
part of this Agreement and shall not affect its interpretation.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together constitute one and
the same instrument.
(f) The parties hereto hereby agree that time is of the essence for all
purposes of this Agreement.
(g) Any notices to be given hereunder by any party to the other parties
may be effected either by personal delivery in writing, or by mail, registered
or certified, postage prepaid with return receipt requested, addressed to the
one or more parties to be notified at the addresses set forth beneath such
parties' respective signatures below.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have signed their names hereto as
of the first date written above.
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
Address: 155 Harwood St #1003 Address: 155 Harwood St #1003
--------------------------------- ---------------------
Vancouver B.C V6E 1S1 Vancouver B.C V6E 1S1
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
Address: 1400 355 Burrand St. Address: 1400 355 Burrand St.
------------------------------------ ---------------------
Vancouver, British Columbia Vancouver, British Columbia
CANADA V6C 2G8 CANADA V6C 2G8
/S/Kent E. Lovelace, Jr. /S/W.D. Groves, PhD., P.Eng.
Kent E. Lovelace, Jr. W.D. Groves, PhD., P.Eng.
Address: 3300 West Beach Blvd., Suite 202 Address: 901 Jervis St. #501
--------------------------------- --------------------
<PAGE>
Gulfport, Mississippi 39502 Vancouver, British Columbia
CANADA V6E 1S1
LS CAPITAL CORPORATION GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle By: /S/Randall W. Heinrich
Name Printed: Paul J Montle Name Printed:Randall W. Heinrich
Title: President Title: Secretary
Address: 15915 Katy Freeway, Suite 250 Address: 3300 West Beach Blvd.,
Suite 202
Houston, Texas 77094 Gulfport, Mississippi 39502
CERTIFICATE
Each of the undersigned hereby certifies and acknowledges that the
undersigned has signed and executed the foregoing agreement with multiple
original signature pages at separate locations to be effective immediately upon
signing and that the transmission of a telecopier facsimile of their respective
signatures, each to the other, shall be sufficient to cause the mutual delivery
of this executed agreement in order to bind the parties and make the agreement
effective upon the date of signing. It is further certified, acknowledged and
agreed that the original signature pages are to be circulated hereafter but that
the failure of any party to obtain the original signature pages hereafter shall
not affect the validity and effectiveness of this agreement which is effective
from and after the execution by all parties and the transmission by telecopier
facsimile of the signature of all parties, each to the other.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto as
of the first date written above.
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
/S/Kent E. Lovelace, Jr. /S/W.D. Groves, PhD., P.Eng.
Kent E. Lovelace, Jr. W.D. Groves, PhD., P.Eng.
LS CAPITAL CORPORATION GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle By: /S/Randall W. Heinrich
<PAGE>
Name Printed: Paul J Montle Name Printed:Randall W. Heinrich
Title: Secretary
EXHIBIT 10.02
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (the "Agreement") is made and entered into effective
as of the 1st day of March, 1997 by and between Griffin Gold Group, Inc., a
Delaware corporation ("Griffin"), and Desert Minerals, Inc., a Delaware
corporation ("DMI").
RECITALS:
WHEREAS, Griffin controls certain tracts of land located in the Amargosa
Valley in the upper Mohave Desert in California (the "Tracts"); and
WHEREAS, the sands located on the Tracts are believed to contain precious
minerals, and Griffin is interesting in confirming whether or not such sands
contain precious minerals and if so, whether or not such precious minerals can
be extracted from such sands; and
WHEREAS, DMI has rights to a certain proprietary, low-toxicity microfine
precious metals extraction technology (the "Technology") and a "pilot" plant
capable of utilizing the Technology (the "Pilot Plant"), and the Technology and
the Pilot Plant are believed to be capable of separating any precious minerals
contained in the sands mined from the Tracts from such sands; and
WHEREAS, both the Technology and the Pilot Plant are in a developmental
stage, and both the Technology and the Pilot Plant will require additional
financing and will involve additional costs and expenses; and
WHEREAS, if the Technology and the Pilot Plant are successfully developed,
DMI intends to construct a much larger plant for commercially exploiting the
Technology (the "Definitive Plant"); and
WHEREAS, Griffin desires to engage DMI to utilize the Technology and the
Pilot Plant in an effort to confirm whether or not precious minerals contained
in the sands located on the Tracts can be separated from such sands, and Griffin
desires to engage DMI to utilize the Technology and the Definitive Plant to
commercially exploit the precious minerals contained in the sands located on the
Tracts, if precious minerals are confirmed to be contained in the sands located
on the Tracts, the Technology and the Pilot Plant are successfully developed and
are capable of extracting precious metals from such sands, and the Definitive
Plant is constructed; and
WHEREAS, Griffin is willing to provide a portion of the additional financing
and to bear a portion of the costs and expenses in connection with the
development of the Technology and the Pilot Plant; and
WHEREAS, DMI is willing to be engaged by Griffin to utilize the Technology
and the Pilot Plant in an effort to confirm whether or not any precious mineral
contained in the sands located on the Tracts can be extracted from such sands,
and DMI is willing to be engaged by Griffin to utilize the Technology and the
Definitive Plant to commercially exploit the precious minerals contained in the
sands located on the Tracts, if Griffin so desires and once the Technology and
the Pilot Plant are successfully developed and are proven capable of extracting
precious metals from such sands, and the Definitive Plant is constructed; and
WHEREAS, Griffin and DMI are willing to undertake all of the foregoing upon
the terms, provisions and conditions set forth hereinafter;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
AGREEMENTS:
l. Engagement. Subject to the terms, provisions and conditions hereinafter
stated, Griffin hereby engages DMI to utilize the Technology and the Pilot Plant
in an effort to confirm whether or not any precious mineral contained in the
sands located on the Tracts can be extracted from such sands, and DMI hereby
accepts such engagement. The preceding engagement shall be subject to the
following terms and conditions, in addition to all other terms, provisions and
conditions set forth herein:
(a) In DMI's efforts to confirm whether or not any precious
mineral contained in the sands located on the Tracts can be
extracted from such sands, DMI shall be obligated to process
such sand at the Pilot Plant but only in such quantities as
are reasonable in view of the capacity of the Pilot Plant and
DMI's obligations to its other customers and other persons
with whom it has contracted.
(b) Upon receipt at the Pilot Plant from Griffin of a quantity of
sand complying with the restriction set forth above, DMI shall
proceed as promptly as is reasonably possible to process such
sand using the Technology to confirm whether or not any
precious mineral contained in the sands located on the Tracts
can be extracted from such sands. In this connection, as soon
as is reasonably possible after such sand is received at the
Pilot Plant, DMI shall inform Griffin as to date by which the
related processing is expected to be completed. If at any
time DMI realizes that it will not be able to complete the
processing by the date previously indicated to Griffin, DMI
shall immediately notify Griffin, and DMI and Griffin shall
reasonably discuss the possibility of extending the date for
completion if legitimate reasons for the delay exist.
(c) As promptly as is reasonably possible after the completion of
the processing of any sand pursuant to this Agreement, DMI
shall deliver its report as to whether or not any precious
mineral contained in the sands located on the Tracts can be
extracted from such sands. Such report shall be in such form
and containing such information as Griffin shall reasonably
request. Griffin shall have the right for 10 days to review
the report and communicate to DMI its tentative comments on
any matter in which it regards the report or the processing to
be deficient in its reasonable discretion. DMI and Griffin
shall then reasonably cooperate with each other in an effort
to cure any such deficiencies and to modify the report or the
processing. Notwithstanding the preceding, DMI shall endeavor
to cure any matter in which Griffin believes the initial
report or processing to be deficient within a reasonable
period of time after Griffin has communicated to DMI such
deficiencies. Once DMI believes that the deficiencies have
been cure, it shall notify Griffin to such effect, and Griffin
shall have the right to review the modified report and
processing. If the modified report or processing is still
deficient to Griffin in its reasonable discretion, Griffin
shall have the right to notify DMI as to the remaining
deficiencies and to permit DMI the opportunity to cure such
deficiencies to the reasonable satisfaction of Griffin within
a reasonable period of time. This procedure of notice, review,
report of deficiencies and attempt to cure shall be followed
until an acceptable report or processing or both are
finalized. If either DMI or Griffin believes that they will
be unable to agree upon the final report and processing, then
either DMI or Griffin shall be entitled to submit the issue to
arbitration in accordance with Section 18 hereof.
<PAGE>
2. Non-Exclusivity. Griffin hereby recognizes that during the term of this
Agreement, DMI will be engaged by persons other than Griffin in much the same
capacity in which Griffin is engaging DMI hereunder. Furthermore, Griffin hereby
consents to DMI's engagement by all such other persons, and Griffin hereby
recognizes that DMI's engagement hereunder is not exclusive.
3 Standard of Performance. In providing services pursuant to this Agreement,
DMI shall use reasonable and its best efforts, shall render such services in a
competent manner of the highest caliber, and cooperate with Griffin and to take
all suggestions of Griffin under serious considerations. However, Griffin hereby
acknowledges that the Technology and the Pilot Plant are new and unproven.
Accordingly, Griffin hereby acknowledges that DMI is not making any
representation, warranty or guarantee as to the results of the Technology and
the Pilot Plant or any other matter relating to this Agreement.
4. Payment for Services. In consideration of the services to be provided by
DMI to Griffin hereunder, Griffin agrees to pay to DMI a fee equal to the sum of
(a) all direct costs incurred by DMI during the course of processing Griffin's
sands (without any allocation for any overhead amounts), plus (b) 10% of the
amount of (a) immediately preceding. All fees that become due to DMI pursuant to
this Agreement for any services rendered by DMI shall be due and payable to DMI
within 30 days after the final report of the related services is approved and
accepted by Griffin pursuant to the above, such approval and acceptance being
deemed given and made for purposes of this Section 4 only on the 10th day after
the initial report of the related services is delivered unless Griffin has
communicated to DMI its deficiency comments on any tentative results prior to
such 10th day, in which case only actual approval and acceptance shall commence
the aforementioned 30-day period. Moreover, Griffin may, at DMI's discretion,
pay for the fee provided for by this Section 4 through the payment of costs,
expenses or capital expenditures incurred by DMI, and if Griffin pays any fee
through this method, the fee owed by Griffin shall be credited with the amount
of the DMI costs, expenses or capital expenditures paid by Griffin.
5. Term. The term of this Agreement shall begin on the effective date hereof
and shall continue for two years thereafter unless this Agreement is terminated
earlier in accordance with the provisions of Section 6 below.
6. Termination Upon Certain Events.
(a) Notwithstanding anything else contained herein, Griffin may
terminate this Agreement and be relieved of any further
liability hereunder (except for obligations provided for in
Section 4(a) above concerning accrued but unpaid fees and the
obligations provided for in Section 7 below) at any time after
notice is given to DMI after and regarding the following
events:
(i) DMI's failure to provide the services required of it hereunder
up to the standards set forth in Section 3 hereof, provided,
however, that DMI has failed to cure such failure within 30
days after the notice required by this Section 6(a) has been
given; or
(ii) DMI's other material breach of this Agreement, provided,
however, that DMI has failed to cure such breach within 30
days after the notice required by this Section 6(a) has been
given.
(b) Notwithstanding anything else contained herein, DMI may
terminate this Agreement and be relieved of any further
liability hereunder (except obligations provided for in
Sections 7 and 8 below) at any time after notice is given to
Griffin after and regarding the following events:
<PAGE>
(i) Griffin's failure to pay amounts that become due under Section
4(a), provided, however, that Griffin has failed to cure such
failure within 30 days after the notice required by this
Section 6(b) has been given; or
(ii) Griffin's other material breach of this Agreement, provided,
however, that Griffin has failed to cure such breach within 30
days after the notice required by this Section 6(b) has been
given.
(c) Notwithstanding anything else contained herein, either party
may immediately terminate this Agreement and be relieved of
any further liability hereunder (except for obligations
provided for in Section 4(a) above concerning accrued but
unpaid fees and the obligations provided for in Sections 7 and
8 below) at any time after notice is given to the other party
after the other party's dissolution, insolvency, filing of a
voluntary bankruptcy petition, filing against it an
involuntary bankruptcy petition, rendering of a material
judgment against it, assignment for the benefit of creditors,
or admission in writing of its inability to pay its debts as
they become due.
(d) This Agreement shall automatically terminate upon the
execution and delivery of an agreement pertaining to the
Definitive Plant by DMI and Griffin.
7. Confidentiality.
Each party hereto (the "Recipient" for purposes of this Section 7) hereby
recognizes and acknowledges that it will receive information from, or will
develop information on the behalf of, the other party hereto (the "Disclosing
Party" for purposes of this Section 7) pertaining to the Disclosing Party and
its business or its properties that is confidential and proprietary. All such
information is referred to hereinafter as the "Information". Each party as the
Recipient hereby agrees to maintain on a confidential basis all Information, and
each party as the Recipient hereby agrees that it will not, without the prior
express written consent of the other party as the Disclosing Party, use for its
or anyone else's benefit or disclose to any other person any Information, except
in connection with such Recipient's work on behalf of such Disclosing Party.
Each party as the Recipient hereby acknowledges that, as between the other party
as the Disclosing Party and such Recipient, such Disclosing Party has the
complete, sole and full right, title and interest in and to the Information, and
that such Recipient has no rights, expressed or implied, with respect to the
foregoing other than those expressly provided for to the contrary in a writing
signed by both such Disclosing Party and such Recipient. Each party as the
Recipient further agrees that it will, immediately upon the request of the other
party as the Disclosing Party, return to such Disclosing Party all written
Information and all writings regarding oral Information whether such writings
were authorized or not. Each party as the Recipient hereby agrees that the
confidentiality agreement provided for hereby shall last with respect to any
Information for ten years after such Information is disclosed by the other party
as the Disclosing Party to such Recipient or developed by such Recipient on
behalf of such Disclosing Party, as the case may be.
8. Property of Griffin. DMI acknowledges that the services to be provided by
it pursuant to this Agreement are on a "for hire" basis. Accordingly, DMI
acknowledges that all right, title, interest and ownership in and to all
tangible or intangible property created by DMI pursuant to this Agreement shall
vest in Griffin, and DMI hereby assigns and conveys to Griffin all right, title,
interest and ownership in and to all such tangible or intangible property. DMI
agrees to take such further action as Griffin may reasonably request with regard
to the perfection of its ownership in such tangible or intangible property. DMI
agrees that, upon the termination of DMI's engagement with Griffin, DMI shall
immediately surrender to Griffin all property, equipment, funds, lists, books,
records, and other materials of Griffin or any affiliate thereof in the
possession of or provided to DMI.
<PAGE>
9. Definitive Plant. In the event that the Technology meets Griffin's
expectations, Griffin and DMI each agree to negotiate in good faith the form,
terms, provisions and conditions of an agreement pertaining to the Definitive
Plant with a view to the execution and delivery of the same.
10. Law Governing. THIS AGREEMENT HAS BEEN ENTERED INTO IN THE STATE OF TEXAS
AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS.
11. Notices. Any notice or request herein required or permitted to be given
to any party hereunder shall be given in writing and shall be personally
delivered or sent to such party by prepaid mail at the address set forth below
the signature of such party hereto or at such other address as such party may
designate by written communication to the other party to this Agreement. Each
notice given in accordance with this paragraph shall be deemed to have been
given, if personally delivered, on the date personally delivered, or, if mailed,
on the third day following the day on which it is deposited in the United States
mail, certified or registered mail, return receipt requested, with postage
prepaid.
12. Headings. The headings of the paragraphs of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
modify any of the terms or provisions hereof.
13. Severability. If any provision of this Agreement is held to be illegal,
invalid, or unenforceable under present or future laws effective during the term
hereof, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement and the remaining provisions of
this Agreement shall remain in full force and effect and shall not be affected
by the illegal, invalid or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable.
14. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings, whether written or
oral, relating to the subject matter hereof.
15. Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of each party hereto and its successors and assigns, but neither
this Agreement nor any rights hereunder may be assigned by any party hereto
without the consent in writing of the other party.
16. Remedies. No remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
17. Independent Contractor. DMI and Griffin are independent contracting
parties, and nothing in this Agreement shall make either party the agent or
legal representative of the other for any purpose whatsoever, nor does it grant
either party any authority to assume or to create any obligations on behalf of
or in the name of the other.
18. Arbitration. All disputes arising out of this Agreement shall be
submitted by either party hereto to arbitration in Houston, Texas pursuant to
the rules of the American Arbitration Association, Commercial Division, as such
party's sole remedy in this regard.
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands hereunto as of the
first date written above.
"GRIFFIN""
GRIFFIN GOLD GROUP, INC.
/s/ Paul J. Montle
BY:_________________________________
Paul J. Montle
NAME:_______________________________
Vice President
TITLE:______________________________
15915 Katy Freeway, Suite 250
Houston, Texas 77094
ADDRESS:____________________________
<PAGE>
"DMI"
DESERT MINERALS, INC.
/s/ Paul J. Montle
BY:_________________________________
Paul J. Montle
NAME:_______________________________
Vice President
TITLE:______________________________
15915 Katy Freeway, Suite 250
Houston, Texas 77094
ADDRESS:____________________________
EXHIBIT 10.03
RELEASE AND PARTIAL TERMINATION AGREEMENT
THIS RELEASE AND PARTIAL TERMINATION AGREEMENT (the "Release") is made and
entered into this the 22nd day of April, 1997 by and among W.D. Groves
("Groves"), on the one hand, and Zeotech Industries, Inc. ("Zeotech"), Ed
Hemsted ("Hemsted"), KJM Capital Corp. ("KJM"), Keith J. McKenzie ("McKenzie"),
Kent E. Lovelace, Jr. ("Lovelace"), LS Capital Corporation, a Delaware
corporation ("LS Capital"), and Griffin Gold Group, Inc., a Delaware corporation
("Griffin"), on the other hand. For purposes of this Agreement, Zeotech,
Hemsted, KJM, McKenzie, Lovelace, LS Capital and Griffin are referred to
hereinafter singly as a "Remaining Party" and collectively as the "Remaining
Parties."
Recitals
WHEREAS, Groves and each Remaining Party entered into an Agreement (the
"Agreement") dated October 31, 1996 regarding the contribution of certain mining
claims to Griffin, the issuance of certain shares of stock in Griffin, the
issuance of certain shares of stock in LS Capital, additional capital
contributions to Griffin, the registration with the United States Securities and
Exchange Commission of certain shares of stock in Griffin owned by LS Capital,
the declaration by LS Capital of an in-kind dividend to its stockholders of the
shares so registered, and various additional matters; and
WHEREAS, Groves and each Remaining Party want to terminate Groves' status as
a party to the Agreement and his rights and obligations thereunder, but leave
unaltered the Remaining Parties' status as parties to the Agreement and their
respective rights and obligations thereunder;
Agreement
NOW, THEREFORE, in consideration of (a) the mutual promises and agreements
herein contained, (b) $10.00 and (c) other good and valuable consideration (the
receipt, sufficiency and adequacy of the consideration recited in (a), (b) and
(c) immediately preceding are hereby acknowledged and confessed by each party
hereto), each party hereto hereby agrees as follows:
<PAGE>
1. Groves hereby acknowledges that he received 166,666 shares of the common
stock of LS Capital pursuant to the Agreement. Groves does hereby assign,
transfer and convey to Hemsted, without any further deed or act, full right,
title and interest in and to the foregoing 166,666 shares of the common stock of
LS Capital, free and clear of all liens, mortgages, security interests,
encumbrances, claims and restrictions on the transfer thereof. Groves hereby
further acknowledges that the Agreement provided that he was to receive
1,250,000 shares of the common stock of Griffin, although Groves has not yet
been issued such shares. Notwithstanding any other provisions contained herein,
Groves does hereby assign, transfer and convey to Douglas Schmitt and Hemsted,
without any further deed or act, full right, title and interest in and to 90%
and 10%, respectively, of the shares of the common stock of Griffin that he was
to receive pursuant to the term, provisions and conditions of the Agreement,
free and clear of all liens, mortgages, security interests, encumbrances, claims
and restrictions on the transfer thereof. Groves hereby agrees that he will
execute and deliver, or cause to be executed and delivered, from time to time
after the date hereof, upon the request of Hemsted or Schmitt (as the case may
be), such other instruments of assignment, transfer and conveyance and will take
such other action as Hemsted or Schmitt (as the case may be) may reasonably
require to effectuate and/or evidence the assignments, transfers and conveyances
provided for herein. Groves hereby represents and warrants to Hemsted and
Schmitt that the execution by Groves and delivery to Hemsted and Schmitt of this
Release and related documentation will vest in Hemsted and Schmitt full right,
title and interest in and to the shares of common stock purported to be
assigned, transferred and conveyed to them above, free and clear of any and all
encumbrances, security interests, liens, charges, claims, restrictions or
limitations, whatsoever, by any person of any kind, including those on the
transfer thereof, whether known or unknown.
2. Groves' status as a party to the Agreement be and hereby is terminated
effective upon the execution and delivery of this Release, and henceforth Groves
shall have no further rights, liabilities, obligations, duties or
responsibilities with respect to the Agreement. Notwithstanding the preceding or
anything else contained herein, the Remaining Parties' status as parties to the
Agreement, and their respective rights, liabilities, obligations, duties and
responsibilities with respect thereto, remain unaffected by this Release.
3. By execution of this Release, Groves represents and warrants to each of
the Remaining Parties that he has not conveyed, assigned, or in any manner
transferred, in whole or in part, to any third party any right, title or
interest that he has heretofore held under the Agreement. Groves expressly
represents and warrants to the Remaining Parties that he has full authority to
enter into this Release and to terminate his status as a party to the Agreement
and his rights, liabilities, obligations, duties and responsibilities with
respect thereto.
4. Groves (and each of Groves' heirs, beneficiaries, legal representatives,
affiliates, agents, successors and assigns) has this day released and by these
presents does release, acquit and forever discharge each of the Remaining
Parties (and their respective heirs, beneficiaries, legal representatives,
affiliates, shareholders, directors, officers, employees, agents, successors and
assigns) from any and all Claims. For purposes of this Release, "Claims" means
all demands, complaints, claims, rights, actions, causes of actions, suits,
proceedings, damages, judgments, costs, expenses, compensation, promises,
agreements, debts, liabilities and obligations of any kind whatsoever, at common
law, by statute, contract, or otherwise, which a releasing party now has or
might have, or in the part had or might have had, against a released party,
known or unknown, directly or indirectly relating to the Agreement.
5. By execution of this Release, Groves represents and warrants to each of
the Remaining Parties that no Claim that he now has or might have, or in the
part had or might have had, against any person released hereby, has previously
been conveyed, assigned, or in any manner transferred, in whole or in part, to
any third party. Groves expressly represents and warrants to each of the
Remaining Parties
<PAGE>
that he has full authority to enter into this Release and to release any and all
Claims he now has or might have, or in the part had or might have had, against
each person released hereby.
6. THIS RELEASE SHALL BE GOVERNED BY, CONSTRUED UNDER, AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.
7. It is expressly understood and agreed that the terms of this Release are
contractual and not merely recitations.
8. It is further understood and agreed that this Release contains the entire
agreement between Groves and each Remaining Party pertaining to the subject
matter hereof and supersedes any and all prior agreements, arrangements, or
understandings between Groves and each Remaining Party pertaining to the subject
matter hereof. No oral understandings, statements, promises, or inducements
contrary to the terms of this Release exist. This Release cannot be changed or
terminated except in writing signed by all parties hereto.
9. Should any court, by judgment or decree, determine that this Release does
not fully and finally discharge all Claims which a releasing party now has or
might have, or in the part had or might have had, against a released party,
prior to the date of this Release, then each releasing party hereby agrees to
reform this document to release any such Claims not hereby released.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto effective
as of the first date written above.
"GROVES"
/S/W.D. Groves, PhD., P.Eng.
W.D. Groves, PhD., P.Eng.
"REMAINING PARTIES"
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted, by power of attorney /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
<PAGE>
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle /S/Kent E. Lovelace, Jr.
Kent E. Lovelace, Jr.
Name Printed: Paul J Montle
Title: Vice President
LS CAPITAL CORPORATION
By: /S/ Paul J. Montle
Name Printed: Paul J Montle
Title: President
<PAGE>
CERTIFICATE
Each of the undersigned hereby certifies and acknowledges that the
undersigned has signed and executed the foregoing agreement with multiple
original signature pages at separate locations to be effective immediately upon
signing and that the transmission of a telecopier facsimile of their respective
signatures, each to the other, shall be sufficient to cause the mutual delivery
of this executed agreement in order to bind the parties and make the agreement
effective upon the date of signing. It is further certified, acknowledged and
agreed that the original signature pages are to be circulated hereafter but that
the failure of any party to obtain the original signature pages hereafter shall
not affect the validity and effectiveness of this agreement which is effective
from and after the execution by all parties and the transmission by telecopier
facsimile of the signature of all parties, each to the other.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto as of
the first date written above.
/S/ Ed Hemsted, by power of attorney
W.D. Groves, PhD., P.Eng.
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle /S/Kent E. Lovelace, Jr.
Kent E. Lovelace, Jr.
Name Printed: Paul J Montle
Title: Vice President
LS CAPITAL CORPORATION
By: /S/ Paul J. Montle
Name Printed: Paul J Montle
Title: President
<PAGE>
EXHIBIT 10.04
FIRST AMENDMENT TO AGREEMENT
THIS FIRST AMENDMENT TO AGREEMENT (the "First Amendment") is made and
entered into as of this the 22nd day of April, 1997 by and among Zeotech
Industries, Inc., Ed Hemsted, KJM Capital Corp., Keith J. McKenzie, Kent E.
Lovelace, Jr., LS Capital Corporation, a Delaware corporation ("LS Capital"),
Griffin Gold Group, Inc., also a Delaware corporation ("Griffin"), and Douglas
Schmitt ("Schmitt"). For all purposes hereof, the preceding parties (other than
Schmitt) are referred to hereinafter as the "Remaining Parties."
Recitals
WHEREAS, W.D. Groves ("Groves") and the Remaining Parties entered into an
Agreement (the "Agreement") dated October 31, 1996 regarding the contribution of
certain mining claims to Griffin, the issuance of certain shares of stock in
Griffin, the issuance of certain shares of stock in LS Capital, additional
capital contributions to Griffin, the registration with the United States
Securities and Exchange Commission of certain shares of stock in Griffin owned
by LS Capital, the declaration by LS Capital of an in-kind dividend to its
stockholders of the shares so registered, and various additional matters;
WHEREAS, during April 1997, Groves executed a Release and Partial Termination
Agreement pursuant to which he terminated his status as a party to the Agreement
and all of his rights, liabilities, obligations, duties or responsibilities with
respect thereto;
WHEREAS, Schmitt will receive shares of common stock in Griffin upon the
satisfaction of certain performance standards set forth in a separate agreement,
and the Remaining Parties require Schmitt to become a party to the Agreement for
certain matters, and Schmitt is willing to become a party to the Agreement for
certain matters; and
WHEREAS, all of the parties named above desire to amend the Agreement upon
the terms, provisions and conditions set forth hereinafter;
Agreement
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the undersigned parties to amend the Agreement, the undersigned parties agree as
follows (all undefined, capitalized terms used herein shall have the meanings
assigned to such terms in the Agreement):
1. Amendments to the Agreement.
a. The Agreement is hereby amended in all relevant respects so that all
references to Grove be and hereby are deleted.
b. The Agreement is hereby amended so that the two references to "April
30, 1997" in Section 4 of the Agreement and the one reference to "April 30,
1997" in Section 8 of the Agreement shall refer to "July 31, 1997."
c. The Agreement is hereby amended in the following respects with respect
to Schmitt, effective immediately upon Schmitt's acquiring any shares of common
stock in Griffin:
(i) Schmitt shall be a "Contributor" for purposes of, and shall be
subject to all terms, provisions and conditions of, Section 2(c) of the
Agreement for all purposes whatsoever;
<PAGE>
(ii) Schmitt shall be deemed to have made all the representations
and warranties contained in Section 5(a) (if Schmitt is a non-U.S. resident)
or all the representations and warranties contained in Section 5(b) (if
Schmitt is a U.S. resident);
(iii) Schmitt shall be subject to all of the consequences of
termination of the Agreement as set forth in the introductory language of
Section 8 and in Section 8(a) and Section 8(d);
(iv) Schmitt shall be subject to the terms and provisions of Section
9(a) with regard to survival of representations and warranties and to the
terms, provisions and conditions of Section 9(b) as an indemnifying party and
Section 9(c) as an indemnified party;
(v) Schmitt shall be subject to terms, provisions and conditions of
Section 10(a) as an indemnifying party, Section 10(b) as an indemnified
party, and the procedure set forth in Section 10(c); and
(vi) Schmitt shall be subject to general terms, provisions and
conditions of Section 11.
2. Miscellaneous. Except as otherwise expressly provided herein, the
Agreement is not amended, modified or affected by this First Amendment. Except
as expressly set forth herein, all of the terms, conditions, covenants,
representations, warranties and all other provisions of the Agreement are herein
ratified and confirmed and shall remain in full force and effect. On and after
the date on which this First Amendment becomes effective, the terms,
"Agreement," "hereof," "herein," "hereunder" and terms of like import, when used
herein or in the Agreement shall, except where the context otherwise requires,
refer to the Agreement, as amended by this First Amendment. This First Amendment
may be executed into one or more counterparts, and it shall not be necessary
that the signatures of all parties hereto be contained on any one counterpart
hereof; each counterpart shall be deemed an original, but all of which together
shall constitute one and the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the undersigned have set their hands hereunto effective
as of the first date written above.
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted, by power of attorney /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle /S/Kent E. Lovelace, Jr.
Kent E. Lovelace, Jr.
Name Printed: Paul J Montle
Title: Vice President
LS CAPITAL CORPORATION
By: /S/ Paul J. Montle /S/ Douglas Schmitt
Douglas Schmitt
Name Printed: Paul J Montle
Title: President
<PAGE>
CERTIFICATE
Each of the undersigned hereby certifies and acknowledges that the
undersigned has signed and executed the foregoing agreement with multiple
original signature pages at separate locations to be effective immediately upon
signing and that the transmission of a telecopier facsimile of their respective
signatures, each to the other, shall be sufficient to cause the mutual delivery
of this executed agreement in order to bind the parties and make the agreement
effective upon the date of signing. It is further certified, acknowledged and
agreed that the original signature pages are to be circulated hereafter but that
the failure of any party to obtain the original signature pages hereafter shall
not affect the validity and effectiveness of this agreement which is effective
from and after the execution by all parties and the transmission by telecopier
facsimile of the signature of all parties, each to the other.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto as of
the first date written above.
ZEOTECH INDUSTRIES, INC.
By: /S/ Ed Hemsted, by power of attorney /S/ Ed Hemsted
Ed Hemsted
Name Printed: Ed Hemsted
Title: President
KJM CAPITAL CORP.
By:/S/ K.J. McKenzie /S/ K.J. McKenzie
Keith J. McKenzie
Name Printed: Keith J. McKenzie
Title: President
GRIFFIN GOLD GROUP, INC.
By: /S/ Paul J. Montle /S/Kent E. Lovelace, Jr.
Kent E. Lovelace, Jr.
Name Printed: Paul J Montle
Title: Vice President
LS CAPITAL CORPORATION
By: /S/ Paul J. Montle /S/ Douglas Schmitt
Douglas Schmitt
Name Printed: Paul J Montle
Title: President
EXHIBIT 10.05
<PAGE>
SECOND AMENDMENT TO AGREEMENT
THIS SECOND AMENDMENT TO AGREEMENT (the "Second Amendment") is made and
entered into as of this the 29th day of July, 1997 by and among Zeotech
Industries, Inc., Ed Hemsted, KJM Capital Corp., Keith J. McKenzie, Kent E.
Lovelace, Jr., LS Capital Corporation, a Delaware corporation ("LS Capital"),
and Griffin Gold Group, Inc., also a Delaware corporation ("Griffin").
Recitals
WHEREAS, the parties to this Second Amendment, entered into an Agreement (the
"Agreement") dated October 31, 1996, together with W.D. Groves who is no longer
a party to the Agreement, regarding the contribution of certain mining claims to
Griffin, the issuance of certain shares of stock in Griffin, the issuance of
certain shares of stock in LS Capital, additional capital contributions to
Griffin, the registration with the United States Securities and Exchange
Commission of certain shares of stock in Griffin owned by LS Capital, the
declaration by LS Capital of an in-kind dividend to its stockholders of the
shares so registered, and various additional matters; and
WHEREAS, the Amendment was amended by a First Amendment to Agreement (the
"First Amendment") in April 1997; and
WHEREAS, all of the parties named above desire to amend the Agreement a
second time upon the terms, provisions and conditions set forth hereinafter;
Agreement
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the undersigned parties to amend the Agreement, the undersigned parties agree as
follows (all undefined, capitalized terms used herein shall have the meanings
assigned to such terms in the Agreement):
1. Amendments to the Agreement. The Agreement is hereby amended so that the
two references to "April 30, 1997" in Section 4 of the Agreement (changed to
July 31, 1997 by the First Amendment) and the one reference to "April 30, 1997"
in Section 8 of the Agreement (changed to July 31, 1997 by the First Amendment)
shall refer to "November 30, 1997."
2. Miscellaneous. Except as otherwise expressly provided herein, the
Agreement is not amended, modified or affected by this Second Amendment. Except
as expressly set forth herein, all of the terms, conditions, covenants,
representations, warranties and all other provisions of the Agreement are herein
ratified and confirmed and shall remain in full force and effect. On and after
the date on which this Second Amendment becomes effective, the terms,
"Agreement," "hereof," "herein," "hereunder" and terms of like import, when used
herein or in the Agreement shall, except where the context otherwise requires,
refer to the Agreement, as amended by this Second Amendment. This Second
Amendment may be executed into one or more counterparts, and it shall not be
necessary that the signatures of all parties hereto be contained on any one
counterpart hereof; each counterpart shall be deemed an original, but all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have set their hands hereunto effective
as of the first date written above.
ZEOTECH INDUSTRIES, INC.
/s/ Ed Hemsted /s/ Ed Hemsted
By:_________________________________ ___________________________
Ed Hemsted
Name Printed:_______________________
<PAGE>
President
Title:______________________________
KJM CAPITAL CORP.
/s/ Keith McKenzie /s/ Keith J. McKenzie
By:_________________________________ ___________________________
Keith J. McKenzie
Name Printed:_______________________
President
Title:______________________________
GRIFFIN GOLD GROUP, INC.
/s/ Paul J. Montle /s/ Kent E. Lovelace, Jr.
By:_________________________________ ____________________________________
Paul J. Montle Kent E. Lovelace, Jr.
Name Printed:_______________________
Vice President
Title:______________________________
LS CAPITAL CORPORATION
/s/ Paul J. Montle /s/ Douglas Schmitt
By:_________________________________ __________________________________
Paul J. Montle Douglas Schmitt
Name Printed:_______________________
President
Title:______________________________
<PAGE>
CERTIFICATE
Each of the undersigned hereby certifies and acknowledges that the
undersigned has signed and executed the foregoing agreement with multiple
original signature pages at separate locations to be effective immediately upon
signing and that the transmission of a telecopier facsimile of their respective
signatures, each to the other, shall be sufficient to cause the mutual delivery
of this executed agreement in order to bind the parties and make the agreement
effective upon the date of signing. It is further certified, acknowledged and
agreed that the original signature pages are to be circulated hereafter but that
the failure of any party to obtain the original signature pages hereafter shall
not affect the validity and effectiveness of this agreement which is effective
from and after the execution by all parties and the transmission by telecopier
facsimile of the signature of all parties, each to the other.
IN WITNESS WHEREOF, the parties hereto have signed their names hereto as of
the first date written above.
ZEOTECH INDUSTRIES, INC.
/s/ Ed Hemsted /s/ Ed Hemsted
By:_________________________________ ____________________________________
Ed Hemsted Ed Hemsted
Name Printed:_______________________
President
Title:______________________________
KJM CAPITAL CORP.
/s/ Keith J. McKenzie /s/ Keith J. McKenzie
By:_________________________________ ____________________________________
Keith J. McKenzie Keith J. McKenzie
Name Printed:_______________________
President
Title:______________________________
GRIFFIN GOLD GROUP, INC.
/s/ Paul J. Montle /s/ Kent E. Lovelace, Jr.
By:_________________________________ ____________________________________
Paul J. Montle Kent E. Lovelace, Jr.
Name Printed:_______________________
Vice President
Title:______________________________
LS CAPITAL CORPORATION
/s/ Paul J. Montle
By:_________________________________
Paul J. Montle
Name Printed:_______________________
President
Title:______________________________
EXHIBIT 10.06
Griffin Gold Group, Inc.
c/o LS Capital Corporation
15915 Katy Freeway, Suite 250
Houston, TX 77094
March 27, 1997
Mr. Richard W. Lancaster
c/o Remediation Services, Inc.
1225 Neosho Dr.
Baton Rouge, LA 70802
Dear Dick:
On behalf of the Board of Directors of Griffin Gold Group, Inc. (GGGI), it is
my pleasure to extend you an officer of employment at will, to join our team as
President and Chief Operating Officer of our gold mining subsidiaries and
affiliates according to the terms and conditions outlined below:
1. Function - You will be a member of the Management Committee and will
report to the Chief Executive Officer of LS Capital and be responsible
for the profit (or loss) of our mining operations.
2. You will be a consultant for April and May 1997 and will receive
50,000 shares of freely tradable LS Capital stock as a consulting fee
for that period.
3. Salary - Initially $72,000 U.S. per annum paid semi-monthly commencing
June 1,1997, with annual reviews beginning in January 1998 by the Compensation
Committee of the Board of Directors of LS .
4. Options - You will receive two (2) option grants effective with
commencement of your two month consulting period, (April - May, 1997):
Grant A. Options on 250,000 shares at an option price of $1.00
vested 50,000 every 90 days commencing June 24, 1997.
Page 2
Grant B. Options on 200,000 shares at a price of $2.00, but vesting
50,000 shares every 90 days commencing September 24, 1998. In
the event of a sale or a merger of the Company which is
defined in the option plan as a "Change of Control", all
options will vest 100% immediately.
<PAGE>
5. Benefits - Beginning June 1 you will be included in all executive
health, disability, life insurance and pension plans as are created for
the officers of the Company. For the time being we will include everyone
under the GGGI plan.
6. Termination - In the event you are terminated except for cause,
-----------
defined as insubordination, unjustified absence, failure to carry out
the duties assigned you and disclosure of confidential information,
by the Company, you will be paid your base salary for three
months, or commencement of your new employment, whichever is
sooner. If you are terminated by the Company, one half of the
current period's unvested options (i.e. 20,000) will be vested. In
the event you decide to leave you will give the Company at least
two months written notice. All unvested options will be canceled
as of the date of your notice of termination in that case.
7. Commencement Date - As we discussed, we need you on board as soon as
possible. We understand that you would like to give your notice soon and
start full-time no later than June 1, but sooner would be preferable.
Very truly yours,
/s/ Paul J. Montle
---------------------
Paul J. Montle
Vice President
CONFIRMED AND ACCEPTED:
By: /s/ Richard W. Lancaster
-------------------------------
Richard W. Lancaster
cc: Kent E. Lovelace, Jr.
EXHIBIT 10.07
Desert Minerals, Inc.
c/o LS Capital Corporation
15915 Katy Freeway, Suite 250
Houston, TX 77094
Thursday March 27, 1997
Mr. Douglas Schmitt
c/o Zeotech Industries, Inc.
P.O. Box 387
Tecopa, CA 92389-0387
Dear Doug,
<PAGE>
Desert Minerals, Inc. (DMI) appreciates your fine efforts on its behalf since
January 14, 1997 while working at our Tecopa facility as a consultant for DMI
employed by Zeotech Industries, Inc. of Vancouver.
To formalize our ongoing arrangement for your services and our joint rights
(50/50) to use the technology you brought to Tecopa and are tailoring to suit
DMI's deposits at our expense we propose the following:
1. Salary - Your weekly consulting fee payable by Zeotech will be
increased from US $750 weekly to US $1,500 weekly effective March 1,
1997 ;
2. Bonus - Upon execution of this letter agreement you will be
paid a bonus of US $10,000 against a total bonus of US $100,000 as
follows:
2.1 The balance of US $90,000 will be paid upon delivery, as
defined in sec. 2.3 below, of the technology, for recovering
micro fine gold and other precious metals from desert sands;
2.2 Prior to payment of the US $90,000 such technology will be
demonstrated to and audited by an independent third party
mining engineering firm of international repute which is
willing, after you have demonstrated the process to them, to
allow its name to be used publicly to verify that DMI has
successfully "cracked the code" to consistently extract gold
and other PMs from desert sands on a large - scale commercial
basis. Alternately, however, the production of commercially
salable quantities of precious metals from DMI's Tecopa area
deposit in a form acceptable to a reputable refiner, with
production costs not greater than 75% of sale proceeds, will
also satisfy the requirements of this sec 2.2;
2.3 Prior to payment of the US $90,000 you
will deliver to DMI a process manual which
will include all formulae, process designs
and systems engineering necessary to
implement and repeat the recovery process on
a consistent, large scale, basis;
2.4 Upon payment of the US $90,000 the
recovery process technology and any
enhancements subsequently developed will be
the joint property of you (50%), LS Capital,
and DMI (50%) and such subsidiaries or
affiliates as they may, from time to time,
assign or license the technology to, with
the proviso, however, that should you
present to LS/DMI a project which would
utilize the technology to extract gold
and/or precious metals, and LS/DMI declines
in writing to pursue that project, then you
shall have the right to utilize the
technology to extract minerals from that
project, as long as appropriate measures are
taken to maintain the integrity and security
of the technology.
3. Royalty - As full and total compensation for the use
of the technology by LS/DMI and their affiliates,
they shall pay to you a royalty of 5% (five percent),
of gross sale proceeds from the refiner minus direct
production costs, but not including any general
overhead or administrative costs, on all precious
minerals extracted and produced in marketable form
utilizing the process, payable in cash or in kind, as
long as you are in compliance with the provisions of
sec. 2.4 above. It is understood by you that LS/DMI
expressly reserves the right to discontinue the use
of the technology you developed for us at any time in
favor of either the a) utilization of technology
provided by another source which LS/DMI believes is
more attractive or cost effective,
<PAGE>
or b) abandonment of the desert sands project. In
either case all royalty payment obligations to you
will cease as long as none of our 50 - 50 jointly
owned technology is being utilized thereafter;
4. Equity - LS Capital/DMI and Griffin Gold hereby give
their consent to the transfer to you of 90% of the
shares of Griffin Gold Group, Inc. and Desert
Minerals, Inc. which were reserved for Dr. W.D.
Groves. The obligation to transfer these interests is
the sole responsibility of Ed Hemsted, and is subject
to the satisfactory completion of secs. 2.2 and 2.3
above;
5. Security - LS, DMI and you will take such measures as
are necessary to secure and protect the secrecy of
the technology, including effecting such intellectual
property filings with the appropriate international
bodies as may be advised by counsel;
6. Performance - Failure of LS/DMI to commission
construction of an operating plant of at least one
thousand (1,000) tons per day within three (3) years
from the date of this agreement constitutes automatic
recission of LS/DMI 50% interest in the technology
and process back to you. Provided however that, if
negotiations and/or design work to commission an
operating plant of that size are underway the
preceding deadline may be extended by up to twelve
(12) months by payment of US $25,000 to you;
7. Confidentiality - The parties to this agreement agree
that it is confidential and highly sensitive and no
disclosure of its terms can be made without the
consent of both parties, except as may be required by
government agencies such as tax or securities
authorities.
This letter agreement is entered into as of the date first written
above.
LS Capital Corporation
s/s Paul J.Montle
by ____________________________
Paul J. Montle, President
Page 4
Griffin Gold Group, Inc.
s/s Paul J. Montle
by ____________________________
Paul J. Montle, Vice President
Desert Minerals, Inc.
s/s Paul J. Montle
by_____________________________
Paul J. Montle, Vice President
s/s Douglas Schmitt
<PAGE>
by ____________________________
Douglas Schmitt
Zeotech Industries, Inc.
s/s Ed Hemsted
by_____________________________
Ed Hemsted
s/s Ed Hemsted
by ____________________________
Ed Hemsted, individually
EXHIBIT 10.08
EXPLORATION AGREEMENT AND OPTION TO LEASE
This Agreement is made and effective as of the 5th day of June, 1997,
by and between CHARLES JACKSON, MARIE UNRUH, JAMES HOPKINS, SR., TRACY HOPKINS,
RICK JACKSON, MARA JACKSON, PAUL JACKSON and JARED JACKSON (hereinafter referred
to as "LICENSOR") and GRIFFIN GOLD GROUP, INC., a Delaware corporation,
(hereinafter referred to as "LICENSEE"), agree as follows:
1. Description of Property/Grant of Exploration Rights.
LICENSOR is the owner of all or part of the unpatented placer mining
claims described in EXHIBIT "A" attached hereto. LICENSOR grants to LICENSEE the
exclusive right to explore LICENSOR's ownership interest in the property set
forth in EXHIBIT "A" (LICENSOR's interest is hereinafter referred to as the
"PREMISES").
2. Term.
The term of this Agreement shall be five (5) years, unless terminated
earlier or extended. LICENSEE shall have the right to extend for two additional
five (5) year terms upon the payment of Five Hundred Dollars ($500.00) for each
such extension.
3. Consideration.
In consideration for the granting of the exploration rights set forth
herein, LICENSEE agrees to pay to LICENSOR each year in which this Agreement is
in effect on or before the anniversary date,
<PAGE>
the sum of Five Hundred Dollars ($500.00). Upon execution of this Agreement,
LICENSEE shall pay the sum of One Thousand Dollars ($1,000.00) which shall be
full consideration for the first and second year's payments. LICENSORS authorize
Rick Jackson to receive such payments for them, for their benefit, as follows:
Rick Jackson
P.O. Box 874
Jacksonville, OR 97530
4. Conduct of Operations.
During the term of this Agreement, LICENSEE shall have possession of,
and free and unrestricted access to, the PREMISES and shall have the right to
explore, investigate, measure, sample (including bulk sample), examine, test,
work, use, manage, control and develop the PREMISES. LICENSOR shall receive an
accounting and production royalty, pursuant to the terms of the Mining Lease
attached hereto as EXHIBIT "B", for all ores, minerals and concentrates removed
and sold from the PREMISES. LICENSEE may trench or drill any part of the
PREMISES, may rehabilitate existing mine workings, construct new workings, and
may erect, construct, use, and maintain on the PREMISES such roads, building
structures, equipment and machinery as in its sole discretion it may deem
necessary to its operations.
5. Notice.
Any notices required or permitted to be given to LICENSOR or LICENSEE
hereunder shall be given in the manner provided herein and be considered as
delivered and received when the same are delivered in person or received by the
addressee following deposit in the United States mail by registered mail, return
receipt requested, with postage prepaid. All notices given hereunder shall be
addressed to the persons and addresses given below or such other persons or
addresses as the parties may designate from time to time. Any change in the
names and/or addresses of the persons listed below shall be effective thirty
(30) days from the giving of the notice to the other party as provided herein.
LICENSEE: Griffin Gold Group, Inc.
c/o LS Capital Corporation
15915 Katy Freeway, Suite 250
Houston, TX 77094
<PAGE>
LICENSOR: Rick Jackson
- --------
P.O. Box 874
Jacksonville, OR 97530
6. Termination.
Upon termination or surrender under the terms of this License, all
rights of LICENSEE under this Agreement, except as provided in Paragraph 11.,
shall terminate and all payments heretofore made under this Agreement shall be
retained by LICENSOR as full compensation, as rental, for the use and occupancy
of said PREMISES and as consideration for which this Agreement is given.
7. Insurance.
LICENSEE shall, at its sole expense, cause to be issued and maintained
during the term of this Agreement, or any extension thereof, workmen's
compensation insurance coverage in accordance with the provisions of California
law.
8. Indemnity.
LICENSEE shall protect and indemnify and hold LICENSOR harmless from
and against any and all claims, actions or causes of action, including, without
limitation, employees of LICENSEE, contractors and employees of contractors of
LICENSEE, for injury to or death of persons or damage to property arising out of
or in connection with LICENSEE's exploration activities.
9. Compliance With Laws.
LICENSEE shall conduct all exploration activities in full compliance
with the applicable laws and regulations of the State of California and the
United States of America including, but not limited to, the provisions of the
Federal Land Management and Policy Act of 1976 and the regulations promulgated
pursuant thereto.
10. Option to Lease.
During the term of this Agreement, or during the term of any extension
hereof, LICENSEE may exercise an option to lease the PREMISES pursuant to the
terms and conditions set forth in the Mining Lease attached hereto as EXHIBIT
"B" and made a part hereof as though set forth in its entirety. The option to
lease shall be deemed exercised when LICENSOR has received a certified check in
the amount of Five Thousand Dollars ($5,000.00), together with two (2) copies of
EXHIBIT
<PAGE>
"B" that have been executed by LICENSEE. LICENSOR shall sign one copy and return
it promptly to LICENSEE. If LICENSOR is the owner at the date of exercise of
this option of less than one hundred percent (100%) of the title to the
PREMISES, LICENSOR shall receive an amount equal to LICENSOR's percentage
ownership multiplied by Five Thousand Dollars ($5,000.00) pursuant to this
paragraph.
11. Removal of Property.
LICENSEE shall have, and it is hereby given and granted, ninety (90)
days after a valid forfeiture, surrender, or other termination of this
Agreement, to remove from the PREMISES all machinery, equipment, personal
property and improvements erected or placed in or upon the said property by it.
If not so removed by LICENSEE within said ninety (90) day period, titles to
unremoved property will then vest in LICENSOR.
12. Information.
12.1 If the Option to Lease contained in Paragraph 10 is not
exercised and this Agreement is terminated, LICENSOR may, within ninety (90)
days, request, and if requested, LICENSEE shall supply LICENSOR copies of all
Information as defined below. As used in this Agreement, "Information" shall
mean all geological, geophysical and geochemical data, maps and reports, whether
acquired, generated or compiled by or for LICENSEE. LICENSEE warrants that all
information supplied to LICENSOR pursuant to the terms of this provision shall
be true and accurate copies of the Information acquired, generated or compiled
by or for LICENSEE; provided, however, that LICENSEE does not warrant that the
data contained therein is an accurate interpretation of the geology described
therein.
12.2 Any and all data, information, reports and samples
provided by LICENSEE to LICENSOR under the terms of this Agreement shall be
treated and held confidential for the term of this Agreement, and for the term
of the Mining Lease attached as EXHIBIT "B", if LICENSEE should exercise its
Option to Lease.
13. Default and Termination.
13.1 Default.
<PAGE>
The occurrence of any of the following events shall constitute
an event of default on the part of LICENSEE:
13.1.1 Breach of Covenants.
Failure (i) to perform any of LICENSEE's covenants hereunder, including, but
not limited to the failure to make a payment under Paragraph 3 herein, and (ii)
to remedy such failure within ninety (90) days after written demand is made
therefor.
13.1.2 Assignments.
The making of a general assignment by LICENSEE for the benefit of creditors.
13.1.3 Bankruptcy.
The filing of any form of voluntary petition in bankruptcy by LICENSEE, or the
filing of an involuntary petition by LICENSEE's creditors, if such petition
remains undischarged for a period of thirty (30) days.
13.1.4 Receivership.
The appointment of a receiver to take possession of substantially all of
LICENSEE's assets or of the interest held by LICENSEE under this Agreement, if
such receivership remains undissolved for a period of thirty (30) days.
13.1.5 Attachment.
The attachment or other judicial seizure of substantially all of LICENSEE's
assets or of the interest held under this Agreement, if such attachment or other
seizure remains un dismissed or undischarged for a period of thirty (30) days
after the levy thereof.
13.2 Remedies.
In the event of the occurrence of any event of default
mentioned in Paragraph 13.1 hereof, LICENSOR shall have the right, so long as
default continues, to immediately terminate this Agreement by giving LICENSEE
written notice of such termination.
14. Inurement.
All covenants, conditions, limitations and provisions herein contained
apply and are binding upon the parties hereto and their heirs, devisees,
successors and assigns.
15. Force Majeure.
<PAGE>
If, because of force majeure, LICENSEE is unable to carry out any of
its obligations under this Agreement, the obligation of LICENSEE shall be
excused to the extent made necessary by such force majeure and this Agreement
shall be extended by a length of time equal to its continuance not to exceed
maximum term permitted by law. The term "force majeure" as used herein shall
include, but not be limited to, acts of God, acts of civil or military
authority, acts of war or the public enemy, legislation, acts or orders of any
court, acts or failure to act of regulatory agencies or administrative bodies
having jurisdiction with respect to the performance of this Agreement,
insurrections, riots, strikes, boycotts or other labor disturbances, fire,
flood, windstorm, explosion and other causes not within the reasonable control
of the parties directly affected and claiming suspension of its obligation
whether or not like or similar to the causes or occurrences specifically
enumerated above.
16. Title.
Each LICENSOR covenants that said LICENSOR now owns and is in actual
possession of an undivided one-eighth interest in the PREMISES free and clear
from all former grants, sales, liens, or encumbrances of any kind, and that
there are no delinquent taxes; and agrees to furnish LICENSEE upon request such
abstracts, deeds, or other evidence of title as may be in LICENSOR's possession
and control. LICENSEE may elect to correct any defects it determines exist in
title to the PREMISES, including, but not limited to, amendment, relinquishment,
relocation of existing claims and location of additional claims over fractions
within the PREMISES.
17. Counterparts.
This Agreement may be signed in counterparts and shall be deemed
effective when all parties have executed this Agreement or any counterpart
thereof.
18. Complete Agreement.
This Agreement and all the terms and covenants contained herein are
deemed to be the complete and unequivocal written agreement of the parties and
no other agreements, either written or oral, are contemplated with respect to
said PREMISES.
<PAGE>
19. Recordation.
This Agreement shall not be recorded, however, the Memorandum of
Exploration Agreement with Option to Lease attached hereto as EXHIBIT "C" shall
be executed and recorded promptly following the execution of this Agreement.
LICENSOR:
/s/ Charles Jackson
- -----------------------------------
CHARLES JACKSON
/s/ Marie Unruh
- ---------------------------------
MARIE UNRUH
/s/ James Hopkins, Sr.
- -----------------------------------
JAMES HOPKINS, SR.
/s/ Tracy Hopkins
- -----------------------------------
TRACY HOPKINS
/s/ Rick Jackson
- -----------------------------------
RICK JACKSON
/s/ Mara Jackson
- -----------------------------------
MARA JACKSON
/s/ Paul Jackson
- -----------------------------------
PAUL JACKSON
/s/ Jared Jackson
- -----------------------------------
JARED JACKSON
LICENSEE:
GRIFFIN GOLD GROUP, INC.
By /s/ Paul J. Montle
Paul J. Montle
Its Vice-President
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
Table of Contents
<TABLE>
<S> <C>
1. Description of Property/Grant of Exploration Rights............................................................ 1
---------------------------------------------------
2. Term........................................................................................................... 1
----
3. Consideration.................................................................................................. 1
-------------
4. Conduct of Operations.......................................................................................... 2
---------------------
5. Notice......................................................................................................... 2
------
6. Termination.................................................................................................... 3
-----------
7. Insurance...................................................................................................... 3
---------
8. Indemnity...................................................................................................... 3
---------
9. Compliance With Laws........................................................................................... 3
--------------------
10. Option to Lease................................................................................................ 4
---------------
11. Removal of Property............................................................................................ 4
-------------------
12. Information.................................................................................................... 4
-----------
13. Default and Termination........................................................................................ 5
-----------------------
13.1 Default............................................................................................... 5
-------
13.1.1 Breach of Covenants.............................................................. 5
-------------------
13.1.2 Assignments...................................................................... 5
-----------
13.1.3 Bankruptcy....................................................................... 5
----------
13.1.4 Receivership..................................................................... 6
------------
13.1.5 Attachment....................................................................... 6
----------
13.2 Remedies.............................................................................................. 6
--------
14. Inurement...................................................................................................... 6
---------
15. Force Majeure.................................................................................................. 6
-------------
16. Title.......................................................................................................... 7
-----
17. Counterparts................................................................................................... 7
------------
18. Complete Agreement............................................................................................. 7
------------------
19. Recordation.................................................................................................... 8
-----------
</TABLE>
EXHIBIT "A"
UNPATENTED PLACER MINING CLAIMS
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
Located in Inyo County, California
<TABLE>
<CAPTION>
Inyo County
Township/Range Date of Document
Claim Name Section SBB&M Location Number CAMC
<S> <C> <C> <C> <C>
Amanda #7 6 20 N./7 E. 5-4-96 96-2325 269230
Amanda #8 6 20 N./7 E. 5-4-96 96-2326 269231
Amanda #9 6 20 N./7 E. 5-5-96 96-2327 269232
Amanda #10 5 20 N./7 E. 5-5-96 96-2328 269233
Amanda #11 6 20 N./7 E. 5-5-96 96-2329 269234
Amanda #12 7 20 N./7 E. 5-5-96 96-2330 269235
Amanda #13 7 20 N./7 E. 5-5-96 96-2331 269236
Amanda #15 8 20 N./7 E. 5-5-96 96-2332 269237
Amanda #19 9 20 N./7 E. 5-6-96 96-2333 269238
Amanda #20 4 20 N./7 E. 5-6-96 96-2334 269239
</TABLE>
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
EXHIBIT "A"
UNPATENTED PLACER MINING CLAIMS
Located in San Bernardino County, California
<TABLE>
<CAPTION>
San Bernardino County
Township/Range Date of Document
Claim Name Section SBB&M Location Number CAMC
<S> <C> <C> <C> <C>
Kurtise #1 35 11 N./4 E. 6-16-96 1996-0260770 269295
Kurtise #2 35 11 N./4 E. 6-16-96 1996-0260773 269296
Kurtise #3 35 11 N./4 E. 6-16-96 1996-0260775 269297
Kurtise #4 35 11 N./4 E. 6-16-96 1996-0260778 269298
Kurtise #9 2 10 N./4 E. 6-16-96 1996-0260781 269299
Kurtise #10 2 10 N./4 E. 6-16-96 1996-0260780 269300
Kurtise #11 2 10 N./4 E. 6-17-96 1996-0260783 269301
Kurtise #12 2 10 N./4 E. 6-17-96 1996-0260784 269302
Kurtise #13 11 10 N./4 E. 6-17-96 1996-0260786 269303
Kurtise #14 11 10 N./4 E. 6-17-96 1996-0260787 269304
Kurtise #15 11 10 N./4 E. 6-18-96 1996-0260788 269305
Kurtise #16 11 10 N./4 E. 6-18-96 1996-0260790 269306
</TABLE>
EXHIBIT "B"
MINING LEASE
This Agreement is made and effective as of the ___ day of _______________,
19__, by and between CHARLES JACKSON, MARIE UNRUH, JAMES HOPKINS, SR., TRACY
HOPKINS, RICK JACKSON, MARA JACKSON, PAUL JACKSON and JARED JACKSON (hereafter
referred to as "LESSOR"), and GRIFFIN GOLD GROUP, INC., a Delaware corporation,
(hereafter "LESSEE").
1. DESCRIPTION OF PROPERTY.
LESSOR is the owner of all or part of the unpatented placer mining claims
described on EXHIBIT "A" attached hereto.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
2. GRANT OF LEASE.
2.1 LESSOR hereby leases
exclusively to LESSEE, subject to the terms and conditions hereinafter
expressed,
LESSOR's interest in the property set forth in EXHIBIT "A" attached hereto
(LESSOR's interest is hereafter referred to as "LEASED PROPERTY").
2.2 This lease is granted for
the purpose of the exploration, development, and mining of the LEASED PROPERTY
for
minerals as may be found therein (hereinafter referred to as the "Leased
Minerals"). LESSEE is hereby granted the exclusive right to enter into
possession of the LEASED PROPERTY, and during the term of this lease, to remain
in possession thereof, and to develop, mine, operate and use the property and
any surface or underground rights, including but not limited to access, and
water or water rights, and to mine, extract and remove from the LEASED PROPERTY
the Leased Minerals and to treat, mill, ship, sell or otherwise dispose of the
same and receive the full proceeds thereof (subject to the obligation of royalty
payment as specified below); and to construct, use and operate thereon and
therein structures, excavations, roads, equipment and other improvements or
facilities which LESSEE shall deem reasonably required for, or in connection
with, the full enjoyment of the rights and interests granted to LESSEE by this
lease.
3. TERM OF LEASE.
The term of this Mining Lease shall be for twenty (20) years from and after the
date of this lease and for so long thereafter as LESSEE is in production on
properties located within a five (5) mile radius of the nearest LEASED PROPERTY.
For purposes of this paragraph, production shall be defined as the processing of
ore. LESSEE may terminate this lease at any time by delivery to LESSOR of a
quitclaim deed to the LEASED PROPERTY, provided that LESSEE is not then in
default under the terms of this lease.
4. ROYALTIES AND CONSIDERATION.
4.1 Advance Minimum Royalty.
LESSEE shall pay to LESSOR advance minimum royalties
as follows:
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
a) Upon execution of this agreement $1,000.00
b) On or before the anniversary date
and each anniversary date thereafter $1,000.00
4.2 Production Royalties.
4.2.1A
production royalty for all minerals mined, removed, and sold from the property
set forth in EXHIBIT "A" equal to
2.5 percent (2.5%) of the Smelter Returns shall be calculated. LESSOR, as
defined in this Agreement, shall receive a percentage of the production royalty
calculated equal to LESSOR's actual ownership interest of the property described
in EXHIBIT "A".
4.2.2The
term "Smelter Returns" shall be defined to be the gross amount received from the
sale of valuable minerals
after recovery of all exploration, development, and capital costs and less all
taxes levied, incurred or imposed on the sale, severance or production of such
minerals and less costs of extraction, mining, milling, treating, transportation
to the smelter and/or refinery, smelting and refining charges and costs of sale.
4.3 Manner of Payment.
4.3.1All
minerals mined, removed and extracted from the LEASED PROPERTY shall be sold
under the name of LESSEE
and a royalty settlement sheet accounting for such transactions shall be
furnished to LESSOR on or before the twenty-fifth (25th) day of the next
succeeding calendar month for all sales made and received during the preceding
calendar quarter. All production royalty payments, accompanied by a settlement
sheet required by this lease, shall be made to LESSOR at the address set forth
in Paragraph 12.1 below, or such other person or address as LESSOR shall
designate by written notice pursuant to the provisions of Paragraph 8 by mail or
personal delivery. LESSEE shall receive a cumulative credit against production
royalties for all minimum royalties paid pursuant to this lease agreement
regardless of the year in which said minimum royalties are paid and production
royalties shall not be payable until the production royalty set forth in
Paragraph 4.2 exceeds the cumulative
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
sums paid by LESSEE pursuant to Paragraph 4.1. If the Leased Minerals are sold
to, or processed by, a smelter or refinery owned, operated, affiliated with or
controlled by LESSEE, in no event shall the royalties computed herein be less
than would have been paid had the ore been sold to or processed by a major
smelter or refinery not owned, operated, affiliated with, or controlled by
LESSEE.
5. CONDUCT OF MINING OPERATIONS.
5.1 General.
LESSEE shall conduct, and cause all mining activities to be
conducted in a prudent, workmanlike, miner-like manner in accordance with
established mining practices.
5.2 Commingling of Ore.
LESSEE may commingle ore from the LEASED PROPERTY
with ore from other properties, either before or after concentration or
beneficiation, provided that the method and procedures LESSEE uses to commingle
the ore and to determine the weight and grade of the ore removed from the LEASED
PROPERTY and of the ore with which it is commingled shall be a method recognized
by the mining industry and conducted in accordance with generally accepted ac
counting principles. LESSEE shall use that method to determine weight and grade
and to allocate net returns from the commingled ore between the LEASED PROPERTY
and the other properties from which the other commingled ore was removed and to
assure that the share of production received by LESSOR is representative of the
ore that was produced from the LEASED PROPERTY. All such weight, grade and
allocation calculations by LESSEE shall be done in accordance with generally
accepted accounting principles and in a manner recognized by the mining industry
as practical and sufficient at that time. If it is impractical to determine
which portions of any of the costs and expenses described in Paragraph 4.2.2
above are directly attributable to ore removed from the LEASED
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
PROPERTY, such costs and expenses shall be allocated on a straight-line, per-ton
basis among all ores that give rise to those expenses, in accordance with
acceptable accounting standards.
5.3 Cross-Mining Rights.
LESSEE is hereby granted the right, if it so desires, to mine or remove from the
LEASED PROPERTY any ores, waste, water and other materials existing therein
or thereon or in any part thereof, through or by means of shafts, openings or
pits which may be sunk or made upon other property owned, controlled, or
operated by or for LESSEE (hereinafter "Other Property"). LESSEE also may
stockpile any ores, waste, or other materials and/or concentrated products of
ores or materials (collectively "Products") from the LEASED PROPERTY, or
any part thereof, upon stockpile grounds situated upon such Other Property.
In the event LESSEE stockpiles Products from the LEASED PROPERTY on Other
Properties, LESSEE shall execute or cause to be executed such instruments as
LESSOR may reasonably request in writing to evidence LESSOR's royalty interest
in the Products so stockpiled. Any such instrument executed by LESSEE,
however, expressly shall acknowledge LESSEE's right to sell the stockpiled
Products. LESSEE also, if it so desires, may use the LEASED PROPERTY and any
shafts, openings, pits and stockpile grounds sunk or made for the mining,
removal and/or stockpiling of any Products from the LEASED PROPERTY and/or from
the Other Property, or for any purpose or purposes connected therewith,
provided, however, that such use of the LEASED PROPERTY does not prevent or
interfere with the mining or removal of ore from the LEASED PROPERTY.
6. RECORDS AND BOOKS OF ACCOUNT.
6.1 Books of Account.
LESSEE shall keep complete, true and proper books and
records of account showing all minerals mined and
removed from the LEASED PROPERTY and recording all sales, transfers, conveyances
or other dispositions of ores, minerals or other materials taken from the LEASED
PROPERTY in accordance with generally accepted accounting principles. Said books
and records shall be open to examination by LESSOR or its duly authorized
representative during regular business hours and shall include any
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
and all documents necessary to establish a gross selling price of the ores,
minerals or other materials taken from the Leased Premises. LESSOR is hereby
granted the right at LESSOR's expense to examine and make a copy or copies of
said books or records or any portion thereof.
6.2 Inspection.
LESSOR or its duly authorized agents shall have, following
advanced notice, the right at reasonable times under reasonable circumstances to
enter upon the LEASED PROPERTY for the purpose of inspecting operations and work
being performed by LESSEE pursuant to this lease. Such entry shall be at
LESSOR's risk and LESSEE shall not be liable for injury to LESSOR unless such
injury is caused by the willful or grossly negligent conduct of LESSEE.
7. PROTECTING FROM LIENS AND TAXES.
7.1 LESSEE shall keep the
subject premises and every part thereof free and clear of any and all liens and
encumbrances for work performed upon the subject premises, or for materials
furnished to it while this agreement remains in force and effect.
7.2 LESSEE shall pay not later
than ten (10) days before due, one hundred percent (100%) of all taxes and
assessments that may be levied or assessed against the premises, including all
taxes that may be levied or assessed as a direct or indirect result of LESSEE's
mining activities, and including, but not limited to, taxes on the mineral
estate, real property improvements and personal property and possessory interest
taxes. LESSOR shall forward to LESSEE, upon receipt, all notices of taxes and
assessments due. LESSOR shall be responsible for payment of all taxes or
assessments due as a result of its activities.
8. NOTICE.
Any notices required or permitted to be given to LESSOR or LESSEE hereunder
shall be considered as delivered when received by the parties to whom they shall
be directed. Notice shall be given by personal delivery or by registered mail,
postage prepaid and return receipt requested, addressed to the persons
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
and addresses given below or to such other person or address as the parties may
designate by written notice from time to time.
LICENSEE: Griffin Gold Group, Inc.
c/o LS Capital Corporation
15915 Katy Freeway, Suite 250
Houston, TX 77094
LICENSOR: Rick Jackson
P.O. Box 874
Jacksonville, OR 97530
Changes in the above names and addresses shall be
effected by sending notice as set forth herein and said change shall be
effective fifteen (15) days from receipt thereof.
9. WASTE AND REFUSE.
LESSEE agrees to dispose of refuse from all mining activities conducted pursuant
to this lease in accordance with good mining practice and in accordance with the
provisions of applicable ordinances, laws and regulations.
10. INSURANCE.
LESSEE shall, at its sole cost and expense, cause to be issued and maintained
during the term of this lease or any extension thereof workers' compensation
insurance coverage in accordance with the provisions of California law.
11. COMPLIANCE WITH LAWS.
LESSEE shall conduct and cause to be conducted all mining activities in full
compliance with the applicable laws of the State of California and the United
States of America.
12. TITLE.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
EACH LESSOR warrants that it is the owner of an undivided 1/8th interest in the
LEASED PROPERTY and that there are no defects in LESSOR's title which would
affect LESSEE's right to possession and use pursuant to the terms of this lease.
LESSORS authorize Rick Jackson to receive all payments
for them, for their benefit, as follows:
Rick Jackson
P.O. Box 874
Jacksonville, OR 97530
12.2 In the event that any
defect in LESSOR's title is determined to exist, LESSOR shall, at its
sole cost and expense, take such steps as may be required, including, but not
limited to, the commencement of litigation, the location of additional claims,
relinquishment, amendment or relocation of existing claims held by LESSOR. In
the event LESSOR fails or refuses to take or complete appropriate steps to
correct any defect in LESSOR's title, LESSEE may elect to correct such defect
and deduct the cost of such correction, including attorneys fees, from the
payment obligations contained in this lease. LESSEE also may make such
deductions for costs or corrections to title to the LEASED PROPERTY incurred by
LESSEE prior to the date of this Lease.
12.3In the event it is
determined that LESSOR owns less than one hundred percent (100%) of the LEASED
PROPERTY, then LESSOR's rights under this Agreement shall be adjusted so as to
reflect the actual interest owned. It is the intention of the parties that the
full ownership of LESSOR be included in this Mining Lease.
13. DEFAULT AND TERMINATION.
13.1 Default.
The occurrence of any of the following events shall constitute an event of
default on the part of LESSEE:
13.1.1 Breach of Covenants.
Failure (i) to perform any of LESSEE's covenants hereunder, and (ii) to remedy
such failure within ninety (90) days after written demand is made therefore.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
13.1.2 Assignments.
The making of a general assignment by LESSEE for the benefit of creditors.
13.1.3 Bankruptcy.
The filing of any form of voluntary petition in bankruptcy by LESSEE, or the
filing of an involuntary petition by LESSEE's creditors, if such petition
remains undischarged for a period of thirty (30) days.
13.1.4 Receivership.
The appointment of a receiver to take possession of substantially all of
LESSEE's assets or of the interest held by LESSEE under this lease, if such
receivership remains undissolved for a period of thirty (30) days.
13.1.5 Attachment.
The attachment or other judicial seizure of substantially all of LESSEE's assets
or of the interest held under this lease, if such attachment or other seizure
remains undismissed or undischarged for a period of thirty (30) days after the
levy thereof.
13.2 Remedies.
13.2.1 Termination.
In the event of the occurrence of any event of default mentioned in Paragraph
13.1 hereof, LESSOR, shall have the right, so long as default continues, to
immediately terminate this lease by giving LESSEE written notice of such
termination.
13.2.2 Eviction.
In the event of any such termination of this lease, LESSOR may then or at any
time thereafter, re-enter the LEASED PROPERTY, or any part thereof, and expel or
remove therefrom LESSEE and any other person occupying the same, using such
force as may be necessary so to do, and again repossess and enjoy the LEASED
PROPERTY, without prejudice to any other remedies
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
that LESSOR may have under this lease, or at law or equity, by reason of
LESSEE's default or of such termination.
13.2.3 Damages.
the event of any such termination of this lease, LESSOR shall have all of the
rights and remedies of a landlord provided by Section 1951.2 of the Civil Code
of the State of California.
13.2.4 Remedies of LESSOR.
In the event LESSEE breaches this lease and abandons the LEASED
PROPERTY, LESSOR shall have all of the remedies of a landlord provided by the
Civil Code of the State of California.
13.2.5 Default by Landlord.
In the event of default by LESSOR, LESSEE shall have all of the remedies of a
tenant provided by the laws of the State of California.
13.3 Termination by LESSEE.
This agreement may be terminated by LESSEE at any time by the
giving of three (3) months written notice.
13.4 Information.
Upon termination of this Agreement LESSEE shall (upon the
request of LESSOR made within 60 days of termination) provide LESSOR with copies
of all Information as defined below. As used in this Agreement, "Information"
shall mean all geological, geophysical and geochemical data, all laboratory
testing results, maps and reports, whether acquired, generated or compiled by or
for LESSEE. LESSEE warrants that all Information supplied to LESSOR pursuant to
the terms of this provision shall be true and accurate copies of the Information
acquired, generated or compiled by or for LESSEE; provided, however, that LESSEE
does not warrant that the data contained therein is an accurate interpretation
of the geology described therein.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
13.4.1 Upon execution of this Agreement, LESSOR shall provide LESSEE
access to all geologic, geophysical and geochemical data concerning the LEASED
PROPERTY which has been acquired, generated, or compiled by LESSOR.
13.4.2 Any and all data, information, reports and samples provided by LESSEE
to LESSOR under the terms of this Agreement shall be treated and held
confidential for the term of this Agreement.
14. FORCE MAJEURE.
The failure to perform or comply with any of the covenants or
conditions hereof on the part of LESSEE (including, but not limited to,
production requirements set forth in Paragraph 3 above) will not be grounds for
cancellation, penalty, termination or forfeiture hereof, during such time as
failure to perform is caused or compliance is prevented by severe weather,
explosion, unusual mining casualty, mill shutdowns, damage to or destruction of
mill or mill plant facility, fire, flood, civil or military authority,
insurrection, strikes, riots, inability after diligent effort to obtain
competent workmen or material or necessary permits, fuel shortages, inadequate
or shortages of transportation facilities not due to the negligence or lack of
diligence by LESSEE, governmental actions or policies which substantially
restrict the legality or profitability of extracting and selling any of the
valuable minerals produced under the Mining Lease, acts of God, or any
circumstances or conditions beyond the control of LESSEE, and in such an event,
LESSEE shall be excused from, and not held liable for, such failure to perform
or comply.
15. INUREMENT.
This lease shall inure to the benefit of and be binding upon their
respective heirs, trustees, conservators, successors and assigns of the parties.
16. RECORDATION.
This agreement is not to be recorded. LESSEE may, however, prepare and
submit to LESSOR for signature, a memorandum of this agreement for recordation.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
17. ASSIGNMENT.
17.1 Assignment by LESSOR.
LESSOR agrees that it shall give notice to LESSEE of its
intention to sell or otherwise assign the Lease or LEASED PROPERTY. Upon receipt
of a bona fide offer to purchase the Lease or LEASED PROPERTY, the LESSOR shall
forthwith give notice, to be accompanied by a true copy of such offer to
purchase attached thereto, to LESSEE, and LESSEE shall have ninety (90) days in
which to present to LESSOR a written counter offer, such counter offer to be for
greater consideration than the offer, expressed in cash or marketable
securities. Upon receipt of such counter offer, LESSOR will have thirty (30)
days to sell to LESSEE or to give notice to LESSEE of receipt of a further
counter offer for greater consideration than LESSEE's counter offer. In the
event of a further counter offer being presented, LESSEE will have fifteen (15)
days from receipt of notice to raise its of fer, and the offers and counter
offers shall thereafter be limited to a response time of fifteen (15) days from
receipt of notice.
17.2 Assignment by LESSEE.
LESSEE may assign this Lease without the prior written consent
of LESSOR provided LESSEE guarantees the obligations of the assignee; otherwise,
this Lease shall not be assigned by LESSEE without the prior written consent of
LESSOR which consent shall not be unreasonably withheld.
18. REMOVAL OF EQUIPMENT.
At the termination of this lease, LESSEE may remove any and all
equipment it placed on the property during the term of this lease, or any
extension thereof, provided said removal is completed within one (1) year of the
termination date.
19. COUNTERPARTS.
This agreement may be signed in counterparts and shall be deemed
effective when all parties have executed this agreement or any counterpart
thereof.
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
20. COMPLETE AGREEMENT.
This writing and all terms and covenants contained herein are deemed to
be the complete and unequivocal written agreement of the parties, and no other
agreements, either written or oral, are contemplated with respect to said
property.
21. CALIFORNIA LAW.
This lease shall be governed by and construed and interpreted under the
internal laws of the State of California.
22. SEVERABILITY.
If any term, covenant, condition or provision of this agreement is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
23. TITLE HEADINGS.
The headings of the respective paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to be a part of this
Agreement and considered in construing this Agree ment.
LESSEE:
GRIFFIN GOLD GROUP, INC.
By _________________________________
Its______________________________
By _________________________________
Its______________________________
LESSOR:
---------------------------------
CHARLES JACKSON
----------------------------------
MARIE UNRUH
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
-----------------------------------
JAMES HOPKINS, SR.
-----------------------------------
TRACY HOPKINS
-----------------------------------
RICK JACKSON
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
-----------------------------------
MARA JACKSON
-----------------------------------
PAUL JACKSON
-----------------------------------
JARED JACKSON
<PAGE>
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
EXPLORATION AGREEMENT AND OPTION TO LEASE
GRIFFIN GOLD GROUP, INC./CHARLES JACKSON, et al.
MINING LEASE
Table of Contents
<TABLE>
<S> <C>
1. DESCRIPTION OF PROPERTY........................................................................................ 1
-----------------------
2. GRANT OF LEASE................................................................................................. 1
--------------
3. TERM OF LEASE.................................................................................................. 2
-------------
4. ROYALTIES AND CONSIDERATION.................................................................................... 2
---------------------------
4.1 Advance Minimum Royalty............................................................................... 2
-----------------------
4.2 Production Royalties.................................................................................. 2
--------------------
4.3 Manner of Payment..................................................................................... 3
-----------------
5. CONDUCT OF MINING OPERATIONS................................................................................... 4
----------------------------
5.1 General............................................................................................... 4
-------
5.2 Commingling of Ore.................................................................................... 4
------------------
5.3 Cross-Mining Rights................................................................................... 5
-------------------
6. RECORDS AND BOOKS OF ACCOUNT................................................................................... 5
----------------------------
6.1 Books of Account...................................................................................... 5
----------------
6.2 Inspection............................................................................................ 6
----------
7. PROTECTING FROM LIENS AND TAXES................................................................................ 6
-------------------------------
8. NOTICE......................................................................................................... 7
------
9. WASTE AND REFUSE............................................................................................... 7
----------------
10. INSURANCE...................................................................................................... 8
---------
11. COMPLIANCE WITH LAWS........................................................................................... 8
--------------------
12. TITLE.......................................................................................................... 8
-----
13. DEFAULT AND TERMINATION........................................................................................ 9
-----------------------
13.1 Default............................................................................................... 9
-------
13.1.1 Breach of Covenants.......................................................................... 9
-------------------
13.1.2 Assignments.................................................................................. 9
-----------
13.1.3 Bankruptcy................................................................................... 9
----------
13.1.4 Receivership................................................................................. 10
------------
13.1.5 Attachment................................................................................... 10
----------
13.2 Remedies.............................................................................................. 10
--------
13.2.1 Termination.................................................................................. 10
-----------
13.2.2 Eviction..................................................................................... 10
--------
<PAGE>
13.2.3 Damages...................................................................................... 11
-------
13.2.4 Remedies of LESSOR........................................................................... 11
------------------
13.2.5 Default by Landlord.......................................................................... 11
-------------------
13.3 Termination by LESSEE................................................................................. 11
---------------------
13.4 Information........................................................................................... 11
-----------
14. FORCE MAJEURE.................................................................................................. 12
-------------
15. INUREMENT...................................................................................................... 13
---------
16. RECORDATION.................................................................................................... 13
-----------
17. ASSIGNMENT..................................................................................................... 13
----------
17.1 Assignment by LESSOR.................................................................................. 13
--------------------
17.2 Assignment by LESSEE.................................................................................. 14
--------------------
18. REMOVAL OF EQUIPMENT........................................................................................... 14
--------------------
19. COUNTERPARTS................................................................................................... 14
------------
20. COMPLETE AGREEMENT............................................................................................. 14
------------------
21. CALIFORNIA LAW................................................................................................. 14
--------------
22. SEVERABILITY................................................................................................... 14
------------
23. TITLE HEADINGS................................................................................................. 15
--------------
</TABLE>
EXHIBIT 21.01
SUBSIDIARIES OF THE REGISTRANT
None
EXHIBIT 23.01
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Griffin Gold Group, Inc.
on Form SB-2 of our report dated October 20, 1997, appearing in the Prospectus,
which is part of this Registration Statement, and of our report dated October
20, 1997 relating to the financial statement schedules appearing elsewhere in
this Registration Statement, and to the reference to us under the heading
"Experts" in such Prospectus.
MALONE & BAILEY
Houston, Texas
December 5, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM
ITEM 22 OF FORM SB-2 FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0001050795
<NAME> GRIFFIN GOLD GROUP, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-30-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 65
<SECURITIES> 50000
<RECEIVABLES> 151407
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 211482
<PP&E> 106873
<DEPRECIATION> 0
<TOTAL-ASSETS> 318355
<CURRENT-LIABILITIES> 209973
<BONDS> 0
0
0
<COMMON> 100000
<OTHER-SE> 8382
<TOTAL-LIABILITY-AND-EQUITY> 108382
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 389539
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2079
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (391618)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (391618)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
